Honda Commits to Finding it's Way Back to Roots

By Chang-ran Kim And Ben Klayman, Reuters

The future of Honda Motor Co. may rest with a pair of contrarian Japanese car engineers working from a drab Tokyo suburb with a hotline to the boardroom. Their mission: just say no.

Honda's creative directors, Toshinobu Minami and Yoshinori Asahi, are out to kill any mediocre car designs rumbling down the pipeline. In short, they have been told to stop anything like the 2012 Civic, a cheapened redesign that prompted critics, consumers and rivals to wonder how Honda had so badly lost its way.

Inside Honda, in both Japan and the United States, that same question has also been asked with urgency.

Honda, many say, slipped into designing cars by committee in recent years and drifted away from the iconoclastic ambitions of its founder.

Honda had become boring.

"Somewhere along the way, we lost the ability to express ourselves more freely," Asahi said. "We have a lot of designers here, and when we ask ourselves, 'Which Honda car would we want to buy?' sometimes some of us draw a blank."

That's a startling admission at a company long praised for the quality and durability of its vehicles - a company that caught U.S. automakers flat-footed in the 1970s with inexpensive, fuel-efficient cars like the original Civic.

Touted four decades ago for its CVCC engine that boasted cleaner tailpipe emissions - as well as inspiring the Civic name - Honda has trailed with advances such as six-speed transmissions and direct fuel-injection systems.

In recent years, Honda's "car guys," the engineers that built the automotive upstart into a powerhouse, were overshadowed by the "bean counters," financial executives more willing to cut corners on vehicle content to shore up margins, insiders say.

That approach looks good on a spreadsheet, but it also carries the risk of a backlash. Consumers can turn on a debased version of a popular car and the resulting publicity can burn a brand - a lesson GM, Ford and Chrysler all learned the hard way in the slide to crisis in 2008.

Ironically, Detroit's willingness to settle for also-ran status in small-car quality created the opening for Honda in the 1970s and 1980s. Now, analysts and industry executives wonder whether Honda can rekindle the underdog ambition of founder Soichiro Honda.

Changes at Honda can't come soon enough after a terrible year. Slow to recover from the earthquake and tsunami in Japan a year ago, Honda's U.S. sales tumbled seven per cent in 2011. By contrast, Nissan bounced back with a 14 per cent sales gain to almost match Honda's market share. Meanwhile, Hyundai Motor Co. and its affiliate Kia Motors Corp. have overtaken Japanese automakers as the benchmark for value-for-money.

"Honda somehow managed to get very, very far away from their engineering discipline," AutoTrends Consulting president Joseph Phillippi said, adding it could take three years for Honda to show it has turned the corner in car development.

Honda's earnings remain supported by a strong finance arm and its leading motorcycle business. In addition, the automaker is taking steps to shift more production to North America to shore up profitability.

In another move that shows the importance Honda attaches to getting it right in the United States, the board last month promoted North America chief Tetsuo Iwamura to become the No. 2 global executive, the first time that job has been based outside Japan.

But behind the scenes, the battle for Honda's automotive soul is being played out in places like Asahi and Minami's sprawling third-floor studio in the Tokyo suburb of Wako. If the upscale Aoyama neighbourhood that houses Honda's headquarters can be likened to New York's Fifth Avenue, then Wako would be a dreary town in New Jersey.

Since September, when they were promoted to fix Honda's car designs, Asahi, 47, and Minami, 44, have been working from Wako with a mission to shake things up. Both worked in the early 1990s on the fourth-generation Accord, a bigger Honda that won praise for its simplicity and a near-indestructible fourcylinder engine.

Honda's creative duo now have a direct line to chief executive Takanobu Ito. Frustrated with the pace of decision-making at Honda, Ito has put himself in charge of Honda's car operations, splitting the core of the company into three units headed by engineers: the Acura brand, mid-sized vehicles and small cars.

Honda is rushing a redesigned Civic to market late this year, essentially a facelift to protect the image of a car that is key to both Honda's future and heritage.