Honda Under Fire : There’s a Cold War in Progress Between American Dealers, Japanese Motorcycle Maker
Southern California is a murderously tough place to sell motorcycles. More bikes are sold here than anywhere else in the country. But there are more dealers here than anywhere else too.
“Those guys kill themselves cutting prices,” said Don Mueller, an East Coast Honda dealer familiar with the California market.
One of the survivors is Dave Pierot of Tustin Honda. And Pierot is perhaps the most visible dealer in a cold war between Honda and some of its retailers, a war that has been fought so far mostly in the pages of the Irvine-based trade journal Dealernews.
Pierot says he feels a sense of urgency in getting Honda’s ear because three of Orange County’s 13 Honda dealers recently bit the dust.
Pierot says Honda has not introduced enough new models, has overpriced most of the rest and has failed to communicate its new business strategy. After years when there were plenty of sales for everybody, the whole motorcycle market is shrinking, and dealers are getting nervous.
Sales are way down. At Tustin Honda, sales representatives are moving only 15 or 20 bikes a month these days, compared to as many as 130 a month early last year. And some Honda dealers--including Pierot--say they are losing money.
As its U.S. sales slipped, Honda shifted more of the cost of doing business to the dealerships. Where once dealers didn’t pay interest on the bikes for 3 months, now they start paying as soon as they get the bikes. That can average $125 a month per bike, according to Pierot.
Honda says the company will soon stop the slide in its market share, and that the dealers should be patient.
“The dealers have to look at tomorrow as well as today,” said Rod Anderson, a vice president at American Honda Motor Co. in Gardena.
And a few local dealers say the retailers have only themselves to blame for their problems; that for years, strong motorcycle sales carried weak and inefficient dealers who are now falling by the wayside during the hard times.
“Some of these dealers got into it because they liked the sport and thought it would be fun to have a dealership,” said Billy Robertson, a third-generation Honda dealer and vice president of Honda of North Hollywood.
“But it’s not fun. It’s a business. And it’s got to be run like a business, which some dealers haven’t realized,” he said.
The management at Tustin Honda became so frustrated that President Don C. Herold wrote two letters to Tadashi Kume, president of the parent company in Tokyo. One was also translated into Japanese “so that there could be no misunderstanding.”
“The Honda motorcycle business in the United States is in mortal danger of extinction through inaction and total lack of leadership on the part of the entire American Honda organization,” Herold wrote in the letter.
What came back, according to the dealership, was a maddeningly bland letter from a middle manager at Honda’s U.S. subsidiary in Gardena.
“Honda can be a very arrogant company,” said Don Emde, publisher of Dealernews, whose brother is a Honda motorcycle dealer. The retailers’ trade publication rarely criticizes the manufacturers, although relations aren’t always warm between supplier and dealer in the motorcycle industry. But this tiff is the talk of the industry, and Dealernews’ pages have been full of the spat for the last 6 months.
While not all dealers are as outspoken as Pierot--and some still strongly support the company--Honda may not be getting its point across to the dealers, concedes Ray Blank, an assistant vice president at American Honda.
“We have to realize that we need to have better communications with the dealers,” he said.
Whoever is right, the rift seems likely to continue as long as Honda’s sales are declining. It may continue without Herold, however; he’s shopping Tustin Honda around, but still hasn’t found a buyer.
