CEO Takanobu Ito reportedly is resisting calls to remove him as head of Honda Motor and wants to stay on for a another two years to overhaul traditional practices at the carmaker.
A Reuters report citing four sources said Ito had been criticised for dismantling the traditional way Honda sources parts and technologies.
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A recent report said Toyoda Gosei would replace long time air bag supplier Takata, currently embroiled in an inflator related recall controversy, as maker of the safety components for three new Honda models. At the time Japanese media reports noted Ito’s dissatisfaction and disappointment with Takata and its management which had had a long association with the automaker.
Reuters said Ito took over the Honda reins in 2009 and, for the past three years, has shaken up its decades old, tightly knit supply chain, looking to trim costs while finding more leading technologies. That apparently annoyed long term local suppliers, and some former Honda chiefs, and the pressure on Ito has been increased by mass recalls over quality issues. Some retired executives reportedly have tried 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,” one former Honda chief told the news agency.
Ito, a former supercar engineer, is however determined to see his reforms through and told his critics as much at a recent meeting with some former Honda chiefs, two of Reuters’ “knowledgeable individuals” sources said.
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By GlobalData“Since the start of this year, we’ve been operating on the assumption that Ito will continue as chief executive,” a Honda divisional head told the news agency, adding Ito has a “70%” chance of keeping his job.
“Ito is determined to keep going as CEO,” said another source who was a senior Honda executive in the 1980s. “We’re generally okay with that.”
A Honda declined to comment on Ito’s position but said the company “procures components in the most optimal way possible, taking into consideration cost, quality and delivery. That policy remains unwavering and unchanged.”
Honda has long been renowned for its innovation and the Reuters report said Ito had refocused on vehicle electrification by courting global suppliers such as Robert Bosch, Continental and TRW Automotive while some contracts have even gone to Denso, a supplier part owned by rival Toyota Motor, often bypassing Honda’s local suppliers such as Keihin and Showa.
But a Keihin spokesman told the news agency 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.”
Ito’s critics acknowledge a need to change but believe Ito has moved too fast and pointed to damaging product recalls as a symptom of his rush to reform.
The recalls included over 13m cars for Takata inflator replacement and no fewer than five in Japan of the latest generation Fit (Jazz) and Vezel variant since their November 2013 launch.
The model has since been launched in North America via a new factory in Mexico. The Mexican cars were recalled early, too, for a non Takata releated airbag installation issue.
Ito’s critics told Reuters the Japan market defects mainly involved supplier Schaeffler’s hybrid transmission technology and how Honda engineers integrated it with their other vehicle technologies.
Former CEO Nobuhiko Kawamoto was so concerned he visited Ito in October and warned him about the quality and reliability dips he said risked damaging the Honda brand, the knowledgeable sources told Reuters.
The report noted that former chiefs retain more clout than in the West due to Japanese corporate culture.
Honda grandees, known as the “old boys”, have a Tokyo office known informally as the Yaesu Club but, under an unwritten code, they don’t intervene in day to day management though some have increased pressure on Ito by airing complaints internally, according to two Reuters resources.
A company insider close to the CEO said Ito understands his critics’ view and would likely slow the pace of reform. Honda shares have risen 37% since he became CEO and operating income has more than trebled since his reform drive began.
Some consolidation of suppliers is expected.
