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Slow and Steady Honda Wins Race


Fuel efficiency keeps automaker on top.

Thomas A. Edison famously quipped, "Genius is 1% inspiration and 99% perspiration."

Honda (HMC) has apparently adopted Edison's methods, since it continues to post modest but steady sales increases in a downbeat auto market.

Honda's sweat-soaked insight: reliable, high-mileage cars at a good price. That sure beats fancy cars loaded with gewgaws and gas-guzzling SUVs.

The company has long relied on the Civic and Accord to deliver profits. It now offers the Fit, another car that barely sips gas. Overall, Honda has the most fuel-efficient models in the industry. Buyers have noticed and year-to-date sales are up 4.8% and just over 1% in June.

Honda also makes a small SUV that gets an estimated 20 miles per gallon around town and 27 on the highway. Toyota's (TM) monster Tundra Crewmax gets 14 miles per gallon in town and 17 on the highway. Toyota, known for the Prius, its fuel-efficient hybrid, reported a 21% decline in June sales because it couldn't quickly make the shift to cars from trucks.

Overall U.S. vehicle sales declined 18.3% in June, the worst month for the auto industry in 17 years.

Ford (F) offers the high-mileage Focus, but production couldn't keep up with demand. It plans to add a third shift at the Michigan plant that builds the car.

Honda can quickly switch production at its plants as needed and appears well-positioned for gas priced at $4 or more per gallon. U.S. drivers have long preferred larger cars and trucks, but high gas prices forced a sudden reversal: Cars, not trucks, now account for 60% of all sales. This left GM (GM) stuck with super-sized models nobody wanted.

Honda has never been flashy and doesn't make brash moves in the market. Slow and steady seems to do it.

Honda's competition is sweating, but not from excessive mental gymnastics, underscoring a basic point: It's hard to stay ahead of the game in a global economy.
No positions in stocks mentioned.
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