NOVI, Mich. — Ask any car company executive how they plan to turn a profit in the future and they'll rattle off plans to sell efficient and well-equipped small and midsize cars for premium prices.
John Mendel, Honda's (HMC) top U.S. auto executive, is well aware that the plans sound as if they were photocopied from the Japanese automaker's playbook.
The increasing competition faced by Honda's bread-and-butter models, the midsize Accord, compact Civic and CRV small crossover vehicle, is what keeps Mendel awake at night.
He says Honda will stay ahead of the pack with new technology and by introducing models in new market segments, but Mendel concedes it may have to update its cars more frequently as competitors keep getting better in quality, reliability and fuel economy.
"We don't have the gap that we had years ago," he said Friday just before unveiling a new Accord crossover vehicle in suburban Detroit. "There's nobody out there building junk any more."
The Accord, Honda's top-selling car and traditionally among the best sellers in the U.S., Honda's largest market, is under serious assault from prime competitors Toyota (TM), Nissan, Ford Motor (F) and General Motors.
All four competitors have four-cylinder midsize models that have passed the Accord in highway gas mileage, and most have received good marks from independent reviewers.
Mendel, speaking before he introduced the new Accord Crosstour, said in some hotly contested market segments, Honda may have to speed up its normal two-year cycle of refreshing vehicles and roughly five-year cycles of total redesign.
Honda is scheduled to update the Accord next year and redesign the car by 2013. But Mendel says the redesign could take place before then as Honda introduces new technologies to raise fuel economy.
New four-cylinder versions of GM's Chevrolet Malibu (33 mpg highway) and Ford's Fusion (34 mpg highway) have passed the Accord's 31 mpg in highway gas mileage, even though Honda usually leads the pack. Toyota updated its top-selling midsize Camry for 2010 by adding a six-speed manual transmission, boosting highway mileage to 33, and Nissan's Altima gets 32 mpg.
Both GM and Ford used six-speed automatic transmissions to raise highway mileage with taller gearing that makes engines more efficient by working less. The Accord, though, still has a five-speed automatic.
Honda, Mendel said, normally waits for the redesign cycle to introduce new technologies that would boost fuel economy, but he wouldn't say specifically what the company might do with the Accord.
Honda already has developed six-speed automatic transmissions for two new models in its Acura luxury brand, the ZDX sport coupe and the MDX sport-utility vehicle.
Mendel says he is constantly thinking about how to balance keeping the company's products fresh against the cost of more frequent updates. On some models, like the Accord, leasing patterns have grown longer, so people don't trade vehicles as often. But that has to be balanced against the competition, as well as how much the company is able to do in the two or three-year refresh, he said.
A lot can be done in mid-cycle updates with new engines or transmissions and a new body style that can change a car's looks as opposed to redesigning the whole vehicle, Mendel said.
"So you get new for less than the cost of new, at least in the customer's eyes," he said.
The redesigned Accord certainly will get new engine and transmission technology as well as aerodynamic improvements, Mendel said. Stricter government fuel economy standards also may force Honda to update vehicles more frequently, he said.