Honda executives to take pay cut after fifth Fit hybrid recall – Reuters

Posted: Thursday, October 23, 2014

TOKYO (Reuters) – Honda Motor Co (7267.T) said on Thursday its president and 12 other executives would take an unprecedented, quality-related pay cut after the Japanese automaker announced the fifth recall in a year of its new Fit hybrid model.

The recall, which covers 425,825 Fit hybrid vehicles and other models in Japan, comes as Honda is facing lawsuits due to accidents involving airbags supplied by Takata Corp (7313.T). The airbags have been linked to four deaths – all on Hondas – and have triggered a multi-million vehicle recall by many automakers worldwide.

“We have inconvenienced many customers, and we’re deeply sorry,” Honda spokeswoman Akemi Ando told reporters after announcing the latest Fit recall. Shares in Honda ended down 1.4 percent on Thursday, underperforming the benchmark Nikkei average .N225.

No injury or death has been reported from the defects, as with the previous four recalls, Honda added.

The recall will cost about 5.7 billion yen ($53 million), and the impact on earnings is minimal, Honda said. The overall cost of the five recalls involving the Fit hybrid now stands at 16.5 billion yen, it added.

Because the recall highlighted quality concerns, the company said that over the next three months, Chief Executive Takanobu Ito will take a 20 percent pay cut while other senior executives including Chairman Fumihiko Ike and Executive Vice President Tetsuo Iwamura will give up 10 percent of their pay.

Honda also said it had appointed Senior Managing Officer Koichi Fukuo to oversee quality improvements across the organization, the first time it has created such a role.

Honda said the latest recall was over two noise-related defects in the Fit and Vezel hybrids as well as some gasoline-engine Fit and N-WGN models. The automaker will also recall 183 cars overseas for the same glitch.

Honda first recalled the Fit hybrid in October 2013 – just one month after launch – for defective controls on its newly developed seven-speed twin-clutch transmission system. Two recalls followed for the same issue.

(Editing by Chris Gallagher and Miral Fahmy)


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