Wednesday, August 27, 2008

Survival of the Fittest

Honda Fit
Via the New York Times, an object lesson in (1) making money while being environmentally sound and (2) remaining economically viable by maintaining a longer managerial time horizon:

During the glory days of big pickups and sport utility vehicles, one automaker steadfastly refused to join the party.

Despite the huge profits that its competitors were minting by making larger vehicles, Honda Motor never veered from its mission of building fuel-efficient, environmentally friendly cars like its Accord sedan.

“I remember being at the Tokyo Motor Show in the mid-1990s and talking about the environment,” said Ben Knight, head of engineering at Honda’s North American division. “The reaction was there’s no return on that.”

But in today’s fuel-conscious automotive market, Honda is reaping the rewards for its commitment.

Welcome HondaNo major automaker in America is doing better than Honda, whose sales are up 3 percent for the first seven months of this year in a market that has fallen 11 percent. By comparison, General Motors is down nearly 18 percent, Ford Motor has dropped 14 percent, and Toyota has slid 7 percent.

While competitors are scrambling to shift their product lineups to build more small vehicles and slash their bloated inventories of trucks, Honda can barely keep up with demand, particularly in the subcompact category.

Sales of its tiny Fit have soared 79 percent so far this year, and interest in the vehicle is so strong that Honda accelerated the introduction of the 2009 model, which will go on sale Tuesday.

The Fit’s four-cylinder engine gets 34 miles per gallon in highway driving, but the quirky little hatchback does not scrimp on creature comforts. The base model — which sells for $15,200, including delivery charges — has a satellite-linked navigation system and safety features like side-curtain airbags.

Honda’s focus on fuel efficiency is paying off on the bottom line as well. The Japanese automaker reported a record profit of 179.61 billion yen ($1.68 billion), during its fiscal first quarter that ended in June, an 8.1 percent jump from the previous year.

By comparison, G.M. and Ford have lost billions this year as the market has moved away from the big vehicles that once generated the bulk of their profits. Detroit is moving radically to downsize its vehicle lineups and, in Ford’s case, to convert assembly plants from making trucks to small cars.

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