Football fans still are buzzing about one of the most exciting Super Bowls in recent memory. The big game also generated tons of buzz for the auto industry, as General Motors (NYSE:GM), Chrysler and Volskwagen (PINK:VLKAY) all delivered memorable advertising spots. Even Ford (NYSE:F) got some attention as the butt of a humorous ad for GM’s Chevrolet Silverado.
One company that failed to generate much positive attention from its Super Bowl commercials was Honda (NYSE:HMC). The Japanese auto giant tried to make a splash with a star-studded Acura NSX spot featuring Jerry Seinfeld and Jay Leno, and with its Ferris Bueller Honda CR-V ad featuring Matthew Broderick recreating his iconic ’80s character. In my opinion, both of these ads fell flat.
For Honda, the lackluster advertising spots coincide with the company’s recent corporate struggles. Natural disasters such as the Japanese tsunami and the floods in Thailand teamed up to thwart production and cause sales to sink last year, and the company’s newly designed Civic model laid a huge egg. The Civic was such a disappointment that Honda actually went back to make additional changes to the model.
Yet despite the natural disasters, and the man-made Civic misstep, Honda — as well as HMC shares — are off to the races in 2012.
Click to Enlarge The company’s sales in the U.S. rose 8.8% in January, which represents a U-turn from the previous eight consecutive months of sales declines. Buyers also have provided fuel to HMC shares. The stock is up more than 16% year-to-date, and it has surged nearly 33% since falling to its Nov. 23, 2011, low. So, from a trader’s perspective, Honda is running full-throttle.
The recent positives for Honda sales, as well as the share price move, are encouraging for investors; however, there still are a lot of roadblocks ahead for automaker.
First, the company’s market share fell to 9% in 2011. That’s well below its market share of 10.6% in 2010. It’s also the lowest level of market share for Honda since 2005.
The company also got pulled into pit lane by Moody’s Investors Service. The ratings agency cut Honda’s credit-rating outlook to negative from stable, citing the “significant challenges” Honda faces in regaining that lost market share.
Honda also faces stiff competition from Toyota (NYSE:TM), Chevrolet and Ford, as all three rivals are making attractive alternatives to the Civic, as well as to Honda’s other bread-and-butter model, the Accord. However, Honda plans to bring a redesigned version of the Accord to market in the fall, so that could give the company’s bottom line a nice boost toward the end of the year.
For now, HMC shares are running hot, as traders jump on the latest bullish uptrend. However, without substantive gains in market share, and without a continued rebound in sales, HMC shares ultimately could stall.
As of this writing, Jim Woods did not hold a position in any of the aforementioned securities.