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

Honda’s revenues have grown strongly since 2000. Its operating margin stood at 6 percent in the financial year that ended on March 31, compared with 7.2 percent at Toyota.

However, Honda’s cars have slipped down quality rankings, from seventh in market research firm J.D. Power’s initial quality study in 2000 to 20th this year.

CIVIC LOSES ITS SHINE

Striving to satisfy shareholders meant controlling costs.

Honda’s chief executive from 2003 to 2009, Takeo Fukui, broke with the firm’s tradition of giving technology managers discretion over how to spend the approximately 5 percent of revenue allocated to the tech arm, the current and former Honda executives and engineers said.

When Takanobu Ito replaced Fukui as chief executive in 2009, he further tightened control over the design phase.

He did this by moving several senior posts in the tech division to corporate headquarters in Tokyo from the R&D unit, whose main automotive center is near Utsunomiya, an hour north of the capital by bullet train, the sources added.

Neither Ito nor Fukui responded to written questions from reporters.

Honda’s popular Civic car was one of the casualties of these changes, the engineer in charge of the model’s redesign beginning in 2007 said.

With a reputation for outstanding engineering, reliability and affordability, the Civic was one of Honda’s top-selling cars.

“Right from the get-go, the program was about making cost savings in real terms,” redesign chief engineer Mitsuru Horikoshi said.

To that end, the global automotive business unit, headed at the time by Ito, and the tech division decided that the redesigned Civic would use many of the same components and systems as the previous model, including the front and rear suspension systems and the front section of the car.

Horikoshi had finished a first design setting down the basic engineering points by February 2008 and a more detailed design by April. When rising gasoline, steel and other prices pushed up manufacturing costs by US$1,200 to US$1,400 per vehicle, Horikoshi’s team refined their design to improve the car’s fuel economy. In early July 2008 they sought management approval for their plan at a meeting in Torrance, California, Honda’s US sales headquarters.

Ito said he would review the design overnight, Horikoshi said. The next morning, Ito came back and told the team to make the car smaller and cheaper to produce, and to complete the redesign by the end of that month.

“With one blow of a cost chopping knife, Ito basically told us to take our design back [to the first plan]. It’s just unheard of. It was unprecedented,” Horikoshi said.

To meet Ito’s specifications, Horikoshi used cheaper materials and made the car smaller, cutting its length by 45mm and its width by 25mm. He also reduced the wheelbase, the distance between the front and rear axle, by 30mm.

A former leader of Honda’s R&D unit said the firm “lapsed deeper into a bunker mentality and that translated into our products. It was cut, cut, cut and it cheapened our cars.”

By the end of 2008, Horikoshi’s team was wrapping up the Civic design. Half a year behind schedule, they were still US$200 short of the cost target per car.

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