Honda: Weathering the Global Crisis or Stuck in Japanese Corporate Quicksand?

Abstract:

Honda: Weathering the Global Crisis or Stuck in Japanese Corporate Quicksand?
 
Since our contribution on Honda entitled “Honda: Serendipity or Strategy” in the Second Automobile Revolution, the global automotive landscape has undergone drastic changes as a direct result of the global economic meltdown. Honda’s future, compared to the fate of many global automotive OEMs, initially looked rather promising as it was embarking on new ventures related to its resolve to develop an electric vehicle. As such, the groundbreaking for a new plant to build lithium-based batteries in a strategic alliance with Yuasa, as well as the announcement of number of hybrid and electric vehicles for both the domestic and global markets, provided positive signs that Honda was taking a leading role in the industry. 
Recently, Honda’s top executives referred to the global OEM market as becoming more competitive. This competitiveness is a result of the global economic crisis, but it impacts Honda primarily with the Hyundai/Kia growth in developed markets, especially in the US. Although this is a concern to Honda, top management expressed confidence that Honda would overcome this. Despite financial hardships resulting directly from the global economic crisis and declining sales in their largest market, the US, Honda seemed to be surviving the global economic crisis in good shape. 
 
This rather positive outlook for Honda in 2009 quickly turned less positive in 2010. When the switches in the power windows of many Honda vehicles were defective, Honda initially asked vehicle owners to keep the windows closed during bad weather conditions as a stopgap measure. Only recently did they issue a recall for 140,000 vehicles in the US, Europe, South America, South Africa and parts of Asia. This sounds much like the troubles facing rival Toyota (we are sure other authors will shed light on the Toyota recalls) that stopped production of a number of vehicles. What is perceived as a lack of action has triggered major concerns that go beyond Honda and the automotive industry. The fear that the once untouchable pride in Japanese quality, exemplified in virtually all Japanese export products from electronics to cars, would be tarnished by the several problems from floor mats, brakes, steering and unintended acceleration at Toyota, now suddenly exposed Honda’s power window switch recall as well as a recall related to airbag problems. The idea that some of these companies may have known about the problems, which in many cases can result is significant safety risks, has damaged the reputations of Japanese automotive manufacturers. Will these actions result in a generalized perception that Japanese manufacturers really do not put safety and quality first?
It is our contention that at this stage (February 2010) many Japanese companies, including Honda, may be experiencing the feeling of being surrounded by a sort of corporate quicksand. The six million dollar question of whether the “Japanese corporate image” will sink deeper or whether the tarnished image is limited to Toyota creates enormous levels of uncertainty as Honda determines the appropriate course of action. In the US, Honda became more proactive in tackling the power window and ABS recall issues, most likely because of the media attention given to Toyota as a result of their hesitancy to act. At the same time, unlike it US domestic competitors, Honda did not offer special incentives specifically targeting Toyota customers, a sign of solidarity among the Japanese OEMs in overseas markets. The fear of being named in the same breath with other Japanese OEMs that Japanese manufacturers have lost not only their quality focus, but also their concern for the safety of their customer, is very real. In our chapter we refer on multiple occasions to Honda being the odd-ball among the Japanese automotive companies, a reputation stemming from the philosophy of its founder, Soichiro Honda, who was never accepted by the Japanese corporate establishment, either as an individual or as a corporate representative.
 
Honda could become the victim of what could be labeled collateral damage, painted with the same broad brush of a sullied reputation as Toyota. Clearly Honda took steps to quickly correct its quality issues, much more so than the actions of Toyota. In addition, Honda can certainly not be blamed for Toyota’s increased focus on becoming the largest OEM and by perhaps cutting corners in terms of total quality management. Nor can Honda be blamed for what appears to be Toyota’s arrogance stemming from the illusion of invincibility in groupthink among its leadership. With the appointment of Ito as the new CEO, Honda seems to be putting the company back on track as an innovator in the automotive industry.
 
Although we feel that the Japanese quality image has suffered major damage, we believe that Honda will do everything possible in order to restore their reputation. Honda, has the opportunity to show the automotive world that they are as much a global OEM as they are a Japanese OEM.