Corrected: EXCLUSIVE-Honda CEO shrugs off critics; will see through his supply reforms
12/02/2015 02:50
(Corrects Denso ownership in paragraph 8)
By Norihiko Shirouzu
Feb 12 (Reuters) - Honda Motor 7267.T CEO Takanobu Ito,
under fire for how he is dismantling the traditional way the
Japanese car maker sources parts and technologies, has resisted
moves for his ouster and will fight on for another two-year
term, according to four people with direct knowledge of the
matter.
Ito took over in 2009, and for the past three years has
shaken up Honda's decades-old, tightly-knit supply chain,
looking to trim costs while finding more cutting-edge
technologies. That's rankled long-term local suppliers, and some
former Honda chiefs, and the pressure on Ito has been ratcheted
higher by mass recalls over quality issues. Some retired
executives maneuvered to have Ito removed.
"Honda's group suppliers were thrown into disarray by Ito's
actions. The way things are going, they're soon all going to
become subcontractors with no technologies of their own," said
one former Honda chief.
But Ito, a former super-car engineer, is determined to see
his reforms through, and told his critics as much at a recent
meeting with some former Honda chiefs, said two of the
knowledgeable individuals. None of the sources wanted to be
named because of the sensitivity of the issue.
"Since the start of this year, we've been operating on the
assumption that Ito will continue as chief executive," said a
Honda divisional head, adding Ito has a "70 percent" chance of
keeping his job.
"Ito is determined to keep going as CEO," said another
individual, who was a senior Honda executive in the 1980s.
"We're generally okay with that."
Honda spokesman Kaoru Tanaka declined to comment on Ito's
position, but noted the company "procures components in the most
optimal way possible, taking into consideration cost, quality
and delivery. That policy remains unwavering and unchanged."
R&D RESET
One of Ito's moves to reset research and development
priorities was to focus on vehicle electrification by courting
global suppliers such as Robert Bosch ROBG.UL , Continental
CONG.DE and TRW Automotive TRWTA.UL . Contracts have even
gone to Denso 6902.T , a supplier part-owned by rival Toyota
Motor Corp 7203.T , often bypassing Honda's local suppliers
such as Keihin Corp 7251.T and Showa Corp 7274.T .
Deflecting any talk of a crisis, Keihin spokesman Hidekazu
Nagasawa said Honda's procurement reforms were "an opportunity
to ... develop better technologies and more innovative,
cost-effective ways to manufacture them, and sell them ... not
just to Honda but other automakers."
While Ito's critics acknowledge a need to change how global
automakers like Honda develop their technologies, they believe
Ito has moved too hastily, and they have been quick to point to
damaging product recalls as symptomatic of his rush to reform.
Besides having to recall more than 13 million cars for
potentially lethal air-bag inflators made by Takata Corp
7312.T , Honda has been hit by five recalls of its Fit
subcompact car and Vezel crossover utility vehicle since their
2013 launch. Ito's critics note the defects mainly involved
German supplier Schaeffler's IPO-SHF.F hybrid transmission
technology, and how Honda engineers integrated it with their
other vehicle technologies.
Former CEO Nobuhiko Kawamoto was so concerned that he
visited Ito in October and warned him about the quality and
reliability slippage that he said risked damaging the Honda
brand, the knowledgeable people told Reuters.
'YAESU CLUB'
In Japanese corporate culture, former chiefs retain more
clout than in the West.
The Honda grandees, dubbed the "old boys," maintain a Tokyo
office known informally as the Yaesu Club. Under an unwritten
code, they don't intervene in day-to-day management, but some
have ramped up the pressure on Ito by airing their complaints
internally, two of the knowledgeable individuals said.
"We're all worried and irritated by Ito's audacious,
not-so-well-thought-out reform moves," the ex-Honda chief said.
A company insider close to the CEO, said Ito understands
where his critics are coming from, and would likely slow the
pace of reform. On the credit side, Honda shares have risen 37
percent since Ito took over as CEO, and operating income has
more than trebled since his reform drive began.
To provide some help to existing suppliers, Ito may follow
Toyota's lead ID:nL3N0UT1IY and seek to consolidate some of
the supply chain, possibly combining transmission units of
Musashi Seimitsu 7220.T , Yutaka Giken 7229.T and Atsumitec
into a single entity. Spokespeople for those companies declined
to comment.
While some suppliers have kept pace with industry changes,
others have struggled. "In a next stage, the possibility of a
consolidation of Honda group transmission producers is
definitely there and real," said a representative from one
supply company, asking not to be identified.
Ito, meanwhile, remains committed to long-term reforms to
Honda's R&D and technology procurement.
"He believes Honda needs new blood from outside to break new
technological ground ... and make a new departure," said another
of the Honda insiders.
(Editing by Ian Geoghegan)
((Norihiko.Shirouzu@thomsonreuters.com;))
Keywords: JAPAN AUTOS/HONDA