Honda Retools Tiny Fit to Regain U.S. Sales Lost to GM, Ford

Jan 14, 2014 9:36 am ET

(Updates with today’s trading in final paragraph. For coverage of the Detroit auto show, see SHOW <GO>.)

Jan. 14 (Bloomberg) -- Honda Motor Co., trailing General Motors Co. and Ford Motor Co. in U.S. subcompact car sales, will try to boost deliveries with a new Fit hatchback that will be made in North America for the first time.

The 2015 Fit shown at the North American International Auto Show in Detroit yesterday is roomier, faster and more fuel- efficient than the current car, while the exterior size is little changed, Tokyo-based Honda said. Along with a new body design and more standard technology, the Fit gets a new 1.5- liter engine that produces as much as 11 percent more horsepower and 16 percent better fuel economy, the company said.

“It’s simply the best Fit to date and, we believe, a new benchmark in the small-car category,” John Mendel, Honda’s U.S. executive vice president, said yesterday. Sales begin in the “late spring,” he said, without elaborating.

While past versions of Fit have been praised by Consumer Reports magazine, the car hasn’t been a big volume hit along the lines of Honda’s Civic, the top-selling U.S. small car in 2013, and the Accord, the market’s second-biggest-selling car behind Toyota Motor Corp.’s Camry. Sales of GM’s Chevrolet Sonic hatchback, at 85,646, and Ford Motor Co.’s subcompact Fiesta, at 71,073, dwarfed Fit’s 52,944 last year.

Yen Impact

With the new car, “we definitely do more,” Mendel said in an interview. He declined to say whether the company’s target was 100,000 annual U.S. sales.

U.S. deliveries of the Honda model, a top-seller in Japan, were limited by the yen’s high value against the dollar that made the import a money loser, said Ed Kim, an analyst at researcher AutoPacific Inc. in Tustin, California. Honda will start making the U.S. Fit at a new plant in Celaya, Mexico, that opens next month.

“Certainly the Fit fills a very important role in the Honda lineup,” Kim said. “The big story is not so much that we’re going to see a huge increase in volume necessarily, but with local manufacturing and a local supply base they can make money on it. Margins on these small cars are pretty thin.”

Once production commences in Mexico, at least 95 percent of the vehicles sold by Honda in the U.S. will be made in North America, Mendel said. Fit would act as a gateway vehicle to Honda as two-thirds of the customers for the model move up to other Honda models, he said.

All versions of the angular Fit come with a multi-angle rearview camera and Bluetooth, Honda said. Options include push- button start, heated side mirrors, a moon roof, heated front seats, a 7-inch touchscreen display with smartphone connectivity and LaneWatch, a camera mounted in the right side mirror to show objects in the car’s blind spot on the center display.

The automaker didn’t immediately provide pricing and volume goals for the car. The company’s U.S. sales unit is based in Torrance, California.

Honda’s American depositary receipts fell 0.6 percent to $40 at 9:32 a.m. in New York. They had gained 5.4 percent in the 12 months through yesterday.

--Editors: Rebecca Keenan, John Lear, Niamh Ring