Good article in the Detroit News yesterday titled Honda Sneaks Up On Big Three, discussing how the company flies under the radar and lets Toyota be the punching bag of auto protectionists. As many of us have pointed out recently, "big three" is a misnomer as technically Toyota is now one of them. But I presume author Christine Tierney meant the "Detroit three."
Our friend Mr. Womack even weighed in. You may recall that a year ago he was taking a pretty light stand on the problems with the Detroit Three until many of us in the blogosphere convinced him to start telling the brutal truth.
With its image as an environmentally friendly company specializing in small cars, Honda arouses less fear and antagonism than Toyota, which has set out to become the biggest automaker in the world. "They love to let Toyota take the blows, whereas Honda has done practically as much damage," said James Womack, chairman of the Lean Enterprise Institute.
The public may not be thinking much about Honda as a "threat," but the Detroit Three are.
"In many areas, we take Honda more seriously than Toyota, especially when it comes to engine technology," said Bob Lutz, vice chairman of General Motors Corp.
While Toyota is focused on manufacturing as efficiently as possible, Honda focuses more on technology. Not that Honda is by any means a manufacturing slouch. But that technology could lead to accelerating market share in the future.
It seems natural to lump Toyota and Honda together. But while they share many similarities, there are striking differences. Toyota is a powerful, process-driven company whose production system has become the template for manufacturers the world over. Honda's emphasis on technology positions it to become an even stronger rival in the future. "At Honda, you want to break through, do something that hasn't been done," said Ben Knight, vice president for auto engineering at Honda R&D Americas in Los Angeles.
What is interesting is that Toyota and Honda see themselves as primary competitors, not the Detroit Three.
When Toyota Motor America President Jim Press says Japan's automakers are battling each other, not Detroit's Big Three, he has a point: Toyota cars are most often cross-shopped against Honda's, and the reverse is true.
While the quality of Detroit Three vehicles has increased, the perception of quality hasn't. And Toyota's ability to deliver exactly what the consumer wants (as opposed to GM building big trucks with small engines just to keep production lines humming) and Honda's technological edge are augmenting that perception. And that perception is worth big bucks.
"When you look at the actual quality, you might find the Malibu doing better than you'd expect against its Japanese competition," said Jack Nerad, industry analyst at Kelley Blue Book, a car-pricing specialist. "But it's the perception of quality that's key here. That's a mountain for the domestics to climb, to overcome the perception that they're not as well-built as the Japanese vehicles." Because Honda's cars have a good reputation for quality, the automaker doesn't need big discounts to sell them. As a result, Honda earns more money and its customers have cars that are satisfying to drive and hold their value.
So Toyota has the manufacturing prowess and Honda has the technology edge. Who will be ahead twenty years from now? Or will it be neither of them?