Automotive News - May 24, 2010 - 4

4 • MAY 24, 2010

Mendel: Honda on track despite lost share
Troublesome trends lurk beneath solid retail performance
Mark Rechtin
mrechtin@crain.com

Swapping shares
Among the top 6 brands, only Toyota and Honda have lost U.S. market share this year.
4 MOS. 2009 4 MOS. 2010

LOS ANGELES — What with all the trouble at Toyota in 2010, this figured to be a banner year for Honda. But instead of taking advantage of its archrival’s woes, the Honda brand has been losing U.S. market share while Ford, Chevrolet, Nissan and Hyundai make gains. While that has disturbed Honda executives in Japan, American Honda sales boss John Mendel isn’t overly worried. Mendel points out that American Honda, which includes

Ford Chevrolet Toyota Honda Nissan Hyundai

12.8% 11.9 13.7 9.9 6.5 4.3

15.0% 13.4 13.1 9.4 7.4 4.4

Source: Automotive News Data Center

Acura, has held onto its retail share this year and remains the same, steady climber it has always been — a company that won’t stray from its

conservative strategy in exchange for a chance to grab market share. “Spikes in our share tend to correlate to events where people count on Honda,” Mendel said. “We’re a safe harbor. People vote on the value proposition that Honda brings to market.” Mendel cites R.L. Polk numbers that show American Honda retail share, including Acura, increasing marginally in February and March. But the Polk numbers only reflect segments in which Honda competes. Left out of the calculation are segments such as full-sized pickups and SUVs. Meanwhile, TrueCar of Santa Monica, Calif., says American Honda’s retail share held steady in March when taking into account all segments.

Still, the drop in overall market share is alarming. The Honda brand slipped from 9.9 percent in the first four months of 2009 to 9.4 percent this year. But the 2010 figures reflect a sharp uptick in many automakers’ fleet sales, something Honda does not engage in. It’s not just the raw share figures that look bad, though. Cross-shopping data compiled by TrueCar and Compete Automotive show that Ford, Hyundai and Kia have all done better than Honda at luring customers from Toyota. TrueCar analyst Jesse Toprak says Honda’s conservative marketing in the early days of the Toyota crisis cost Honda/Acura a half-point of share from potential conquests.

“Honda has gotten the most benefit from Toyota’s trouble in terms of conquests,” Toprak said. “But when you look at consideration, the percentage change was actually highest for Ford, Hyundai, Kia, and then Honda.”

Product problems
Data from the consultancy Compete Automotive in Boston show that the Honda brand’s share of overall shopper interest has sagged despite its recent incentives, while Ford and Hyundai both surged. Also, Compete says cross-shopping by Honda intenders is at record-high levels, and “visitor engagement” at Honda’s Web site has declined
see HONDA, Page 36

SURVIVING A TOUGH YEAR

Memphis dealer recovers from brother’s murder, store closings
David Barkholz
dbarkholz@crain.com

MEMPHIS, Tenn. — Memphis dealer Russell Gwatney is still rebuilding his life after a disastrous past 21 months. Gwatney’s world began to unravel Aug. 13, 2008, when his brother, Little Rock dealer and Arkansas Democratic Party bigwig Bill Gwatney, was gunned down for no apparent reason at party headquarters. The assailant was trapped by police a few hours later and killed when he refused to surrender. The motivation for the murder remains a mystery. Five months later, a tottering General Motors said it would eliminate or sell its Saturn division, imperiling Russell Gwatney’s two Saturn stores in the Memphis area and a third in nearby Jackson, Tenn. When retail and racing giant Roger Penske couldn’t complete the purchase of Saturn in September, Gwatney had to shut his stores, except for one in Memphis that now performs only service.

‘It’s been a hard time’
“It’s been a hard time. You wouldn’t be bored walking in my shoes,” said Gwatney, whose father, Harold Gwat-

ney, got his two sons involved in the business with a Chevrolet store that he opened in Jacksonville, Ark., in 1959. Today, Gwatney, 58, is restoring his business and personal equilibrium. Since October, he has replaced two of his three lost Saturn stores with Mazda franchises. Those startups are keeping him plenty busy, Gwatney said. For relaxation, he plays guitar and ukulele. And he cooks — especially on weekends, when he joins the Gwatney Championship BBQ Team at major competitions throughout the South. This month at the Memphis in May championship, the Gwatney team fell short in its effort to recapture a world title in the category of whole-hog barbecuing. The team finished eighth in a competitive field, Gwatney said. “This is the Super Bowl or Indianapolis 500 of barbecuing,” said Rick Dalton, leader of the Gwatney team and parts manager at Gwatney’s Mazda store in the Memphis suburb of Germantown. The Gwatney team, which won the world title in 2005, was one of nearly 250 teams that competed in wholehog, shoulder and rib categories. Dalton said Gwatney is much more than just a sponsor of the barbecue team. “He’s a good cook; he’s very com-

petitive,” Dalton said. He said Gwatney Mazda could expect plenty of local exposure for the $15,000 sponsorship. Thousands of spectators were expected to attend festivities surrounding the barbecuing competition. The Mazda stores need the visibility, Gwatney said. The previous Saturn stores were very well-known in Memphis, he said. At the peak, the three Gwatney Saturn stores sold 2,700 new and used vehicles annually.

‘Get the word out’
Together, the two new Mazda stores sold 80 new and used vehicles last month. Employment that once totaled 125 at the three stores now stands at 58, Gwatney said. “It’s an adjustment. But Mazda has great products,” he said. “We just have to get the word out.” In addition to the barbecue publicity, Gwatney is ramping up a directmail blitz. This month, he began sending coupons to about 3,600 Memphis area owners of Japanese mid-sized sedans that compete with the Mazda6, including the Nissan Altima, Honda Accord and Toyota Camry.
see GWATNEY, Page 34

DAVID BARKHOLZ

Russell Gwatney knows his way around a barbecue grill. His Gwatney Championship BBQ Team competes at events throughout the South.

Lieb says small car will fuel Mercedes’ growth
Diana T. Kurylko
dkurylko@crain.com

Baby Benzes
Mercedes’ small-car plans Coupe version of the current C class in 2011 Crossover, coupe and sedan based on the next B class, starting in 2012 Convertible, possibly other variants of next C class, starting in 2013 dealers will be able to sell the B class — especially those who have renovated their stores to comply with the brand’s more modern Autohaus design. “If you take a dealership like we had three or four years ago — and we still have some today with dark wood, carpets and low ceilings — it’s a nice ambience but not necessarily youthful and aggressive,” said Lieb. “Then you will have a problem because the image doesn’t fit the car.” c

Talk from the top Q&A ➤ 24
the United States. Mercedes plans a small-car blitz starting in 2012, with three vehicles — a coupe, crossover and sedan — based on a new generation of the B class sold in Europe. When the redesigned C class launches in 2013, Mercedes will add a convertible and possibly other variants. A coupe based on the current C class goes on sale next year. “If we want to grow, this is the segment that we have to grow — and below it,” said Lieb. BMW has a 3-series sedan, coupe, convertible and station wagon. So Lieb said Mercedes will have “an opportunity to meet our competitors at their own game.”

Mercedes-Benz USA expects a new family of small vehicles and future derivatives of its compact C-class sedan to drive a 30 percent sales increase in the next five years. Opportunities for growth are limited for Mercedes’ larger E- and S-class cars, CEO Ernst Lieb said in an interview. So the German luxury brand is betting on success in smaller segments in which it doesn’t currently compete. “The potential is there,” said Lieb. “Even if the market doesn’t grow by a huge rate and stays at 13 or 14 million, the majority of these buyers will be in that lower segment.” Mercedes’ U.S. sales are up 26 percent through April to 68,826 units. Last year it sold 190,538 vehicles in

“Everybody wants to be MercedesBenz,” he said. “They are after us in the S- and E-class segment. With C class, we’re sitting with a four-door sedan and not doing anything else. Now we will go into segments where [competitors] are strong.” The B-class vehicles will be trickiest for Mercedes-Benz. BMW’s similarsized 1-series coupe has not been a hit in this country, and the brand’s pricing policy may be one reason. The base 128i starts at about $30,000, about $4,000 below the entry 3 series. But with options such as leather and electric power seats, the 1-series price approaches that of its bigger brother. BMW sold only 3,648 1-series cars through April. BMW executives say they aren’t pushing 1-series volume with incen-

tives because the car is popular in Europe, where the company can make a bigger profit. Lieb said Mercedes won’t follow BMW’s pricing or volume strategies. He expects sales of at least 15,000 for each B-class derivative. Anything less wouldn’t make sense for the required investments in training, tooling and marketing, he said. “We will always have a price premium,” he said, “but we can’t have a premium like in the S class.” Engines haven’t been chosen for the coming small cars, but Lieb said four-cylinders will be available for models derived from the B class as well as the new C-class variants. Mercedes now offers no four-cylinder models in the United States. Lieb is also confident that Mercedes
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