BUSINESSWEEK ONLINE : JULY 5, 1999 ISSUE
INTERNATIONAL -- ASIAN COVER STORY

Handicapping Honda


ITS STRENGTHS...

1.
Technology and manufacturing knowhow that lets Honda make cars more profitably than most other carmakers.

2. A global reach that stretches from Brazil to China. Honda sells more abroad than at home.

3. Economies of scale. Honda sells 2 million vehicles a year, but 10 million engines, for everything from lawn mowers to sedans.

4. Research. Its R&D budget now exceeds that of Japan's No.2, Nissan. Honda spends 5% of revenues on R&D. It has supplied engines for Formula 1 cars for years and has rolled out a dizzying array of envirocars.


... AND WEAKNESSES

1.
Honda depends on North America for 85% of its profits.

2.
It can't afford a wrong move on big-volume models. Honda relies on Civic and Accord sedans for 55% of sales.

3. The company can't count on raking in profits from gas-guzzling recreational vehicles or luxury cars as its rivals do. Its Acura near-luxury line needs a major overhaul in the U.S.

4. Honda is unable to spread its fixed costs for engineering, technology, and marketing over a huge volume of vehicles.

5. It faces a long road in Europe. It has failed to make a dent in the small-car market, and it stands for ho-hum sedans driven mostly by pensioners.



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