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Once-mighty Honda slips, but Detroit can't celebrate yet

Honda. For years the name struck fear and awe into the U.S. auto industry.

But with a strong yen forcing up prices and with many Detroit models flourishing on the strength of improved quality and creative design, Honda Motor Co. is stumbling _ still profitable, but not the powerhouse it once was.

From 1989 through last December, for example, Honda's Accord was the best-selling car in the United States, and the company's smaller Civic and sporty Prelude sold well.

Honda was in the forefront of companies that were shifting production to the United States, reducing costs through efficient production techniques and exporting cars back to Japan. And Honda, with the Acura, was the first Japanese automaker to bring luxury cars to America.

But now sales of most Honda models are tepid. Only months after the Accord was barely edged out by Ford's Taurus as the best-selling car of 1992, sales of Accords have plunged almost 35 percent, and this year the car is not even in the top five.

Even worse for Honda, the company, once so canny, was caught flat-footed in the fast-growing markets for minivans and four-wheel-drive sport-utility vehicles, which many Americans buy as a substitute for cars. Honda, alone among the large automakers, offers no competition for Chrysler's successful minivans or Jeeps and their many competitors.

Few auto industry people believe Honda's wounds are mortal, and Honda itself says a wave of new designs will soon rekindle its growth and popularity.

Indeed, Nobuhiko Kawamoto, Honda's president, has been exhorting staff members to set their sights high and surpass the much larger Nissan Motor Co. as the No. 2 Japanese automaker, after Toyota, by the end of the decade. That would require higher sales in the United States, Honda's largest market.

Indeed, Honda's decline has been so swift and unexpected that automotive rivals, particularly Detroit's Big Three, cannot figure why the tables have turned. Indeed, a stunned U.S. auto industry is not willing to believe the sky has opened to drop a house on the wicked witch.

Honda "didn't get dumb overnight," said Arthur C. Liebler, vice president for public relations at Chrysler. "They will be back."

Like Honda, Nissan and Toyota Motor Corp. have been hurt by the strong yen and the worldwide economic slump. The yen's value against the dollar has increased 15 percent in 1993 alone, forcing the Japanese to raise prices more sharply than overseas competitors to maintain profit margins.

Last week, six of Japan's nine big automakers reported earnings for the last fiscal year; collectively they were down 76 percent.

But the strong yen does not fully explain the problems at Honda, which was the only major Japanese automaker with declining sales in the United States in 1992. That forced Honda to cut back production at its plants in Marysville, Ohio, and in Japan.

This year has been no better. In May, for instance, Honda's sales were flat, while Toyota sold 12 percent more cars and 15 percent more light trucks than in May 1992. Nissan sold 24 percent more cars and 48 percent more trucks.

Theories abound about why Honda is stumbling, but no one questions the quality of its cars. Rather, many people in the automotive industry say, Honda has had more difficulty than most automakers in keeping up with changing tastes and demographics.

"The other models are just getting better, and the service at other dealerships is getting better, too," said George Peterson, president of AutoPacific Inc., a California automotive marketing firm.

In Honda's early days in the U.S. market _ the mid-1970s _ the marketing message focused on value, emphasizing practicality and a low price, said Leon Mandel, editor of Auto Week magazine. Many of Honda's first buyers were young, and they bucked the conventional wisdom that Detroit's cars were best.

In 1990, an Accord sold for less than $16,000, less than the American cars with which it competed.

Today it sells for nearly $19,000, more than its Big Three rivals.