With New Accord, Honda Hopes to Regain No. 1 Spot

DETROIT — Shortly after introducing the fifth-generation Accord in 1993, Honda Motor Co. dispatched a team to gauge consumer reaction to its flagship car.

While most owners and shoppers seemed satisfied with the car’s quality, handling and relative value, they readily tossed out some cutting criticisms: It was cramped, too noisy and lacked power.

The findings did not bode well for a vehicle that once was the top-selling passenger car in America and hoped to wear the crown again.

Honda quickly set out to fix the car’s shortcomings. The result is a 1998 Accord that is bigger, more powerful and quieter. Just as important, it will not cost any more, and in some cases will cost less, than the previous model.

Early assessments by auto experts suggest that the new Accord, which arrives in dealer showrooms Sept. 24, is poised to set a new standard for entry into the important mid-size car segment, a high-volume arena once dominated by Detroit creations.

Chris Cedergren, an analyst for the auto-forecasting firm Nextrend in Thousand Oaks, said the new Accord establishes a benchmark against which other mid-size cars will be measured.

“It’s really flawless,” he said.

Such unreserved praise is unusual among the enthusiast car crowd, which normally points out a vehicle’s flaws faster than a Corvette goes from 0 to 60 mph. So unrestrained are some analysts that they are already predicting that next year the Accord will again become the best-selling car in America. It will have to supplant the Toyota Camry, this year’s expected winner, and the Ford Taurus, champ the previous five years.

“The Accord has a better-than-even shot at recapturing the title as the No. 1 seller,” said Joseph Phillippi, an analyst with Lehman Bros. in New York.

In many ways, the sedately styled Accord symbolizes the continuing rejuvenation of the Japanese auto makers, which are again grabbing market share from Detroit’s Big Three in an increasingly competitive and sluggish car market.

The vehicle, which reigned for more than a decade as one of the most popular cars in America, provides a case study of how the Japanese are continuing to cut costs without sacrificing quality or scrimping on creature comforts.

Honda reduced engineering and manufacturing costs by 20% in the new model, allowing it to hold or lower the Accord’s retail price but maintain a healthy profit margin. It is a formula first used by Toyota when it brought the Camry sedan to showrooms last year priced as much as $1,750 lower than the previous model.

The Accord also shows how the Japanese are increasingly adept at using common platforms--the basic underbody of a vehicle--to build at minimal cost several vehicles attuned to differing nations’ tastes.

Using the same chassis, Honda is producing distinctly different models for North America and Japan. It can build a sporty coupe on the same line as the sedan, and soon will add Accord-based minivans and sport- utility vehicles.

The Japanese cost-cutting began several years ago when the auto makers’ fortunes flagged because of an economic slump at home and a strong yen that made their products more expensive abroad.

Since then, Honda and Toyota have benefited to some degree from a weaker yen. But the currency gyrations have become less important as they have moved more manufacturing operations here and bought more parts in this country. All the 1998 Accords sold in the United States will be made here.

It is hard to exaggerate the importance of the Accord to Honda. The vehicle accounts for half the company’s sales and profit. The company earned $529 million in its fiscal first quarter ended June 30, up 36% from a year ago.

“Honda goes the way Accord goes,” said Cedergren. “It’s their highest-volume, highest-profit vehicle.”

Honda, which first made its mark worldwide as a motorcycle maker in the 1960s, introduced the Accord in the U.S. in 1976. It began making the vehicle in Marysville, Ohio, in 1982. Soon it became a favorite of baby boomers attracted by its reliability and easy handling. In the mid-1980s, the Accord was in such demand that dealers charged premiums of $1,000 to $2,000 above the sticker price.

By 1989, Accord had become the nation’s top-selling passenger car, a title it held for three years. It was supplanted by Taurus, which held the No. 1 ranking for the last five years. Camry should take top honors this year.

For Honda, the Accord’s fall from the top was softened by the growing popularity of its subcompact, the Civic, whose sales topped 280,000 the last two years. Some buyers saw the Civic, which was enlarged in 1995, as a cheaper alternative to the Accord, among the smallest cars in the mid-size class.

The Accord remains immensely popular, however. Honda has sold an average of 362,000 Accords annually for the last five years and the car is the perennial leader in retail sales to individuals. Taurus has kept its sales higher by marketing to commercial fleets and giving rebates of up to $1,500 to buyers.

A measure of Accord’s success is the brisk sales of the 1997 model. Most auto makers must offer incentives to move old models being succeeded by new ones, but Accord sales have remained strong with no rebates. It has imported more than 20,000 vehicles this year to meet demand.

Honda expects U.S. sales of Accords to surpass 340,000 this year and 375,000 in 1998. But its Ohio plant has boosted capacity to 420,000 vehicles, so production could be increased if necessary.

“Winning the sales title would be nice,” said Tom Elliott, executive vice president of U.S. auto operations, “but that’s not our goal. We want to sell all the vehicles we make and make a profit on them.”

Honda is taking no chances. According to Automotive News, a weekly trade publication, Honda will increase advertising and marketing spending to $100 million for the new Accord in the next year. The campaign’s theme will be “An Accord Like No Other.”

The new Accord sold in the United States, the car’s largest market, will be much different from the model planned for Japan and Europe. This has not been the case in the past, but the company found that what appealed to consumers in North America often made no connection with buyers in Japan or Europe.

Honda was faced with finding a way to affordably develop a so-called world car that would be tailored to the tastes of different markets.

“It was apparent that building one car for all markets would require too many compromises,” said Yozo Komo, chief engineer for the Accord.

The solution, he said, was a “flexible platform design.” Honda developed an innovative frame that allows Honda to shrink or expand the vehicle with essentially the same foundation.

It can use the same chassis to build a larger, conservatively styled car for an American family or a snazzier, narrow car for young Japanese professionals or a shorter European version tuned for a stiffer ride.

Because the platform is the most expensive part of a new car, Honda can save millions of dollars in development costs on a vehicle designed to compete globally. Analysts estimate the company spent a modest $600 million to develop the Accord, about 25% of what Ford spent on the 1996 Taurus.

In addition, Honda set a target of reducing the number of parts it used by 20%. It achieved a 15% reduction, decreasing the design complexity and making the car simpler to assemble.

“They made a quantum leap in cost reduction,” said Maryann Keller, analyst with Furman Selz, a New York brokerage. “These guys always seem to be one step ahead of the Big Three.”

Some of the cost savings are being passed on to consumers. Honda says it will hold the price of its four-cylinder models but cut prices on V-6 models. Prices won’t be formally announced until later this month, but analysts expect price cuts of $1,000 to $1,500 on more expensive models. That would put Accord in the $15,500-to-$21,500 range.

The Accord is still more expensive than its U.S. rivals, but consumers have long been willing to pay a premium for what they regard as better quality offered by the Japanese.

Some critics have taken Honda to task for the Accord’s understated--some say bland--styling. But others argue that mid-size-sedan buyers want quality and comfort--not a head-turning car.

So far, the Accord is racking up rave reviews from auto enthusiasts. Said Ken Zino, Detroit editor of Road & Track magazine: “They managed to retain its handling and fun-to-drive aspects while making it smoother, quieter and roomier.”

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ACCORD’S DRIVE TO THE TOP

The Honda Accord has been one of the most popular cars in the United States for more than a decade. Honda has made the 1998 Accord roomier, quieter and more powerful--and will price it no higher than the previous model. The changes could help the Accord recapture the crown as the best-selling car in America. U.S. sales and milestones for the Accord:

* 1976: First-generation Accord introduced

* 1982: Honda begins Accord production in Ohio

* 1989, 1990 and 1991: Top-selling car in U.S.

* 1997: Sales estimated at 340,000

Source: Industry reports