Honda CEO shuffles top leadership, wants to refocus on design – Columbus Dispatch

Posted: Sunday, March 06, 2016

Honda’s CEO, less than a year into his tenure, has sent ripples across the company’s global
footprint with a management shakeup and calls for a course correction.

The underlying message from Takahiro Hachigo is this: Honda needs to focus on the basics of
design and manufacturing, and the management structure needs to support this.

“The management, including myself, must lead in changing our mindset, and every associate needs
to change their perception and the way they work,” he said at a recent news conference in Tokyo,
translated from Japanese by Honda. “We need to realize a renovation of Honda’s manufacturing.”

The corporate changes will allow for “simple and speedy decision-making,” he said.

Analysts see this as an attempt to fight complacency while also dealing with some nuts-and-bolts
production challenges.

Honda has about 14,300 employees in Ohio, including at assembly plants that make the Accord,
CR-V and other models. Any big moves will have effects here, although it is too early to say what
may change for workers.

Hachigo’s 25-minute speech closely followed the announcement of job changes for about two dozen
senior executives. The new CEO for North America is Toshiaki Mikoshiba, who is coming over from a
similar role in Europe. He is replacing Takuji Yamada, who has been on the job for two years and
will serve as “senior managing officer” until his retirement. The North American chief spends much
of his time at offices in Marysville, where Honda maintains its largest manufacturing plant in the
continent.

On Friday, Honda sought to explain the changes to its Ohio employees in the form of a written
Q&A with Yamada. One of the questions: “Did we somehow get away from our core practice?”

Yamada replied that Honda has focused too much on differentiating itself from other automakers,
and not enough on its own innovations. “From now on, we will focus on our own ‘product concept’ by
thinking more clearly about the daily lives of our customers,” he said.

Hachigo, who came up through Honda’s research and development side, became CEO in June and said
he would aim to fix problems with vehicle quality. His actions in the past few weeks are signs that
he was not pleased with the pace of changes, according to analysts.

By many indicators, Honda had a strong 2015 and early 2016. It set a U.S. sales record,
exceeding the one from 2007. The redesigned Civic compact car has been a sales success and was
named North American Car of the Year.

But there are some lingering concerns. The company continues to deal with recalls of Takata
Corp. airbags, an issue that has affected Honda more than any other automaker. Honda’s newest
plant, in Celaya, Mexico, has had a series of delays that pushed back last year’s debut of the HR-V
compact crossover. Also, the new Civic had a recall last month because of an engine defect.

“Honda is trying to resurrect and reignite that spark,” said George Peterson, president of
AutoPacific, a research firm in Tustin, Calif.

He thinks Honda wants to get back some of the spirit it had from the mid-1980s to the mid-1990s
when its vehicles had industry-leading reliability and design. “They were doing some spectacularly
good cars that were very well-made,” he said.

Jack Fisher, director of automotive testing for Consumer Reports, says Honda has become
“excruciatingly conservative.”

“I think you could say they’re feeling the heat,” he said. “They’re feeling the heat from the
Koreans, which are coming on strong with Hyundai and Kia brands, and from the domestics, which have
really reinvented themselves.”

It should be noted that Hachigo is far from the first Honda leader to talk about a need to get
back to basics of design and manufacturing. This is indicative of Honda’s culture of frank
self-criticism. And yet, these recent comments seem to rise above the routine, said Stephanie
Brinley, a senior analyst for IHS Automotive.

“What I think is interesting is (Hachigo’s) desire to address issues quickly,” she said. He
could have made the same changes over several years, but chose to do so with much more of a splash,
she said.

Honda also has made some changes in production to better use some plants that were operating
below capacity, including the following:

• The company is making the Civic Hatchback in Europe for export to North America.

• The Fit subcompact and Accord Hybrid are being made in Japan for export to North America.

• The Acura MDX crossover will be assembled in East Liberty, Ohio, in addition to its current
home in Alabama. This will free up some capacity in the Alabama plant.

• Honda is considering making some of the Civic and CR-V in Japan for export to North America,
but would maintain the production already taking place on this continent.

Tucked among the other announcements was a new commitment to electric vehicles. Hachigo said
that by 2030, two-thirds of Honda’s vehicles should come from all-electric or hybrid.

In all, the speech could be seen as a blueprint for Honda at a time when the industry is already
going through rapid change.

“Through the initiatives that I have explained, what Honda wants to aim at is to expand the
possibilities of customers’ lives and create smiles and joy,” he said.

dgearino@dispatch.com

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