I can remember, up to not very long ago, when Honda was arguably the best-built car on the road for the money...in some ways surpassing Toyota. Hondas came from the factory feeling like they were assembled by the people who make Rolex Watches. I've long-felt that they reached their peak with the early-90s Accord, although they still did well-built vehicles up till just a few years ago. But, since then, it's been mostly downhill. They still assemble their vehicles like Swiss watches, but significant engineering defects and quality-lapses in areas under the skin, where you don't see them, have been showing up. The company recognizes the problem and is (apparently) ready to deal with it.


https://www.reuters.com/article/us-h...-idUSKBN1YD2DP


BUSINESS NEWS

DECEMBER 9, 2019 / 5:06 PM / UPDATED A DAY AGO

Honda's Hachigo seizes the wheel as quality crisis hits profits

Norihiko Shirouzu, Naomi Tajitsu9 MIN READ

UTSUNOMIYA, Japan (Reuters) - At a two-day gathering for Honda’s suppliers in March, Chief Executive Takahiro Hachigo sounded the alarm.

FILE PHOTO: Honda's President and CEO Takahiro Hachigo shows the new Honda Fit during the Tokyo Motor Show, in Tokyo, Japan October 23, 2019. REUTERS/Edgar SuAt the Hotel Higashinihon in Utsunomiya, Hachigo told them the Japanese automaker was facing a crisis after a string of costly recalls and other quality blunders and it needed to plot a new course, according to two people who attended the meeting.

Since then, Hachigo has been quietly working on reforms to centralize decision-making by bringing Honda’s standalone research & development (R&D) division in-house and cutting some senior management roles, according to three Honda insiders.

Expected to be announced early next year, the reforms are meant to simplify the way Honda designs cars and put its engineering resources to more effective use at a time when it needs to develop cars for an electric age, the sources said.

“Decades ago, localization ... was the buzz word and our tech center independence was a key driver for innovation,” said a former Honda executive who now is the head of one of its suppliers. “Those days are over.”

The sources said Hachigo was poised to integrate Honda R&D Co Ltd into Honda Motor Co Ltd so its technicians work more closely with key departments such as purchasing, manufacturing, quality assurance, and sales and marketing.

“Honda believes strengthening the automotive business and reforming it in preparation for the arrival of next-generation mobility technologies are our most critical management tasks. This is a priority,” a Honda spokeswoman said in response to questions about the plans.

In the 1980s and much of the 1990s, the name Honda struck terror into the hearts of executives at the big three U.S. carmakers in Detroit because they simply couldn’t match its low-cost, efficient, well-built cars.

But after a slew of recalls since 2014 for problems with components such as airbags, sliding doors and engines, Honda’s status as a benchmark for quality and efficiency has been seriously damaged - and the quality crisis is hitting profits.

According to five Honda insiders, quality blunders have helped squeeze the operating margin at its global automotive business to 2%-3% - giving it less room for maneuver just as bigger rivals are building partnerships and overhauling their operations to become stronger.

That’s in stark contrast to Honda’s motorcycle business which has already brought its R&D division in-house and has a margin of 13.9%.

In J.D. Power’s study of vehicle dependability in the United States, one of Honda’s two main auto markets along with China, the Japanese brand fell to 18th place this year from 5th in 2015 and 4th in 2002, its highest ranking.

“These moves we’re making today will decide our eventual fate: whether we’re going to be in business as an independent player 10 to 15 years from now,” a Honda source told Reuters.

For an interactive graphic on Honda's automobile operations: tmsnrt.rs/35UnuNr

‘CRAZY COMPLEXITY’

A senior engineer at a technical center north of Tokyo in Utsunomiya, where Honda does much of its development, said the root of the problem was the “crazy complexity” of its vehicle range and all the associated engineering processes.

“Quality is acting up,” the engineer said. “Honda has created too many regional models, in addition to an array of types, options and derivatives for its global models.”

“All that’s eating up our profit.”

In the United States, for example, Honda’s 2020 Accord sedan comes in 13 versions, including three hybrids. GM’s rival Malibu has five, though it doesn’t have hybrid models.

At the two-day meeting in Utsunomiya, Hachigo and his procurement managers told suppliers to help Honda slash its range of cars and dumb down model types and options.

They called on suppliers to use more common parts, from engines and transmissions to door handles, rear view mirrors and even ***** and switches, according to two people who attended the meeting and slides Honda used in presentations.

Honda’s problems stem largely from an aggressive expansion before Hachigo took over in 2015. In addition to so-called global models such as the Civic, Accord and CR-V sports-utility vehicle (SUV), Honda developed a host of regional models which now account for 40% of its global car sales.

They include the Crider sedan in China, the Brio and the Mobilio in southeast Asia, the WR-V in Latin America, which is also now sold in India, the Pilot SUV in the United States and the N-series of micro-minis in Japan.

Its global models, which account for 60% of sales, come with an array of equipment options and vehicle trims that Hachigo, an engineer by training who has worked at Honda since 1982, has called unnecessary product derivatives.

The explosion in the number of regional models had an unintended consequence: the engineering became more complex and the elevated workload led to lapses in quality and costly recalls, two company sources said.

Even though the impact of the Takata airbag crisis had largely subsided by 2017, Honda still put aside 520 billion yen ($4.8 billion) in the 12 months through March 2017 for product warranties and over 450 billion in each of the past two years.

In the four years before the Takata debacle, warranty provisions ranged from 171 billion to 274 billion yen, before surging to 727 billion in the year ending March 2016.

In 2018, for example, Honda recalled about 600,000 cars in China because sludge was collecting in the engines of six models when driven in cold weather while the sliding doors on its U.S. Odyssey minivans started opening while the vehicles were moving.

For an interactive graphic on Honda's car troubles: tmsnrt.rs/2KXziX6

‘BACK TO THE MOTHERSHIP’

Hachigo flagged some of the issues at a news conference in May, saying he wanted to eliminate two-thirds of derivative products on global models by 2025 and wean Honda off its tendency to go overboard by creating colors, model types and options specific to different regions.

He said he was aiming to cut engineers’ workloads by about a third to free up time and resources for Honda’s technical divisions to research technologies for the cars of the future.

What Hachigo and senior Honda officials haven’t discussed publicly are the planned structural reforms to help its quality and efficiency drive - and the main target is its R&D division, three company sources said.

Besides the quality issues and engineering workload linked to the proliferation of regional models, the advent of new technologies requires Honda’s big-spending technical division to act less independently, two sources said.

“In many ways, Honda’s tech companies behave much like university labs, and that was fine in years past,” the former Honda executive and supplier said.

By putting decision-makers in Honda’s Tokyo headquarters, the hope is that the R&D division will deploy capital and human resources more economically.

Honda’s R&D and engineering units are expected to spend 860 billion yen this financial year, or 5.5% of expected revenue. Toyota, whose revenue is double, is expected to spend 1.1 trillion yen, or 3.7% of its global revenue, on technology.

Two company sources said Hachigo plans to eliminate the top management roles at Honda R&D and will probably turn some into divisional managers within Honda Motor.

One source said the aim was: “to centralize the company’s fragmented, localized decision-making power back at the mothership in Tokyo.”

According to the engineer, Honda has also introduced an internal quality target to cut global recalls by two-thirds in the next few years from a crisis level of 6 million in 2017.

It was clear at the two-day suppliers’ powwow that Hachigo meant business.

Without naming names, Honda executives discussed exemplary product development projects - and bad ones - so lessons could be learned. It was fairly obvious within Honda’s small community of suppliers who was being singled out and they weren’t happy, said one supplier at the meeting.

So much so that some skipped golf on day two.

Reporting by Norihiko Shirouzu in Utsunomiya and Tokyo and Naomi Tajitsu in Tokyo; Editing by David Clarke

Our Standards:The Thomson Reuters Trust Principles.

 

While it's rankings have slipped on paper and in publications, I have not heard of mass problems from owners or dealers. The Honda family of models are wildly popular here in the Los Angeles suburbs. I don't think the problem is as bad as the article makes it out to be. Sounds more like corporate complaining they aren't making as much money as they'd like. Pretty much the case with all car companies with any sort of standard.

 

This first line (from the article) is very misleading. First off, the soon-to-be-discontinued Malibu has 6 trims, not 5. Second, within Honda trims, the only "options" that are not dealer-installed accessories are paint color and wheels. The Malibu has different packages of factory-installed options like driver assistance, leather interior, moonroof, etc, individually selectable within the trims. So the possible number of factory build configurations, excluding color and wheels, is far higher with the Malibu.

As for the second line, well there goes the excellent Accord Sport 6MT.... <sigh>

 

I'm not sure they were assembled like Rolexes with their weak transmissions. Then again, if you look close enough, Rolex has QC issues as well so I guess the built like a Rolex claim has some truth?

 

I didn't write it, of course. That is what the author wrote.


Hard to say, but, perhaps, in this case, the author, by "factory" also means "factory-authorized"......which, of course, usually includes dealer-accessories. Most of them have the official Honda name on them.

Well, no arguments there...I'm no fan of what companies are doing to sedans in the American market, either.

 

Honda is seen as one of the benchmarks within the industry for minimizing complexity. As others noted, "options" are easy installed dealer accessories. Yes, the expanding lineup and growth of SUVs yields complexity in itself with 2WD and AWD variants potentially doubling variation in certain regions. That said, it shows something that even Honda sees opportunity to further reduce overall complexity. Less complexity allows for more time in quality and development, don't have to engineer for and certify endless combinations of vehicle features.

Now, with most Honda's having Honda Sensing as standard, a backup camera, bluetooth, remote keyless entry. That generally satisfies a huge portion of what mainstream buyers are looking for. Basic questions are still... leather vs cloth, sunroof vs not, etc.

Across the globe you're hearing auto companies talking about reducing complexity, even the luxury automakers, where a la carte type options were seen as luxurious personalization (Porsche perhaps being the largest offender of this). But realistically, buyers can often be lumped into buying lots of the same sets of options/packages. OEMs just need to put some effort into understanding what combinations of features customers really want.

 

I love Hondas. But they have had glaring quality issues since the 2000s. Some minor, some big. Systematic AT failures from 2000-2004 vehicles with a v6. Paint clear coat failure from basically any vehicle from that time period, and rusty wheel wells.

 

out of the car fleet we have had throughout the years, our 04 TSX is probably the worst reliablity during and after warranty, good thing we had an extended one

 

The new Accord and Pilot seem to be well built from my recent experience. Nice cabin materials, good fit and finish. Powertrains seemed smooth.

 

No complaints on my Odyssey. We abused her good and she's held up like a champ. It's still
My weekend car

 

Welcome to the automotive industry.
I always thought of Honda as being less complex than any other manufacturer in the industry.

 

Only time will tell for Honda. In 2015, J D Power ranked them 5th, in 2017 9th and 2019 they were 18th out of 31. Obviously an alarming trend. For Acura even more alarming. They are 26th out of 31.

 

From the article, sounds like Honda wants to streamline their products and reduce all the regional models. This will, in theory, reduce the complexity and reduce the warranty claims which is hitting their profits. Much ado about nothing as Toyota was ahead of Honda when they went TNGA

 

Honda has always had a better reputation for reliability and quality than it's actually deserved in my experience. Lots of issues, QC issues with poorly installed panels, etc, reliability issues, generations of terrible transmissions...

Toyota has long, long made better cars IMO.

 

In the last 10-15 years or so, yes, I'll agree. But, in the 80s and 90s, their vehicles were just as good as, if not better, than Toyotas. The Camry, for example, IMO reached its peak in the early-mid 90s.....the Accord, in the early 90s. I still see examples of both running around every day.

Honda also, for many years, had the (justified) reputation of having what was probably the slickest-operating, easiest-to-shft FWD manual transmission and clutch in the business. Adjusting to it was so easy and second-nature that one could row through the gears almost as easy as with an automatic....although some entry-level versions of the Civic had final-drive gearing that was too tall and required clutch-slipping from rest to keep the engine from bogging down. But most Honda products manual-shifted almost like magic.