Honda's Lindsay Smalley - Face behind the Brand

Lindsay Smalley - Senior Director of Honda Australia

With a product lineup that seems to go from sporty excitement to basic daily transport in cyclical waves, Honda has had its ups and downs with subsequent regular changes of the guard.

However, one person who has been there through it all is current Senior Director, Lindsay Smalley. Having joined the company 17 years ago as IT Manager, Smalley has been a director since 2001 and was promoted to his current position two years ago.

Prior to joining Honda, Smalley worked in IT in the public sector and before that spent 13 years with GMH.

Smalley We have a car for every segment of the market. Starting with the light car sector we have the Jazz variants, 1.3-litre and 1.5. Moving into the small car segment, we have the new Civic that we have just launched including the sports 2.0-litre version as well as the hybrid. In the medium car segment we have the Accord Euro, which has been a stunning success in the marketplace, and the larger wide-bodied Accord including a V6 in that range.

In the SUV segments, we have the CR-V with quite a few variants in that range, starting at $29,990, which is quite aggressively priced. In the large luxury SUV segment we have the MDX. In our sports range we have Integra including S-type model and S2000 super sports car. Then we have the Odyssey people mover and there is a new Legend luxury sedan coming.

Smalley Certainly the Civic hatch would be very good for this market. That may or may not eventuate depending on the cost of production in the UK and exchange rates. Whether Honda Motor will shift production to the Asian region I don’t know but we are certainly keen on that car.

CarPoint Anything else?

Smalley I think we really have a full plate at the moment. Every car that we have in each segment is performing well.

CarPoint Do you think you are still well-catered for in the sports arena -- we used to have Prelude and at the top of the range, the NSX?

Smalley Honda has its roots in sportscars and Integra is a good car in that range and S2000 is a great sportscar. We have just introduced a Euro Sport as well and I sure that there might be other sporty opportunities across our range in the future.

CarPoint Looking at the range, what do you think buyers are looking for in terms of models and what are their main priorities in each segment?

Smalley Certainly segments vary quite drastically along with the price and for Honda I think the common denominator is that people are looking for high quality, value for money, good technology, fun to drive, 21st century type solutions to personal transport.

CarPoint What do you think makes Honda products different to their competitors in the respective segments?

Smalley Almost in every one of our vehicles that we sell, to me they demonstrate clear leadership from an engineering, environmental and fun to drive point of view. They are a 21st century products. They are not bound up by tooling investment decisions made in the 1950s where people are still crunching out cars based on that type of technology.

CarPoint Different market segments appeal to different sort of customers but can you give me an idea of what sort of customers Honda is targeting?

Smalley Honda has traditionally appealed to professionally qualified and small business people. They are generally private buyers -- the vast majority of our market is private -- well-educated, medium to high income demographic.

CarPoint Just looking at the factors that customers look for when buying a new car across the segments, how would you rate Honda products, in terms of safety first of all?

Smalley Safety is something that we don’t beat a loud drum on from a marketing point of view but Honda vehicles always perform exceptionally well in the independent ANCAP and EuroNCAP tests. All of our cars are fitted with ABS brakes across the range; they all have dual airbags across the range including our entry-level Jazz. Whenever Honda develops a car, it has these huge crash labs that dynamically test car against car as well as barrier testing. The fundamental testing is real life type testing of crash performance.

CarPoint You mentioned fun to drive as one of your core attributes, how would you rate Honda products in terms of their driveability?

Smalley The driveability obviously changes depending on the segment but no matter what the segment they all provide an absolute surety of performance from the steering and braking point of view and within the scope of the car, top-class handling.

CarPoint What about in terms of fuel economy and emissions. Obviously you have a hybrid version of the Civic?

Smalley Fuel economy and low emissions have really been built into Hondas since the early 1970s. In fact, Honda was the only company to produce a car that met the Californian regulations without having to clamp on catalytic converters back in the early 1970s -- that focus on environment and fuel economy has been here from day one.

We have moved very quickly towards Euro IV, the majority of our volume models now meet Euro IV emission standards, well in front of government regulations in Australia. The new Civic we have just released achieves Euro IV and runs on standard unleaded petrol.

If you look at the average fuel economy across our range starting with Jazz, in the field a 1.3-litre Jazz gets around 5.5lt/100km in real world conditions, the new Civic is just under 7 and the Euro certainly under 9lt/100km. I actually drive an MDX and my average fuel consumption is 12.2 and it’s a very big car. Odyssey is also a standout on fuel economy.

CarPoint You have a hybrid Civic, would you like to see more hybrids across the range? The other alternative fuel that everyone is looking at at the moment is diesel, where does Honda stand on that?

Smalley Honda has developed its own diesel technology and launched it in Europe about 18 months ago in Civic, Accord and CR-V. The engine has won multiple awards for low emissions and wonderful performance. We currently have an Accord diesel in the country and we are testing and evaluating that. Diesel itself still doesn't have a huge following in Australia, there is a problem with a lot of the logistics; the dirty filling stations, the odd sized nozzles, the wonderful aroma of diesel. Unless something is done in the fuel logistics area diesel will have a following but not as strong as petrol.

CarPoint Do think there is more opportunity then for hybrids?

Smalley Hybrid technology is wonderful technology but Honda doesn’t see that as the final solution, that is more fuel cell technology. So Honda believes that hybrid technology will be around for the next 10-15 years before the next big step to fuel cells. During that 10-15 year period, I'm sure the Honda hybrid solution can be fitted to any type of petrol or diesel reciprocal engine.

CarPoint So will we see more hybrid Hondas in Australia?

Smalley Possibly in the future but at this stage we need to separate the marketplace reality and public acceptance from some of the early enthusiasm, particularly in the press area. We are targeting 100 a month on Civic hybrids, about 10 per cent of our sales, so it is early days and let's see how we go with this one. If the public accept it warmly then certainly we will see if we can extend it across to other models as and when Honda bring those on line.

CarPoint What about in terms of creature comfort features: how would you rate Honda products on that?

Smalley We have had a tight focus on value for money and affordability since about 2001, so every car that we have in the marketplace generally comes with a rich range of features and creature comforts. The new Civic is a prime example of that. When customers first see the car they can't believe that they don’t have to buy other bits and pieces, it is a complete package.

CarPoint Honda sources a number of products out of Thailand. Has that had a positive influence on the value and affordability that you are able to offer customers?

Absolutely. We source wide-bodied Accord and Civic from Thailand at this point in time (Ed: Jazz is now Thai sourced too). With those vehicles we have passed on the duty saving fully to consumers and that has allowed us to reposition the cars in the market and pick up a lot more volume.

CarPoint Is there any particular area that you feel Honda still needs to improve?

Smalley Honda spends about $5 billion a year on R&D to seek further improvement so I don’t think you can ever be satisfied in such a dynamic market as the car industry. I am happy with what I have got and what we currently have in Australia, from my experience, is the richest, most comprehensive model line-up, beautifully engineered for the 21st century. I am just waiting to see what Honda will come up with next from its R&D operations.

Smalley We have got around 95 dealers at the moment. As our volume increases we would certainly be increasing the number of sales and service outlets but our intention is to maintain roughly the same number of dealers but allow them to extend their own networks around the country.

CarPoint Are there any particular areas where you see they might be needed?

Smalley Certainly in most capital cities there is rapid expansion happening, suburbs going out and demographics changing and our intention is to be where the action is. As our volume increases, open points that weren't viable with smaller volumes are now becoming viable so our intention is to have more Honda dealers in smaller rural country towns.

CarPoint What is Honda doing to improve dealers from a customer's perspective in terms of the facilities that they offer and the showroom appeal?

Smalley We have a very strong relationship with our dealer council and in cooperation with it we have established minimum standards for every Honda dealer. Along with the dealer investment to meet those standards, Honda Australia has also provided support programs to ensure that as our business grows, our facilities will properly reflect our brand.

But facilities is only one aspect, clearly there are standards as far as behaviour is concerned in the sales process and also sales techniques. Again we work closely with the dealer council and we invest a lot of money in sales training.

We have recently launched a traineeship program for sales people across the country where dealers will employ a junior salesperson and through the national apprenticeship scheme, within three years they go out the door as a fully-accredited Certificate 3 salesperson.

As far as our service operations are concerned we have regular training regimes and we measure everything we do. We seek direct feedback from customers all the time and we have quite sophisticated monitoring programs to see where we can improve our performance and also to identify problems to quickly recover.

The dealer is provided with detailed survey results on every sale and salesperson so performance is measured for every car that we sell.

CarPoint Does Honda offer any other services such as branded finance or insurance?

Smalley Both Honda Finance and Honda Insurance are part of our portfolio.

Smalley From a parts point of view we set our parts pricing mid-point against all of our competitors, so historically Honda has had a challenging position with parts pricing but about four years ago we cut our parts pricing to make sure that we are always mid-point. If we are up against Toyota and Nissan and Mazda we make sure that we are always in the middle of that pricing regime.

For service, as the technology on the cars changes the requirement for service drops and a lot of our cars are highly competitive. If you look at the total hours required to service a car at 200,000km Honda is again virtually mid-point between all the key volume players.

CarPoint Time requirements are obviously coming down but labour rates have gone up, so where would you sit in terms of five years ago?

Smalley Costs have come down dramatically. We can't control labour rates, that is a function of the site of the dealership, the wage regimes in various states etc. But if you look at the number of hours required to service a Civic for example, at 200,000km that has almost halved over the last three generations.

As an example on the new Civic we have abandoned the timing belt, which was quite a high cost maintenance item at about 80,000km. We now have an enclosed timing chain with its own oil pump that is maintenance free. Those types of technology changes have cut the cost of servicing dramatically.

CarPoint The biggest cost to customers is depreciation. Where would you say Honda vehicles sit in terms of their residual values and is there anything Honda is doing to try and improve them?

Smalley Honda's residual values historically have been very high. It is quite difficult for people to buy a used Honda generally.

What we find when a customer comes in to swap their car is that the Honda has been passed on to someone else in the family - the son, the daughter, the sister-in-law - so there is not a big population of used Hondas in the market. Those that are there tend to be traded privately. Residual values are very high and if you look at the guides like Glass's, they are well ahead of the industry.

One of the key reasons apart from that people love their Honda, is that we do not participate in major fleet or government contract sales, we do not discount our product from the start.

Certainly what we have noticed is that the companies that are heavily involved in large fleet or rental car business, when a large fleet decides to dump 1000 cars onto the market, it just destroys used values for that particular brand.

CarPoint The market in Australia is obviously enormously competitive, if you're pitching to Joe Punter out there, why should he buy a Honda over the competition?

Smalley Honda offers high quality, value for money, fun to drive, environmentally-friendly personal transport solutions for the 21st century.