Industry view: how can Honda return to former glories?

Honda has not had a good start to 2013. A slump in demand across Europe has forced the Japanese car manufacturer to slash the workforce at its Swindon plant by 25%.

The company, which is known for producing some of the most reliable vehicles on the roads, had never previously cut jobs in the UK. It said the cull of 800 jobs had been prompted by a slump in demand in Spain, Italy and Greece, in particular. European sales of its vehicles fell by 1m over the past year.

Just over a year ago, Honda had recruited 500 extra staff at the Swindon plant as part of ambitious expansion plans, bringing the total workforce to 3500. It also announced a £267m investment in September, the biggest such programme at the site in more than a decade, amid plans to step up production to support the introduction of Honda's latest Civic and CR-V models. Yet in 2012, it produced only 166,000 vehicles, even though the plant has capacity for 250,000. While this is more than the 97,000 built in 2011, numbers are still significantly down on the 230,000 that were manufactured there in 2008.

Despite these job cuts and wider fears about the stability of the European car market, Honda says it is committed to building cars in Swindon for the foreseeable future.

How can the brand revive its fortunes? We asked Peter Duffy, marketing director at easyJet and a former marketing director at Audi UK, and Ben Walker, executive creative director at Crispin Porter & Bogusky London, who previously worked as creative director at Wieden & Kennedy, which holds the Honda advertising account.

HONDA STATS

1992 - The year Honda started building cars in the UK

40% of cars made at its Swindon plant are sold in the UK

Source: Honda

BRAND HEALTH CHECK DIAGNOSIS

PETER DUFFY, Marketing director, easyJet, (and former marketing director at Audi UK)

One of the significant issues faced by the volume car market is that despite five years of tough trading, no significant manufacturer has gone bust. The problem is compounded by a lack of meaningful product differentiation between some of the brands, an increase in the number of models and derivatives by pretty much every supplier. On top of that, the premium brands have been encroaching on the volume market by introducing smaller and cheaper models. In combination, it means fewer customers chasing more products. Competition has never been so intense and, in real terms, supply is running ahead of demand.

Remedy

- The solution will be brutal. At least one, and ideally two, manufacturers need to leave the market.

- Until that happens, margins will continue to decline and volumes will be under pressure.

- In the meantime, manufacturers will have to take a pragmatic view on capacity and begin to reduce volume to protect margin. Honda is doing a sensible thing: I doubt it will be the last.

BEN WALKER, Executive creative director, Crispin Porter & Bogusky London

It's sad to read about Honda's problems at Swindon. It is a brand with a wonderful history and culture.

Obviously advertising alone can't solve everything, but, as a huge fan of the brand (I have a Honda, I bought my sister one and persuaded my dad to swap his Range Rover for a CR-V), I've had no dialogue with the company for the past seven years, and that's something it could really work on.

The brand has a fascinating engineering story to tell that's incredibly relevant at a time when value and authenticity are so important to people.

Remedy

- Be honest. Tackle the situation with the Swindon plant head on. Let people know why it's happened, what it means and how Honda plans to fight back.

- Galvanise the support of the huge number of loyalists out there. Restart the dialogue through social media, direct mail and dealerships.

- Use traditional media and experiential to re-ignite the wider public's interest in engineering. When told in a human way, it's fun, it's fascinating and it's the heartbeat of Honda.

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