Reports that tell in excruciating detail of payments made by hungry dealers who needed more cars or wanted new territories to Honda employees who brazenly demanded everything from expensive watches to cars to oblige surfaced in The New York Times two weeks ago under a banner headline that read 'Honda's Ugly Little Secret.' Since then, local media has picked up on a story that had largely been confined to the automotive trade press.
Honda responded quickly to the Times story, sending letters to dealers to alert them to the possibility that the piece could be picked up locally as well. Honda also reassured dealers that its strict policy regarding conflicts of interest is aggressively enforced. But while the company concedes that the incidents have tainted Honda's image, there are no plans for a broader program of damage control that would address the potential negative impact of the story on the car-buying public.
'It's of concern, naturally, whenever something is run that negatively impacts the company's positive image,' said a spokesperson at Honda's Torrance, Calif., offices last week. 'But these are old charges. They do not involve any current employees, and they're being made by people who are involved in litigation and who stand to benefit financially.' Still, the federal Bureau of Investigation is looking into the matter for possible 'executive corruption.'
Crisis management experts wonder whether consumers will see it the same way. 'Why should the public differentiate?' said Dr. Ian Mitroff, director of the University of Southern California Center for Crisis Management in L.A. 'One of the things companies do is they confuse their internal structure with that of the outside world. I think Honda's got a real problem.'
During the time period in question, the demand for Honda was outstripping the supply by a wide margin, and as a result, consumers often paid prices above sticker for the cars. But Mitroff believes that consumers may not understand that distinction either. 'Haggling over price with the dealer is not a pleasant experience and you don't come in with a lot of trust,' he said. 'Now how do you know that that price doesn't reflect an increase because of the kickbacks?'
So far dealers are content to let the issue ride, believing that they and Honda have a more pressing problem in the down market, where 1993 sales plummeted 17.9% to 116,501 through March, according to The Power Report.
'I don't think Honda needs to respond publicly,' said David Conant, National Dealer Council chairman and vp of Norm Reeves Honda Superstore in Cerritos, Calif. 'It's an account that has a golden image, and I think that's the possible downside, that it taints the image, but I don't think people sit down to buy a Honda and wonder if someone's getting hit.'
That may be true so long as press reports don't spread widely. When it was discovered that some Chrysler dealers had turned back the odometers on some cars and sold them as new, then-chairman Lee Iacocca hit the airwaves and accepted full responsibility. 'Chrysler's sales went up because people reckoned that if he was telling them the truth there, he was probably also telling the truth in that ad which says Chrysler makes a good car,' said Greg LaBrache, senior vp/head of the media relations division of Hill & Knowlton in L.A. 'If it turns out this story has more currency and legs, then maybe that kind of an announcement should be made by Honda too. Certainly Honda should have in its pocket a standby statement that has a lot of the same elements.'
Copyright Adweek L.P. (1993)