LOS ANGELES--Honda's U.S. executives have pledged for years to make Acura a top-tier luxury brand, on par with Lexus, Mercedes, and BMW. Dealer Dave Conant is gambling $20 million that this time Honda will succeed.
That's how much Conant spent to upgrade his Acura dealership in suburban Los Angeles. The renovated store opened in May.
"We invested in this facility on the bet they really mean it," Conant told Automotive News.
Jeff Conrad, vice president of American Honda Motor's Acura division, concedes that dealers' expectations are high. He says Acura is working to improve its vehicles, marketing, and retail network. But achieving those goals will take time, he warns.
"Every product we launch becomes more of a Tier One product." Conrad says. "But you don't just snap your fingers and do it overnight. It is a long-term effort."
The redesigned 2009 Acura TL, a compact sedan that emerged from the brand's new design center in Torrance, Calif., is competitive with better-selling luxury models in styling and performance, Conrad says.
The TL has a 3.5-liter, V-6 engine and offers all-wheel drive as an option. It went on sale this fall with a base sticker price of $34,955, including shipping.
Acura dealers say they like the revamped TL. But T.Y. Lai, COO of the western region for DCH Auto Group, says sales of the redesigned model have been disappointing.
"We don't consider it luxury yet," says Lai, whose company owns four U.S. Acura dealerships. "I don't think the buyer considers it luxury."
Conrad says the marketing launch for the redesigned TL is Acura's most expensive campaign. He declined to disclose its budget.
RPA, American Honda's advertising agency, created an Acura division last year. The TL campaign is the first for the new unit. Its tag line: "The most powerful Acura ever built."
Wanted: Broader lineup
Acura needs a wider selection of products, Lai says. The brand offers models in five market segments. Lai complains the brand is "not even considering a hybrid."
Conrad says Acura will launch a "new or reskinned" vehicle every year for the "foreseeable future." He declined to discuss which segments Acura plans to enter.
Acura must offer vehicles in higher-priced segments if it wants to be considered a Tier 1 luxury brand, says Tom Libby, senior director of industry analysis at J.D. Power and Associates.
Such vehicles would "contribute to the reputation for luxury," Libby says. Acura especially needs to compete in the segment that includes the Mercedes E class, BMW 5 series, Audi A6, and Infiniti M series, he says.
A replacement for Acura's most expensive model, the $46,000 Acura RL, is due in 2010. Dealers say Acura must offer buyers a V-8 engine as an option if the car is to be considered Tier 1.
"To elevate the brand, they gotta have it," says Mark McKellop, general manager of Acura of Mission Viejo in suburban Los Angeles.
In April, Acura told U.S. dealers that the brand plans to bring out a V-8 within 18 months. In October, Honda Motor CEO Takeo Fukui said that Acura would offer a V-8, but he did not suggest a timetable.
Acura has formed a 25-person team of executives to define how it will achieve Tier 1 luxury status. John Mendel, executive vice president of automobile operations at American Honda, heads the team.
Conrad says the brand is forming Acura University, which will offer personal and online training for dealership sales, service, and finance employees.
Acura also is showing dealers a computer simulation of what it wants its dealerships to look like, Conrad says. Among the features the brand seeks: larger and fancier facilities for sales, service, vehicle delivery, and customer reception. A few Acura dealerships, such as Conant's upgraded store, already reflect that vision.
Conrad declined to discuss how much Acura expects its dealers to spend to improve their stores. He concedes dealers are likely to resist spending demands in a down market. But he says: "We are going to ask them to invest just as we are investing."
Too far too fast?
Some dealers warn Acura against trying to step up in class too quickly.
"They immediately say they want to be like BMW, like Mercedes, like Lexus," says John Hawkins, president of Great Metro Autogroup, a suburban Los Angeles dealership group that includes an Acura store. Instead, Hawkins says, Acura should aim first to "compare themselves with Infiniti and Audi."
Hawkins also calls Acura's management too "process-driven," lacking "bold, imaginative" leadership.
"There's not a Bob Lutz over there," he says. "There's not a Jim Press."
DCH's Lai offers a more measured appraisal of Acura executives.
"This will not be a smooth road," he says. "But at least they are headed in the right direction."
(Source: Automotive News)