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Honda Hopes '94 Accord Will Return It to Driver's Seat : Autos: The Japanese company that once dominated U.S. sales has lost leadership to rivals. But executives say they are confident of reversing the decline with the new Accord.


MARYSVILLE, Ohio — On the U-shaped No. 2 assembly line at the Honda auto plant near this country town, employees dressed in white uniforms feed stamped metal panels into a row of welding robots.

With each weld, a spray of sparks rains down. Amid the tangle of complex machinery, the skeleton of another car is fused together. At the end of the line, a steady procession of 1993 Honda Accords emerges.

But this week, a new-generation Accord will move onto the line--and with it the hopes of Honda in America.

Never before has Honda Motor Co., long considered the star Japanese performer in the United States, faced such pressure to produce a winner.

"If the new Accord is unsuccessful, it would be a significant problem," acknowledges Tom Elliott, executive vice president of auto operations and Honda's top U.S. official.

The reason is that Honda's sales have slumped as the competition has grown and its rivals' cars have improved.

Worldwide, the company's profit dropped 41% to $344 million for the year ended March 31. Its first-quarter net earnings fell 62% to $57 million, due largely to slumping auto sales in North America.

So far this year, Honda's U.S. sales have fallen 10%. Its share of the U.S. car market has declined to 6.5%, from almost 10% in 1991.

And the Accord--America's best-selling car from 1989 to 1991, accounting for 60% of Honda's U.S. sales last year--is now ranked fourth.

Some analysts criticize Honda for becoming too stodgy in its styling. (The Accord's design has changed little since its introduction in 1976.) Others say it has fallen behind in marketing, where much of the battle is waged today.

Moreover, Honda lacks vehicles in the fast-growing truck segment, and the company is just now scrambling to produce a minivan and a sport-utility vehicle.

"The heyday is over for Honda," says Susan Jacobs, an auto industry analyst based in Little Falls, N.J.

Most observers, however, say the rumors of Honda's demise have been greatly exaggerated.

The company's products continue to rank high on quality surveys. Honda's customers are remarkably loyal. And the firm remains on the cutting edge of manufacturing processes.

"They have stumbled, but it would be a mistake to count them out," said Chris Cedergren, a forecaster for AutoPacific Group in Santa Ana.

There is little question that the past year has been a difficult one for Honda.

* In November, the Big Three auto makers kicked Honda out of the Motor Vehicle Manufacturers Assn., re-christening the group the American Automobile Manufacturers Assn., the prime lobbying entity for U.S. manufacturers.

Honda--which portrays its U.S. unit as an American company--took offense at the unilateral action. The company employs 16,000 U.S. workers and builds in Ohio more than 70% of the cars it sells in the United States.

* The Ford Taurus knocked the Accord off its perch as the best-selling U.S. car. Taurus outsold the Accord 409,751 to 393,477 last year.

Sales have continued to slump this year, with the Accord now behind the Taurus, Toyota Camry and Chevrolet Cavalier, although Accord sales have gotten a boost lately from dealer incentives of $1,000 to $1,500 a vehicle.

* The yen has strengthened about 17% against the dollar in 1993, putting pressure on Honda--like other Japanese car makers--to raise prices.

Honda claims it is better shielded from currency fluctuations than its Japanese competitors because of its extensive U.S. production and reliance on U.S. parts suppliers. But it still imported from Japan more than 25% of the vehicles it sold in America last year.

* The company was rocked earlier this year by several lawsuits charging that dealers had paid bribes to Honda executives to obtain cars during the days of heavy demand. Honda dismissed several regional sales executives accused of accepting illegal payments. Analysts said the scandal has largely been contained and that damage to customer relations was minimal. * Honda has recalled 1.8 million 1983-87 vehicles to fix defective fuel filler pipes that could cause gasoline leaks and fires. The recall is the largest in the firm's history and could cost the company an estimated $15 million to $20 million.

Despite these problems, Honda remains a formidable force in the U.S. auto industry.

A corporate maverick first known worldwide for its motorcycles, Honda began exporting cars to America in 1970.

Long before protectionist sentiment and a strong yen became major concerns, it decided to build manufacturing plants in the United States. Indeed, Honda is now the leading U.S. exporter of autos, producing right-hand drive vehicles for Japan on the same line it produces left-hand drive cars for U.S. consumers.

Along the way, the company proved that U.S. workers could produce automobiles of equal quality to those made in Japan. It continues to apply principles of employee empowerment in its auto plants in Marysville and East Liberty, Ohio, and at an engine plant in nearby Anna.

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