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by John Cadogan

August hasn’t been a happy month for Honda. Earlier this month, in addition to the recall of 2.5 million vehicles, respected news agency Reuters issued a compendium of the damning US assessments of the 2012 Honda Civic. The new 2012 Civic is a vital car for Honda, representing about 20 per cent of the company’s three-million-plus annual production volume. Apparently, it’s not a real winner, at least in the USA.

Above: North American critics don’t appear to like the new Civic

The balance of credible expert opinion is that the car’s interior is overdone with cheap, hard plastics. But wait, like those hateful late-night TV infomercials say, that’s not all.

Respected and hugely influential US consumer advocacy agency Consumer Reports (think: like Australia’s Choice magazine) also canned the 2012 Honda Civic, rating it only the 11th best small car (out of 12) in the US market.

Not only did Consumer Reports hate the 2012 Civic’s interior, it was also significantly cold on the car’s steering, braking, handling and noise levels.

Above: Ride, handling, steering, braking and interior are major Civic bugbears, according to influential US publication, Consumer Reports

Consumer Reports was hardly backward in coming forward:

“The problems that really hurt the Civic’s score run deeper and they showed up at our test track. Stopping distances are long. The steering is lightly weighted and comes up short on feedback. Body lean appears early in the corners. The ride is marred by frequent short pitches. And road noise still remains an annoying companion.”

Honda is currently Japan’s number three carmaker, which built its reputation over decades on a foundation of clever engineering and innovation. However, Reuters says there’s a real risk the company is today “spiralling into mediocrity”.

Above: Remember when Civics were this cool?

Just 20 years ago, Honda’s reputation was, broadly, that it was the ‘BMW of the East’. The parts were expensive but, hey, if you wanted a quality Japanese product and you couldn’t afford a European prestige car, Honda was where you shopped. Bill Visnic, analyst with Edmunds.com, told Reuters that today, Honda is taking a series of backward steps and devolving into a “very normal car company”.

This is a view echoed by many American experts – and you have to remember that the locally produced US automotive fodder is hardly anywhere near the global ‘excellence’ level when it comes to quality.

This is a very important assessment for Honda to get its head around because the USA is the company’s single biggest market. Honda enjoys almost 11 per cent of the US auto market, and its Civic, Accord and CR-V are either first or second in their segments for US car buyers.

Above: Honda’s Australian market share has fallen almost 25 per cent this year

Here in Australia, in the first six moths of the year, Honda’s market share has slipped to 3.3 per cent, compared with 4.2 per cent for the first six months of 2010.

When you look at Honda’s current product lineup, it’s frankly impossible to see any real jaw-dropping ‘wow’ factor. It reeks of beancounter overload and passion deficit in the upper echelons of senior management.

Way back, before iPods, I remember being overtaken at warp speed in Tasmania while driving an Integra Type R (think: go-kart) by a colleague driving an NSX. Flat in fifth in the Integra, left-hand sweeper, and the NSX just stepped into the right lane and devoured the Type R. Sadly, both levels of accessible passion and mind-blowing technical excellence are absent from the Honda lineup today.

Above: When Honda still built supercars…

The company’s $40k Civic Type R is probably the closest thing to ‘wow’ factor in the current lineup – but it’s massively overstyled and on sale at the same price as a Golf GTI or Subaru WRX … and frankly it doesn’t hold a candle to either.

The Honda Accord Euro (best car currently in the Honda range) highlights one of Honda’s real problems: ‘Euro’ sells – but real ‘Euro’ is better than ‘me too, faux Euro’. The Accord Euro is a credible, elegant, and well equipped car. However, the Europeans keep introducing cheap, high quality entrants with real European cachet. Would you prefer a Honda Accord Euro in your driveway, or a Peugeot 508, Alfa Giulietta, BMW 1 Series or Volkswagen Jetta? They’re all available at the same pricepoint around $40k.

The global financial crisis, and its ‘death by oversupply’ prognosis, hasn’t helped. Obviously, costs were cut – like the pesky BAR Honda F1 team, which consumed Yen faster than you could pour it from a 10-tonne tipper. Clearly many Honda future product plans were also put on ice in the fallout from the GFC, with the price for that delay being paid today on the showroom floor.

Above: Legend – a nice luxury car made fundamentally irrelevant by market sentiment

And then there’s the Legend, Honda’s (let’s be kind) flawed attempt to enter the luxury car market. The only problem is … nobody, statistically, wants one. Five per month, on average, are sold in Australia – so good luck spotting one in traffic. (This is the approximate sales volume of an Audi R8 or Aston Martin – which is good news for low volume supercars but not so hot for $80k mass-produced jobbies.) If you sit on an average street corner in Australia, your clothes will probably be out of fashion before a Honda Legend drives past.

The Legend is mitigated by being a fundamentally good car. Its only problem is that people aren’t generally receptive to spending $80k on a Japanese car when they could instead have a nice BMW or Audi in the driveway. ($50k is about the ceiling for a car with a Japanese badge.) Toyota, however, has managed to pull off this particular high-priced Japanese car trick – but only by building a completely separate brand (Lexus) and investing a quarter of a century and untold megabucks into making that marque an ‘overnight’ success. And even today, Lexus, though credible, fails to carry the same outright cachet as BMW, Audi or Mercedes-Benz.

Above: Kia Optima. A big winner by any objective yardstick when compared with Accord (below)

In the cheap seats, the South Koreans are exerting massive pressure on the Japanese. (This is something the Chinese will be doing to the South Koreans in five to 10 years.) This pressure from just across the Tsushima Strait is also occurring in middle-of-the-range cars. Line up a Kia Optima (best mid-size South Korean car to date) against a Honda Accord VTi, and see which one you like best. By any objective measure the Optima is better looking, better finished, better equipped and cheaper. The purchase decision is a no-brainer.

Above: Accord is out-gunned by the South Koreans – an unthinkable proposition just 10 years ago

To put this in perspective, the Optima has LED daytime running lights, a proximity smart key, heated and air conditioned seats, a direct-injection engine – it’s more current in every technical and tactile way. The Accord has … a Honda badge, and attendant heritage.

So, Honda is being squeezed at the bottom end and in the middle by the South Koreans and at the top by a proliferation of ever-more affordable European cars. (Check the new Focus Titanium with auto reverse park and adaptive cruise…)

This is an economic and competitive vise within which conventional conservative corporate responses (ie, let’s cut costs) can’t hope to solve the problem.

Honda’s top engineer, Yoshiharo Yamamoto, admits there’s a profound problem at Honda Central. He told Reuters:

“In the past, the US Big Three lost out to us, and their position in the market diminished. We’re going to be in that same position if we’re not careful. We can’t let that happen.”

Above: Honda’s significant challenge is to reinsert the ‘wow’ factor … and overcome being bilaterally squeezed by the competition

What’s less vocal is an actual strategic response, or proposal. What’s happening is clear; what’s being done about it is not. Honda is not alone here – many Japanese carmakers are in danger of delivering product ranges in the medium term with as much sex appeal as last week’s Bing Lee whitegoods sale catalogue. And the external economic squeeze is upon them all.

The obvious solution? Throw the beancounters in solitary, grab every piece of current technology and urgently incorporate it into the lineup – with a big, fat helping of ‘wow’ factor in future product, in terms of both styling and tech. And be quick about it.

Above: There is still hope for Honda – as long as North American financial expert consultants aren’t retained to assist

Otherwise? Here’s what Tatsuo Yoshida, a Tokyo-based automotive analyst with UBS Securities, predicts:

“Otherwise, they risk going the way of Buick and Oldsmobile, which ended up with only aging customers who remembered the brands’ past glory.”

And where are they now? It’s a serious problem.

What do you think? Can Honda reinvent itself and put the ‘wow’ factor back despite the squeeze? What steps do you think they should take?