Sun, Sep 10, 2017 - Page 7 News List

How Honda lost its mojo and the mission to get it back

A failed 2012 Civic redesign and complaints by company talent of ‘indentured servitude’ have shaken Honda’s competitiveness, but a small group is working behind the scenes to bring it back

By Norihiko Shirouzu  /  Reuters, TOKYO

Illustration: Louise Ting

The driver punched the air as his red-and-white Honda McLaren roared over the finish line. It was 1988 in Suzuka, Japan, and Ayrton Senna had just become Formula One world champion for the first time. The McLaren racing team and its engine maker, Honda Motor, were unstoppable that year, their drivers winning all but one of the 16 grand prix races.

Off the track, Honda was also tasting success. In the 1970s, its engineers had raised the bar for fuel efficiency and cleaner emissions with the Compound Vortex Controlled Combustion engine.

In the 1980s, as its engines were propelling Senna to multiple victories, the Civic and Accord cars were redefining the US family sedan. In 1997, Honda became one of the first automakers to unveil an all-electric battery car, the EV Plus, capable of meeting California’s zero-emission requirement.

Jump forward nearly 30 years from that Senna moment and Honda is flailing. On the racetrack, the Honda McLaren partnership is in trouble: The team is without a single win this season and McLaren is losing patience with its engine supplier and speaking of parting ways.

On the road, the Honda fleet has been dogged by recalls. More than 11 million vehicles have been recalled in the US since 2008 due to faulty airbags. In 2013 and 2014, there were five back-to-back recalls for the Fit and Vezel hybrid vehicles due to transmission defects. Honda has lost ground in electric cars to Tesla and others.

“There’s no doubt we lost our mojo — our way as an engineering company that made Honda Honda,” chief executive officer Takahiro Hachigo said.

Hachigo joined Honda as an engineer in 1982 and became chief executive in June 2015. He wants to revive a culture that encouraged engineers to take risks and return to a corporate structure that protected innovators from bureaucrats focused on cost-cutting.

To help him achieve this, he says he has tapped into the ideas of a small group of Honda engineers, managers and planners. This group is modeled on the freewheeling “skunkworks” teams that drove aircraft development at Lockheed Martin, computer design at Apple and self-drive technology at Google.

In interviews, more than 20 current and former Honda executives and engineers at the company’s facilities in Japan, China and the US recounted the missteps that they say contributed to Honda’s decline as an innovator. They also revealed details of the firm’s efforts to rediscover its creative spark.

They said Honda had become trapped by Japan’s monozukuri (“making things”) approach to manufacturing. This culture of incremental improvement and production-line efficiency, called kaizen, served the company well in the decades after World War II, they said, but today’s challenges — electrification, computerization, self-driving cars — demand a more nimble and flexible approach.

Most importantly, over the past two decades, company executives in Tokyo were given too much control over research and development (R&D), they said. In their view, this led to shareholder value being prioritized over innovation. There was a reluctance to draw on talent from outside Japan.

In its quest to deliver for shareholders, Honda sought to maximize volume and profit and match the product range of its main Japanese rival, Toyota.

“The upshot was, as we obsessed about Toyota and beating it in the marketplace, we started to look like Toyota. We started to forget why we existed as a company to begin with,” Honda R&D president and chief executive Yoshiyuki Matsumoto said.

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