Honda risks much with am­bi­tious goals

Winnipeg Free Press - Section F - - INDUSTRY - By Mark Phe­lan

IN an am­bi­tious and risky ex­pan­sion, Honda will nearly dou­ble global car sales to six mil­lion a year by 2017, the com­pany’s leader re­cently said in Ja­pan.

Honda will also in­crease mo­tor­cy­cle sales 67 per cent to 25 mil­lion by the fis­cal year that will end March 31, 2017, pres­i­dent and CEO Takanobu Ito de­clared.

What could pos­si­bly go wrong? Let me count the ways.

“That’s a huge jump in a short time,” said Ed­ se­nior an­a­lyst Michelle Krebs. “The com­pe­ti­tion is tough.”

The his­tory of au­tomak­ers’ high-speed ex­pan­sion pro­gram plans is rife with cau­tion­ary tales. Ask Toy­ota. Its boast­ful growth plan led to a dis­as­trous spate of re­calls. Toy­ota may never re­cover the hard-won rep­u­ta­tion for qual­ity and re­li­a­bil­ity that was its great­est as­set.

“This is very, very dif­fi­cult,” said Jim Hall, manag­ing di­rec­tor of 2953 An­a­lyt­ics. “They’ll have to (ex­pand) in new mar­kets, and that can be very ex­pen­sive.”

Honda hopes about half the six mil­lion sales will be in its tra­di­tional North Amer­i­can, Ja­panese and Euro­pean mar­kets. It’s tar­get­ing de­vel­op­ing mar­kets like In­dia and China for the re­main­der.

Af­ter an­nounc­ing 1.4 mil­lion re­calls last week, there’s rea­son to ask whether Honda is in any con­di­tion for a growth spurt. Re­calls can be the ca­nary in the coal mine, a warn­ing of po­ten­tial dan­ger and fail­ings in a com­pany’s engi­neer­ing and man­u­fac­tur­ing de­part­ments.

Like many au­tomak­ers, Honda fears it will be marginal­ized, then elim­i­nated by a hand­ful of global giants. This per­spec­tive casts Toy­ota, GM, Hyundai, VW and po­ten­tially Ford as jug­ger­nauts that will crush any­thing in their path.

For all its suc­cess, Honda is a small com­pany, with less room for er­ror than Toy­ota. Pro­por­tion­ally, Honda’s goal of dou­bling sales is even more chal­leng­ing than the 50-per-cent growth pro­gram that led Toy­ota astray. Honda’s strat­egy hinges on: — Ma­jor sales in­creases for a new fam­ily of sub­com­pact ve­hi­cles; — Dras­ti­cally im­prov­ing its hy­brid tech­nol­ogy; — In­tro­duc­ing a new fam­ily of large mo­tor­cy­cles next year;

— Rein­vig­o­rat­ing its up­scale Acura brand, start­ing with the new RLX sedan that goes on sale next year;

— Giv­ing its re­gional op­er­a­tions more re­spon­si­bil­ity for de­vel­op­ing ve­hi­cles.

The last two goals should be good for Honda’s Amer­i­can unit. The au­tomaker will in­crease how much engi­neer­ing and de­sign it does here. It wants to move from of­fer­ing es­sen­tially the same ve­hi­cles around the world to adapt­ing them for the needs of each ma­jor mar­ket around the world.

The first test of Honda-Amer­ica’s abil­ity is the Acura NSX sports car that ar­rives in 2014. Honda’s U.S. de­sign and engi­neer­ing cen­ters are lead­ing global NSX de­vel­op­ment. They’ll also do the North Amer­i­can ver­sion of the next Civic, which should go on sale in 2015.

While the ex­pan­sion plan doesn’t men­tion any new man­u­fac­tur­ing plants in North Amer­ica, Honda is build­ing an assem­bly plant in Mex­ico to pro­duce the new 2013 Fit sub­com­pact, which plays a huge role in the plan. The plant, to open in the spring of 2014, will also pro­duce a sec­ond ve­hi­cle, prob­a­bly a small cross­over SUV based on the Fit’s ar­chi­tec­ture. Ex­pect Honda to build the Fit, a small SUV and other re­lated new small ve­hi­cles in high num­bers around the world.

Honda also plans to in­tro­duce sev­eral new types of gasoline-elec­tric hy­brids. Al­though Honda pi­o­neered hy­brid tech­nol­ogy, it’s never been able to match the sales and rep­u­ta­tion of — guess who? — Toy­ota.

Achiev­ing all those goals while si­mul­ta­ne­ously dou­bling pro­duc­tion and fix­ing the prob­lems that lead to mil­lion-car re­calls is a tall or­der. Honda will have to be more fo­cused than ever be­fore to avoid po­ten­tially dis­as­trous mis­takes.

The first test of Honda-Amer­ica’s abil­ity is the Acura

NSX sports car that ar­rives in 2014.

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