Business | Honda

Recalling the boss

Japan’s number three carmaker has come unstuck by following the crowd

“I’D SOONER die than imitate other people,” said Soichiro Honda, founder of the firm that is now Japan’s third-largest carmaker. On February 23rd Honda’s current boss, Takanobu Ito, suffered lesser consequences after trying to follow in the tyre tracks of Toyota and Nissan. He will quit in June after a year of recalls and disappointing sales that led in January to a second profit warning in three months. His error was to embark on an over-ambitious expansion plan in an effort to close the gap with Honda’s closest rivals.

Mr Ito’s decision to quit was not unduly premature. Like him, most recent bosses have lasted for around six years. But the timing was undoubtedly influenced by the spate of recalls, which has affected millions of vehicles. Honda had to replace faulty airbags made by Takata, a Japanese supplier, that in a few instances exploded. Quality problems of Honda’s own making accounted for many others.

The recalls not only cost money but delayed the launch of new models, which hit sales. It now expects to sell 4.5m cars in the year to March, 127,000 fewer than it had hoped. One of Mr Ito’s final decisions was to abandon a target he set in 2012, for sales to be 6m by 2017. By putting all its efforts into boosting capacity, Honda has ended up with an uninspiring product range and a badly damaged reputation for reliability.

Setting up new plants in Brazil, Indonesia and Thailand has proved trickier than expected. A new version of the Fit, a small “city car”, has suffered five recalls since its launch in late 2013. In America, its main market and source of over half its revenues, Honda’s cars were once the best the mass market could offer. But it stood still as competitors caught up. Launched in 2012, a new version of the Civic, the car that made Honda’s fortunes in the 1970s and 1980s, underwhelmed the critics.

Toyota is the world’s biggest carmaker, and Nissan’s close alliance with Renault of France has put it in the motor industry’s top league. But until a few years ago Honda seemed to be following a different track. It has a strong sideline in motorbikes—it is the world’s largest maker of them, with a dominant presence in big emerging markets. Although this only provides one-seventh of the company’s revenues, it is a less volatile business than selling cars, and is nicely profitable. It has other steady businesses making lawnmowers, engines for boats and the like. It could apply its innovative capabilities across a range of related products.

Before he said his goodbyes this week, Mr Ito had begun trying to reclaim Honda’s lost advantages. He had revamped its research-and-development operations and appointed a “quality tsar”. His successor, Takahiro Hachigo, another engineer and Honda lifer, will continue those efforts. But he will also be seeking to imitate Toyota, in one sense: it too suffered serious quality problems, five years ago, as a result of rapid expansion, but quickly bounced back.

This article appeared in the Business section of the print edition under the headline "Recalling the boss"

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