Honda Regroups Amid Sales Slump

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK (Trefis) -- Honda's(HMC) sales slump continued into November in the U.S., the automaker's largest market.

Year to date, the automaker has seen its sales decline to 5.7 percent compared to last year. Decreased production capacity after the March earthquake depleted Honda's inventories and hurt sales through the second and third quarters of 2011.

Then Thailand floods added more trouble causing parts shortages through October and November that hurt its North American production and sales.

Honda is counting on new model launches and replenishing inventory for a short-term turnaround.

Now Honda is counting on new model launches and replenished inventory to turn around its misfortunes in the short term. It is also aggressively targeting fuel-efficiency technologies to better compete against rivals such as Toyota(TM), GM(GM), Ford(F) and Hyundai.

Our price estimate of $37 for Honda's stock is around 20% above the current market price.

See our complete analysis for Honda stock here.

Honda's six auto production plants in the U.S. and Canada had been making production adjustments since Nov. 2, 2011, due to restricted parts supply from Thailand. But the automaker announced that the parts supply issues have been resolved to a certain level and hence hopes to normalize production from this month. A recovery in its production capacity will help replenish Honda's inventories in the U.S., which in turn will support its sales efforts.

Honda recently announced that it will launch several new Honda and Acura models over the next 24 months, which will help the company recoup the market share that it lost through 2011.

Moreover, Honda is aiming to become the industry leader in fuel-efficiency in every category of its vehicle line-up within three years. Also, by 2020, it aims to cut CO2 emissions across all its products by 30 percent, relative to emission figures for 2000.

To achieve these goals, Honda is targeting six different technologies, which include improvements to its diesel engine lineup, a two-motor hybrid system and electric powertrains. These initiatives will further support Honda's market share growth in the medium term.

You can drag the trend lines in the modifiable charts above to see the impact of these trends on Honda's stock value.