The automaker plans to reduce the number of model variants in order to focus on quality.
IHS Automotive perspective | |
Significance | Honda has announced plans to streamline its product offering by reducing the number of model variants and scrapping its global target of selling 6 million vehicles annually by 2017. |
Implications | The Japanese automaker also announced it is no longer considering providing financial aid to its biggest airbag supplier Takata. |
Outlook | Honda’s move to restructure its product portfolio is part of the company’s efforts to improve its vehicle development process and overall operations after a spate of recalls. |
Honda has announced plans to streamline its product offerings over the next few years, the Wall Street Journal reports. The automaker plans to narrow down the number of model variations by one-fifth to focus more on the quality of vehicles, the report said, citing Honda's research and development chief, Yoshiharu Yamamoto. "Even though we're narrowing these down, that doesn't mean our business would shrink," Honda's CEO Takanobu Ito said. The company is looking to cut down on model variations of certain cars and engines. However, it declined to name specific models that could be affected by the plan.
Meanwhile, the Japanese automaker has scrapped its global target to sell 6 million vehicles annually by 2017, according to Reuters. The scrapping of the previous sales target is likely to be due to quality lapses that led to several vehicle recalls last year. Ito conceded that the shelving of the 6-million unit sales target is largely on account of quality woes that occurred as a result of pressure to reach its sales target. He added that the carmaker will not set a global sales target in its next mid-term plan.
Separately, Ito said that Honda is not interested in offering financial aid to its airbag supplier Takata, according to Dow Jones Newswire. The automaker dismissed speculation that it will take the lead in assisting the airbag manufacturer, which is going through a tough period following large-scale vehicle recalls due to defective airbag inflators. The CEO said, "Takata itself needs to figure out how to fulfil its duties, but if it makes any request to automakers, then we would think about that."
Outlook and implications
Honda's move to restructure its product portfolio is part of the company's efforts to improve its vehicle development process and overall operations after the spate of recalls (see Japan: 3 October 2014: Honda, Mitsubishi, Suzuki to recall 290,000 vehicles in Japan). The company faced repeated recalls of its key models, including the subcompact Fit, last year over quality issues that also led to delays in the launch of some new products (see Japan: 23 October 2014: Honda recalls new Fit hybrid for fifth time in Japan). The automaker is chalking out a plan to trim down its model variants that share the same product characteristics, in order to focus more on quality than just fulfilling its sales targets. Reducing its model variations by 20% will help the company ease pressure on its engineers and streamline its vehicle output quality. However, the idea of trimming down its product offering has stirred debate within the company as regional operations and dealers like to have more model variants to meet local preferences. Recently, the automaker also urged its suppliers to improve quality standards (see Japan: 9 January 2015: Honda to introduce new predictive safety cruise control system, urges suppliers to improve quality).
Honda's quality problems have been compounded in recent years as millions of vehicles have been recalled globally over several issues, including the potentially defective Takata airbag inflators (see United States: 8 December 2014: Ford, Honda, and Mazda expand Takata-related recalls – reports). The recalls have raised an eyebrow over quality standards at Honda, which have led it to take evasive action including the establishment of a supplier quality auditor. The company is now pushing for supplier reforms to keep up with the in-house quality standards and plans to focus on new vehicle launches that have already been delayed (see Japan: 12 February 2015: Honda starts sales of new Jade MPV, CEO to push for supplier reforms despite criticism – report).
It was earlier reported that Honda would help Takata amid the recall crisis to ensure support and allow it to continue its operations (see Japan: 9 December 2014: Honda to help Takata amid expanding global recalls – report). However, as Takata has been struggling to supply the huge volumes of replacement airbags to automakers including Honda, the latter has planned to procure airbag inflators from other suppliers including Autoliv, Daicel, and Toyoda Gosei (see United States: 4 December 2014: Takata rejects nationwide airbag recall in US, Honda to expand replacement campaign, Autoliv to supply parts). Takata has kept a separate budget to cater for airbag replacement demand following the recall crisis and claims to have sufficient funds to cater for the recalls. However, Honda has cut down its profit forecast for the second time in the current fiscal year due to the repeated recalls and quality issues last year (see Japan: 30 January 2015: Honda says Q3 FY 2014/15 net income fell 15.1% y/y, revises full-year forecast).