Why Honda is spending on shrinking segment
On its face, the announcement was a head-scratcher.
Honda, an automaker known for its conservative approach to expanding production globally, revealed in September that it was adding 300 new jobs in Ohio and pumping $267 million into production of the 2018 Accord midsize sedan.
That's a bold move considering the headwinds the 10th-generation Accord — and all midsize sedans of its ilk — are facing.
For the first nine months of 2017, the segment has contracted 15 percent vs. the same period a year earlier, to 1.4 million vehicles. Every model in the category has seen a sales decline in 2017, most by double digits. In 2016, segment sales dropped 12 percent overall.
Of course, sedan sales have been slipping for years, and it's not something that's expected to stop: IHS Markit forecasts the segment will account for 1.8 million sales in 2020 and 1.72 in 2025.
"I'm not sure that the sedan segment in the U.S. will ever be as large as it was 10 years ago," said Mike Ramsey, a research director at Gartner. "Even if we settle out at 16 million [SAAR], the percentage going to sedans is likely to keep flat or decline."
While that may make Honda's $267 million investment seem out of step, alas, the devil is in the details.
Honda's investment is less a story about expanding its capacity for building Accords and more about facility and technology upgrades that were necessary for the new model.
A bulk of that investment was for the company's Marysville, Ohio, plant where the Accord and Acura TLX and ILX are built.
The welding department, new from the ground up, features 342 new robots and accounted for $165 million of the total investment. This brings to the Accord a construction technique called Inner Frame that saves weight and boosts chassis stiffness.
Honda uses a new laser brazing process on the 2018 Accord to join the roof to the body side panels (eliminating that black plastic garnish many sedans use to cover the rain channels).