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

“I already had my pants down to my ankles — nothing more to shed,” Horikoshi said.

When the 2012 model year Civic went on sale in 2011, it was met with a barrage of criticism. Influential US magazine Consumer Reports dropped the car from its recommended list for the first time since it began rating vehicles in 1993. It criticized the new Civic for a poor quality interior and uneven ride.

Matsumoto said the episode is a lesson that creativity should not be sacrificed on the altar of shareholder value. During previous assignments for Honda in Thailand and India, Matsumoto said he had looked at the headquarters from afar and recognized a lack of creativity there.

“We have to be allowed to go wild at times. If you operated a technology center only from an efficiency perspective, you’d kill the place, which is exactly what happened at Honda. We don’t want headquarters people telling engineers what to do,” he said.

Honda went back to the drawing board. The redesigned model that replaced the 2012 Civic was named last year’s North American Car of the Year.

Ito and Fukui did not respond to questions about the Civic. A former senior executive said the decision to reduce costs was taken in the context of a global economic slowdown. Honda’s chief spokesperson, Natsuno Asanuma, said the focus on shareholder value under previous management was “for the sake of the company’s future.”

Honda failed to keep up with developments in suspension and transmission during Fukui and Ito’s tenure, but the firm was doing well enough financially, which masked the problem, IHS Markit Automotive Asia-Pacific chief of consultancy James Chao said.

“One could argue that Honda nonetheless performed nearly as well with the lower investment, but it was hard not to see that they were no longer leading in some technology areas,” said Chao, who is based in Shanghai.

Honda’s rivals, such as Ford, were not reining in costs to the same degree, Chao said.

At the same time as Honda bosses were tightening the budget for the 2012 Civic, they were also looking for savings in R&D.

Other car firms were investing heavily in “green” technology, an area where Honda had already established itself as a leader with the unveiling of its EV Plus battery car in 1997, one of the first electric vehicles from a major automaker.

However, just as its competitors were investing more, Honda began holding back.

Fukui, who became chief executive in 2003, felt Honda was engaged in too many areas of research, four current and former executives and engineers said.

As a result, Honda scaled back work on plug-in battery electric vehicles and put its faith in the hydrogen-fueled car.

By the time Honda turned back to plug-in cars in the late 2000s, it had already lost several years to its competitors. Honda finally came up with a competitive plug-in car in 2013, 16 years after its original EV Plus. It is still playing catch-up with the likes of Tesla.

Fukui did not respond to questions from reporters. Two former engineers said Fukui was calculating that advanced battery technology would become commoditized, and so Honda would be able to buy it in if necessary. This assumption was correct, the former engineers said.

FRUSTRATED TALENT

For too long Honda has overlooked the potential of its workforce outside Japan and that has harmed the firm, said Erik Berkman, a former head of Honda’s technology unit in the US, the automaker’s biggest market.

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