President, CEO of Honda Outlines New Challenges And Direction For The Global Automaker

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Honda Motor Co.’s president and CEO Takahiro Hachigo recently spoke about two of the automaker’s management challenges it will be tackling going forward to meet the rapid changes happening in the global automotive industry.

These include the strengthening of the company’s auto business and directions it is taking with electrification.

“Ever since I became the president of the company, I have been conveying the message that we will make Honda strong by creating strong products and also by strengthening our inter-regional coordination and collaboration,” Hachigo said “We put special emphasis on the strengthening of our global models, which have been the source of Honda’s core competence, and also the enhancement of our regional models.

“As a result, we currently have the five global models, namely Civic, Accord, CR-V, Fit/Jazz and Vezel/HR-V, and these five strong models now account for 60 per cent of our global automobile sales. At the same time, our regional models such as the N Series for Japan, Pilot for North America and Crider for China are playing an important role as a source of growth for each respective region.”

However, as a result of accommodating regional Honda recognizes that the number of models and variations at the trim and option level have increased and our efficiency has declined, he added.

“So, we will undertake initiatives to further strengthen our inter-regional coordination and collaboration and advance our art of making automobiles in order to simultaneously increase the attractiveness and efficiency of both global and regional models,” Hachigo continued. “As for inter-regional coordination and collaboration, under the new operational structure we adopted for our automobile operations starting from April, we began reviewing and sharing the product lineup by grouping some of our six regions outside Japan based on a similarity of key factors, such as market needs and environmental regulations. With this initiative, by 2025, we will reduce the total number of variations at the trim and option level for our global models to one-third of what we have now. In addition, we will increase efficiency by eliminating and consolidating some similar regional models into even more competent models shared across multiple regions.”
There will also be a great focus on increasing competitiveness by increasing the efficiency of our production system in North America.

“For our business in North America, while keeping pace with sales expansion, we enhanced our model lineup and established a flexible production system where our plants sometimes produce various models in duplication to accommodate changes in market demand,” he said. “However, as a result of the pursuit of high flexibility, an increase in the investment amount and a decline in production efficiency started to become an issue. Therefore, in North America as well, we will reduce the number of variations at the trim and option level, and at the same time, we will simplify the production model allocation at each plant. Through this initiative, we will re-establish a highly-efficient production system and realize the growth of North American business through the pursuit of quality. By implementing these initiatives to increase production efficiency in each region, we are expecting to reduce global cost in the area of production by 10 per cent by 2025, compared to the cost recorded in 2018.”

In terms of electrification, Honda is still on track to reach its goal to electrify two-thirds of its global automobile unit sales by 2030.

“When we talk about the introduction of electrified vehicles, there are two perspectives. One is the improvement of fuel economy, and the other is zero emissions,” Hachigo said. “Regulations for the Corporate Average Fuel Economy (CAFE) standards are becoming increasingly stringent in every country around the world and complying with CAFE standards is one of the most important challenges for the automobile industry. At Honda, in light of the required infrastructure and how people use automobiles, we believe that hybrid technology is, at this moment, the most effective way for us to comply with CAFE standards. Therefore, we will electrify our products mainly with hybrid technologies. By increasing sales of our hybrid models all around the world, Honda will contribute to the global environment through the improvement of fuel economy.”

He added that Honda will expand the application of its 2-motor hybrid system to the entire lineup of Honda vehicles. In addition to the 2-motor hybrid system, which is compatible with mid-to-large-sized vehicles, Honda has developed a new, more compact 2-motor hybrid system suitable for small-sized vehicles.

“This small-sized 2-motor hybrid system will be adopted first by the all-new Fit which we are planning to exhibit as a world premiere at the Tokyo Motor Show this fall,” he continued. “In addition to the expansion of the lineup of products equipped with the 2-motor hybrid system, we also will expand the application of the 2-motor hybrid system on a global basis. With that, by 2022, we are expecting to reduce the cost of the 2-motor hybrid system by 25 per cent compared to the cost of this system in 2018.”

Hachigo added that because of the Zero Emission Vehicle (ZEV) programs being adopted by California and other states in the U.S. and China’s New Energy Vehicle (NEV) mandate, “we will efficiently introduce our battery EVs to the market by selecting the most appropriate partners and resources to satisfy the different needs in each region.”