Honda, in a funk, tries to revive the Civic's virtues
09.09.2005 From Norihiko Shirouzu / The Wall Street Journal
For years, the cornerstone of Honda Motor Co.'s success around the world was the Civic. During the 1980s and '90s, the iconic compact car was prized by young enthusiasts for its easily souped-up engine, sporty looks and low price. But as Civic sales grew, so did pressure to make the car appeal to the mass market. Plush seats and new safety technology started dictating the car's design, killing its trademark low-slung look.
As the Civic became more civilized, loyal buyers fled. Despite profit-sapping discounts, Civic sales are off 8% since their 1998 peak.
Now, Honda is plunging into a high-stakes mission to snap the Civic out of its midlife crisis and recapture its allure as a feisty alternative to Detroit's mainstream brands. The eighth version, due out in the middle of the month, harks back to the model's better days with steeply raked windshield and a wide body.
Its success is crucial to Chief Executive Takeo Fukui's broader attempt to re-energize Honda. Although the auto maker, the world's eighth largest, has broadened its lineup into SUVs and even a pickup truck, the Civic still accounts for nearly one-fifth of its 3.2 million global vehicle sales. Without a strong Civic, Honda is vulnerable to archrival Toyota Motor Corp.'s new Scion brand in wooing younger consumers looking for small, fuel-efficient vehicles.
The Civic's bumpy ride also highlights a fundamental problem faced by many industries: How can maturing companies continue to grow without watering down the allure that made them successful in the first place?
"We lost that performance halo...that illuminated the whole Civic lineup for years," says John Mendel, a former Ford Motor Co. executive recently named senior vice president of auto operations at Honda's American sales unit in Torrance, Calif.
In 1998, the Civic's peak year, Honda sold 335,000 Civics in the U.S. Sales were 309,000 in 2004. Partly because Honda has been discounting the Civic to stem the slide, Honda's North American second-quarter operating profit fell 9.8% to $658 million from a year earlier. That caused a 3.1% slide in overall net profit to $1 billion.
In the early 1970s, Honda was exporting mostly motorcycles to the U.S., and until the 1973 launch of the Civic, its cars weren't much known outside Japan. The Civic was an instant, if accidental, hit. It was boxy and clunky and a front-wheel drive at a time when rear-wheel-drive cars ruled. But amid an energy crisis, its 30 miles-per-gallon was a big lure. The car left a lasting impression on baby boomers who continued to buy Hondas even when they outgrew the Civic.
Honda, one of the first foreign auto makers to set up shop in the U.S., was unlike Detroit's staid manufacturers. Then-CEO Kiyoshi Kawashima counseled executives to escape the office and live the "American life" to better understand the "joy" and "despair" of the U.S., recalls Honda's retired design chief, Norimoto Otsuka.
The Civic truly blossomed in the mid-1980s as Honda changed the look of its cars in the U.S. Japanese cars, including the Civic, were initially designed for narrow city streets and Mr. Otsuka thought they looked "embarrassingly ugly" on California's expansive highways. He sent designers in Japan pictures of Palos Verdes and other tony communities in southern California to convince them that Honda cars should appear low and wide to fit the American landscape. A blown-up version covered the wall of a design studio in Japan.
Mr. Otsuka decided the task could be accomplished using design tricks to make Honda's cars appear wide. That meant, for example, lowering roof and hood lines. In the second half of the 1980s, the hoods on Honda's Accord and Prelude, a sporty coupe, were so low that Honda had to rely on retractable lights to meet U.S. safety regulations governing head-lamp height.
The Civic began gaining market share, generating sales of up to 235,000 vehicles a year by the end of the 1980s. Honda was also fast becoming a pop-culture icon. Urban hot-rodders in southern California customized Civics and other Hondas with beefier engines, a sportier suspension, big chrome wheels and flashy tail lamps, not necessarily to drag race, but to go fast and look cool. The Civic, almost single-handedly, spawned a modern version of the 1950s and 1960s hot-rod culture, which has since grown into a multibillion-dollar industry.
Drag-race circuits for amateur drivers such as the Import Drag Racing series, were dominated by Civics. By the late 1980s, Honda also was a formidable force in Formula One racing, winning 15 of 16 races in 1988, a rare feat.
But the unique Honda look ran afoul of its own success. As Honda sold more cars, with an ever expanding number of U.S. factories to support, executives began to pay more attention to mass-market customers and their complaints and demands: easy handling, a cushier ride, more interior space. The car's styling came to be dictated more by managers and engineers, people at the company say, as pragmatism came to the fore.
In the early 1990s, in part prompted by regulatory changes in the U.S., Honda created a bigger "crush zone" under the hood to better absorb the impact of a head-on collision. It also added air bags, bigger bumpers and antiskid brakes.
This onslaught of technology added significant weight to Honda cars and triggered a fight for space. At this time, Honda was developing cars by focusing on "packaging hard points." These precise dimensions were determined by the layout of seats, the engine and other equipment, in order to maximize passenger space. But they ultimately dictated the car's look. This triumph of function over style made it hard for Honda to maintain its cars' novel external appearance.
The result: The Civic became gradually taller and taller to accommodate the new gear. Honda couldn't substantially increase the car's width or length and still keep its designation as a compact car.
In 1992, Honda withdrew from Formula One racing and didn't return for eight years.
Sumptuous and Mass Market
In the late 1990s, Honda began planning the Civic currently on sale. It wanted to "create the most sumptuous compact car ever built" by making even more room inside, recalls Honda executive Yoshikazu Kigoshi, who was the car's chief designer at the time.
To generate up to 7% more passenger-cabin space, Honda engineers made the engine and transmission more compact. The company dumped its "double wishbone" suspension, which provided a zippy ride, to cut costs and make more room under the hood for safety and technology improvements, to the chagrin of Honda enthusiasts. It further irritated Civic-owning hot rodders by making it hard to swap the engine for those from other, higher-powered Honda models.
Launched in 2000, the seventh Civic was two inches taller than the model it replaced and five inches taller than the model before that. It was roomy inside, but stubby and bland on the outside. The low-and-wide era was definitely over.
The approach didn't work with U.S. customers. Terry Cheung, who turned his first Civic into a sleek street racer, traded his 2002 Civic hatchback after only six months because he couldn't get it to go faster. "The car was basically garbage," says Mr. Cheung, 29, a spa and exercise-equipment salesman from Matawan, N.J. He now drives a souped-up Mitsubishi.
"I think we overdid it," concedes Mr. Kigoshi, the model's chief designer.
In 2002, organizers of the Import Drag Racing Series changed the circuit's name to Sport Compact Drag Racing to reflect a growing number of cars from Detroit participating in the sport. That year, General Motors Corp. began pouring money into the series, sponsoring drivers in return for their agreeing to race Chevy Cavaliers and Pontiac Sunfires.
Civic sales started to slide, requiring the company to offer profit-eating discounts. In customer surveys, younger buyers said the Civic had lost its youthfulness. They preferred cars like the Volkswagen Jetta. According to J.D. Power & Associates' PIN Information Network, 18% of Civic buyers are now 25 years old or younger, compared with 23% in 1999.
"We were concerned the Civic might keep growing old with the baby boomers and die off," says Honda Chief Engineer Toshiro Morita, who headed the latest Civic redesign. He says the car had lost its edge and had become like a "big rounded ball."
About the same time, Honda CEO Mr. Fukui, who took over in 2003, was trying to rid the company of its conservatism. He says in an interview that Honda was afflicted by "big-company disease" in the way it develops technology, conducts product-planning and markets its vehicles.
Stung by weak sales, top Honda executives began rethinking the Civic three years ago. When Mr. Fukui took over as CEO, he broadly encouraged this kind of endeavor and pushed Honda to embrace what he called "a smell of danger."
Meanwhile, company managers pledged to stay out of the Civic redesign, recalls Mr. Morita, the chief engineer. "They told me on so many occasions that they no longer understood what moved young buyers and that they were willing to give me and my team free rein in designing the next generation Civic," he recalls.
The Civic's new direction even has a name: "kan-no dotai," or sensual moving object. "We want to move away from a design that is totally utilitarian in its message," says Jiro Ikeda, chief designer of the upcoming Civic.
Among the attributes of the new look: windshield pillars on the coupe version pitched at a steep 21.9-degree angle. Honda designers say that's sportier than the Acura NSX, a car Honda built to compete with Ferraris. The Civic sedan is also comparable to the NSX, they say, and both versions have a sleek, unified look from head to tail.
Engineers narrowed the gap between the Civic's tires and its body and lowered its roof, even though that sacrificed room in the rear seat. The new Civic is 1.4 inches wider than the previous version, which puts it over the limit defining a small car by Japanese regulatory standards. It also has a small steering wheel, like a race car.
The new Civic will face tough competition for the minds of younger performance-craving consumers. The market Honda helped create is flooded with alternatives to the Civic, such as Fuji Heavy Industries Ltd.'s Subaru WRX, the Mitsubishi Motors Corp.'s Mitsubishi Lancer Evolution and Toyota's Scion tC. Many hot rodders now prefer rear-wheel-drive cars.
To gird Honda for the fight ahead, younger Honda managers are rounding up executives from its American sales unit and taking them to hot-rod events. A key meeting is the Specialty Equipment Market Association's annual show, a big powwow of auto-customization specialists.
In a first for a foreign auto maker, Honda will be the title sponsor for this fall's SEMA show in Las Vegas. There, it's planning to unveil the souped-up version of the new Civic coupe.[/b]