LOW GEAR : The road has been rough lately, but the Japanese giant is trying to strengthen its position as leader of the pack in motorcycles. : HONDA

Back in 1959, when people who rode motorcycles looked a little scary roaring around on the wrong side of the tracks, marketing motorcycles in America was a small, quiet business in which a handful of companies together rarely sold more than 60,000 bikes a year.

Honda changed all that.

In a savvy marketing move, the Japanese firm overcame the motorcycle’s outlaw image by promoting its bikes as good clean fun. After all, the company’s ad slogan went, “You meet the nicest people on a Honda.” The Beach Boys rhapsodized about running through the gears on a Honda. Soon teen-agers, clean-cut college kids and even young professionals were tooling around on inexpensive, dependable Honda bikes.

In short order, the company dominated the U.S. market. By the early 1960s, Honda was selling 60,000 motorcycles a year all by itself. And until a few years ago, three of every five motorcycles, dirt bikes and all-terrain vehicles (ATVs) registered in America were Hondas.

But those heady days are gone. The decline of the dollar, an aging rider population and--according to disenchanted dealers--a series of marketing missteps have cut the company’s domestic motorcycle sales by more than half in recent years.

Although Honda is still No. 1 in the domestic market, its lead has narrowed significantly. Since 1985, Honda’s market share has shriveled to 39% from nearly 59%. Many buyers are snubbing Honda’s lineup for machines made by Japanese rivals Yamaha, Kawasaki and Suzuki and America’s Harley-Davidson.

To make matters worse, the entire U.S. motorcycle market is rapidly dwindling. The reasons: The decline of the dollar against the yen has added hundreds of dollars to the cost of Japanese bikes sold in the United States. And motorcycle manufacturers have neglected to court first-time customers. As a result, the majority of people buying motorcycles these days already own one.

“New people just aren’t coming into the market anymore,” said Ray Blank, an assistant vice president of marketing at American Honda Motor Co. in Gardena.

The effect on Honda’s motorcycle sales has been dramatic: Although manufacturers won’t divulge actual sales figures, industry estimates indicate that fewer than 300,000 Honda bikes and ATVs were sold in the U.S. market last year, down from about 750,000 in 1984.

The dealers are hurting, too. From a peak of 1,700 in 1985, the number of Honda dealers nationwide has dropped to 1,360. Some went belly up, some left the business and some of the survivors say they are only a few sales away from disaster.

“If I didn’t sell some other lines, I’d be packing it in right now,” said Darrow Rowndy, president of Fun Bike Center in San Diego, one of the nation’s largest dealerships. “They’re killing us.”

Faced with the drop in sales over the past few years, Honda has shifted more of the costs of selling the bikes onto its dealers. The company is asking dealers to assume more advertising costs and charging them interest on the bikes they order instead of giving a few months’ grace period, as Honda did in the past.

Some of those dealers are now conducting a noisy revolt, incensed by the new arrangements and by what they say are a series of blunders by Honda.

Honda, some dealers say, is surreptitiously taking advantage of its decline in market share to whittle down an unruly dealer network and push the survivors into line.

“Things just don’t get this bad this fast on their own,” said Dave Pierot, general manager of Tustin Honda in Orange County. “I believe it’s being done deliberately.” Honda says it isn’t so, and the company is now attempting to shift its marketing strategy to regain lost sales.

Like the other manufacturers, Honda for a long time had been marketing its motorcycles mostly to enthusiasts who already own a bike and simply want a bigger or sportier one.

But that strategy apparently wasn’t enough, and Honda is slowly trying to turn around. It’s not the company’s fault, says Honda, if some of the dealers get swamped.

Now Honda is reviving its old business strategy: Bring new customers into the motorcycle market. There are fewer Honda ads in motorcycling magazines these days and lots of more lavish spreads in Sports Illustrated and Life.

“We’re trying to make these people consider a product they’ve never thought about before,” said Rod Anderson, vice president of American Honda’s motorcycle sales division. “It doesn’t happen overnight.”

In fact, U.S. motorcycle sales have dropped every year for the past five, from the market’s last peak of 1.3 million in 1984 to about 710,000 last year.

There are a lot of reasons: Motorcycles are considerably more expensive to own and operate these days. Not only do they cost much more to buy, the cost of insurance and repairs has risen, too.

When Honda began selling those first small bikes in the United States, they cost as little as $150 and looked like a bargain, compared to $800 and up for the big Harleys and the muscular bikes made by BSA, Triumph and other overseas manufacturers.

Today, by comparison, you can’t get near a Honda motorcycle for less than $2,100, the price of a small bike with a 125-cubic-centimeter engine. And they go up to $11,500 for the monster Honda Gold Wing, a 1,500-cc touring bike with all the bells and whistles, including AM-FM stereo and cassette player, cruise control and reverse gear.

Attracting new customers is important, because a lot of enthusiasts tend to champion a certain brand of bike all their lives. Take Cameron Hall, a 39-year-old loan officer at Norris, Beggs & Simpson in Orange County: He bought a Yamaha dirt bike 25 years ago, and through several bikes since he hasn’t changed manufacturers yet.

“You fall in love with your first one, and so I’ve tended to stay with Yamaha,” Hall said. “It’s like a Ford and Chevy thing with cars; some guys won’t touch Yamahas and some won’t go near a Honda.”

Baby Boomers Aging

Another reason for the drop in sales: Consumers have a lot more ways to spend their discretionary income these days, including jet skis, videocassette recorders and computer games, none of which existed on the mass market in the 1960s.

The baby boomers are also aging and less inclined to ride motorcycles; motorcycle sales took off in the early 1960s at the same time that enormous numbers of kids turned 18 and 19 years old.

And the industry has made mistakes; Honda wasn’t the only company to neglect first-time buyers in a race to sell more sophisticated and expensive bikes to people who already owned one.

“We may have engineered ourselves into a corner,” said Mike Dreyer, an owner of Dreyer Honda in Indianapolis. Only the ninth Honda dealership when it opened in 1959, Dreyer Honda is now said to be the oldest continuous Honda retailer in the United States, and Mike Dreyer--the third generation of Dreyers to sell motorcycles--has seen the market go from feast to famine.

“We don’t have the guys between 25 and 35 coming in,” said Dreyer wistfully. “I don’t know whether it’s because they’re all married now or they’re buying hot tubs instead or what. But we used to sell them a lot of motorcycles.”

Then there were the all-terrain vehicles. Big sellers since the early 1980s, by 1987 some states and the federal government considered the three-wheel version extremely dangerous because it was prone to tip over. They demanded a ban.

Under a federal consent decree last year, the manufacturers--including Honda, the biggest maker of ATVs--agreed to stop selling the three-wheel version. But the publicity from a barrage of lawsuits filed by injured riders has held sales of the four-wheel version down. And taken altogether--legal fees, settlements and lower sales--the ATV fiasco cost the manufacturers millions of dollars.

Managed a Compromise

And the industry’s been under attack on other fronts. The year before the consent decree, in 1987, Sen. John C. Danforth (R-Mo.) proposed federal legislation to ban so-called superbikes, the extremely powerful type of motorcycle Tom Cruise rode in “Top Gun.” Some of these bikes can go from zero to 60 miles an hour in less than three seconds.

The manufacturers’ lobbyists eventually talked Danforth out of pushing his bill in return for promoting driver education. But it sent another scare through the industry.

On top of all this, Honda has made some recent moves that sent its sales plunging even more steeply than the market as a whole.

First, some observers say the company seems shaken by the ATV fiasco. Unlike many American concerns, the Japanese often seek to blunt controversy rather than tough it out. Honda now sells only a few different types of the machine, say dealers, even though ATVs still account for 40% of the motorcycle market and Honda retains a dominant share.

“It may be true they had a knee-jerk reaction in pulling away from the ATVs prematurely, probably because of the threat of lawsuits,” said Don J. Brown of the consulting firm D. J. Brown Associates in Irvine. “But the ATV market has held up better than anybody expected.”

Some of Honda’s newest ATV models don’t exactly have buyers mobbing the stores; many of them have had disappointing sales, dealers say.

Then there were the scooters, which are smaller and slower than regular bikes. Honda heavily promoted them in television ads a few years ago, and by 1987 the industry was selling more than 150,000 a year.

Last year, however, that number dropped to half, which hurt Honda most as the largest producer of scooters. Honda had promoted the scooters to what Brown calls “the new-wave set,” using ultra-trendy rock stars such as Grace Jones.

Price Rise Hurt

But Honda soon saturated that market, Brown said, and then found “other people weren’t buying scooters because they didn’t want to be associated with new-wave types. The yuppies wouldn’t have anything to do with them.”

Finally, sticker shock has taken its toll on the motorcycle market, especially Honda’s.

Although the dollar’s decline is responsible for much of the price appreciation of recent years, dealers say Honda has raised prices to the point that some of its bikes cost $400 or $500 more than the competition’s comparable models.

While all other manufacturers have increased their share of the $2.3-billion U.S. market, Honda’s share has plummeted. No. 2 Yamaha, for instance, climbed from about 16% in 1985 to nearly 23% last year, according to Detroit market researcher R. L. Polk & Co.

Meanwhile, since Honda exported its first car to the United States in 1970, the company has come out of nowhere to become a major player in the U.S. auto market. Honda was primarily a motorcycle manufacturer before it began making cars in Japan in 1963.

Though stock analysts who follow the company say the strong dollar has held down sales of Hondas and other Japanese cars, the company still sold 790,000 autos in the United States last year for about 7.5% of the market, largely because its U.S. factories now make more than half the cars it sells in the United States. Honda’s market share has increased slightly in each of the past three years.

And Honda’s motorcycle problems aren’t limited to the U.S. market. In fact, America accounts for only a small chunk--about 12%--of Honda’s total cycle sales. Worldwide, motorcycles, mopeds and scooters are usually big sellers because they’re basic transportation in Third World countries.

Sales slumped in Japan--where Honda sells half of its motorcycles--after a mandatory helmet law went into effect a few years ago and have only recently begun to come back. The most recent figures available indicate that the company’s worldwide sales are down slightly.

Autos More Important

But that’s small consolation for the company’s U.S. dealers. Some say they suspect Honda is de-emphasizing its troublesome U.S. motorcycle business in favor of its more profitable cars.

Stock analysts who follow the company don’t go quite that far. But they note that autos accounted for 75% of Honda’s worldwide sales of about $28 billion last year, while motorcycles were only 11%.

“It’s true Honda is putting more of its effort into autos,” said Masahiko Goto, a vice president at New Japan Securities in New York. “But it’s natural to concentrate on your biggest business.”

Of its competitors in the U.S. motorcycle business, Honda is the only one making a full line of cars.

“If I were in their shoes, I don’t know if I’d want to sell bikes anymore,” said Don Mueller, president of New Jersey’s Freehold Honda, which says it is the biggest Honda dealership in the state. “Every time somebody falls off a bike, Honda gets sued.”

This is an industry that’s not noted for cozy relationships between manufacturers and retailers. But Alan R. Isley, president of the Motorcycle Industry Council--the manufacturers’ trade association--says this is the most acrimonious flap in memory.

“The dealers seem to be blaming Honda, but it seems to me it’s really a question of simple economics rather than a business strategy,” Isley said. “There aren’t enough buyers now to support the same number of retailers.”

And even some Honda dealers blame each other, particularly in motorcycle-crazy Southern California, where dealerships have proliferated to the point that there is almost one every few miles from San Diego to Los Angeles.

Making New Effort

“Honda propped up too many of the dealers for a lot of years,” said Jim Sharpe, president of South Coast Honda in Orange County. “Some of them aren’t even sure if they’re making a profit, but they’re all in there undercutting each other.”

Meanwhile, Honda has brought out four new models this year and says it is intent on regaining market share, although the company won’t publicly commit itself to a goal.

The new lineup includes the Pacific Coast, an 800-cc, $8,000 bike that Honda hopes will appeal to yuppies looking for the motorcycle equivalent of a luxury sedan and that some dealers say is too big and expensive to appeal to first-timers.

For enthusiasts, there’s the CB-1, a smaller bike that--if it were a car--would probably be a sports car, and the Transalp, which would probably be a Jeep.

But Honda must walk a fine line: It’s got to convince people that motorcycles are fun but not dangerous and that they’re worth a sizable chunk of disposable income. It’s also got to keep old customers while persuading more upscale buyers that motorcycles have that ever-so-raffish appeal.

“We’re at the beginning of a renaissance here,” said Blank, the Honda marketing executive.

“We know it’s going to take some time, but we’re pretty sure we’re right about this.”