Honda's Hachigo seizes the wheel as quality crisis hits profits | The Business Standard
Skip to main content
  • Latest
  • Economy
    • Banking
    • Stocks
    • Industry
    • Analysis
    • Bazaar
    • RMG
    • Corporates
    • Aviation
  • Videos
    • TBS Today
    • TBS Stories
    • TBS World
    • News of the day
    • TBS Programs
    • Podcast
    • Editor's Pick
  • World+Biz
  • Features
    • Panorama
    • The Big Picture
    • Pursuit
    • Habitat
    • Thoughts
    • Splash
    • Mode
    • Tech
    • Explorer
    • Brands
    • In Focus
    • Book Review
    • Earth
    • Food
    • Luxury
    • Wheels
  • More
    • Sports
    • TBS Graduates
    • Bangladesh
    • Supplement
    • Infograph
    • Archive
    • Gallery
    • Long Read
    • Interviews
    • Offbeat
    • Magazine
    • Climate Change
    • Health
    • Cartoons
  • বাংলা
The Business Standard

Tuesday
June 10, 2025

Sign In
Subscribe
  • Latest
  • Economy
    • Banking
    • Stocks
    • Industry
    • Analysis
    • Bazaar
    • RMG
    • Corporates
    • Aviation
  • Videos
    • TBS Today
    • TBS Stories
    • TBS World
    • News of the day
    • TBS Programs
    • Podcast
    • Editor's Pick
  • World+Biz
  • Features
    • Panorama
    • The Big Picture
    • Pursuit
    • Habitat
    • Thoughts
    • Splash
    • Mode
    • Tech
    • Explorer
    • Brands
    • In Focus
    • Book Review
    • Earth
    • Food
    • Luxury
    • Wheels
  • More
    • Sports
    • TBS Graduates
    • Bangladesh
    • Supplement
    • Infograph
    • Archive
    • Gallery
    • Long Read
    • Interviews
    • Offbeat
    • Magazine
    • Climate Change
    • Health
    • Cartoons
  • বাংলা
TUESDAY, JUNE 10, 2025
Honda's Hachigo seizes the wheel as quality crisis hits profits

Global Economy

Reuters
10 December, 2019, 09:45 am
Last modified: 10 December, 2019, 10:17 am

Related News

  • Honda Hornet 2.0: Same spirit, upgraded sting
  • Honda Vario 160 ABS: The commuter that turns heads
  • Revving into the past: JAAB second anniversary celebrates automotive icons
  • Honda, Nissan aim to merge by 2026 in historic pivot
  • Honda, Nissan move to deepen ties, sources say, including possible merger

Honda's Hachigo seizes the wheel as quality crisis hits profits

Since 2014 Honda’s status as a benchmark for quality and efficiency has been seriously damaged and the quality crisis is hitting profits

Reuters
10 December, 2019, 09:45 am
Last modified: 10 December, 2019, 10:17 am
Honda's President and CEO Takahiro Hachigo shows the new Honda Fit during the Tokyo Motor Show, in Tokyo, Japan October 23, 2019/ Reuters
Honda's President and CEO Takahiro Hachigo shows the new Honda Fit during the Tokyo Motor Show, in Tokyo, Japan October 23, 2019/ Reuters

At a two-day gathering for Honda's suppliers in March, Chief Executive Takahiro Hachigo sounded the alarm.

At the Hotel Higashinihon in Utsunomiya, Hachigo told them the Japanese automaker was facing a crisis after a string of costly recalls and other quality blunders and it needed to plot a new course, according to two people who attended the meeting.

Since then, Hachigo has been quietly working on reforms to centralize decision-making by bringing Honda's standalone research & development (R&D) division in-house and cutting some senior management roles, according to three Honda insiders.

The Business Standard Google News Keep updated, follow The Business Standard's Google news channel

Expected to be announced early next year, the reforms are meant to simplify the way Honda designs cars and put its engineering resources to more effective use at a time when it needs to develop cars for an electric age, the sources said.

"Decades ago, localization ... was the buzz word and our tech centre independence was a key driver for innovation," said a former Honda executive who now is the head of one of its suppliers. "Those days are over."

The sources said Hachigo was poised to integrate Honda R&D Co Ltd into Honda Motor Co Ltd so its technicians work more closely with key departments such as purchasing, manufacturing, quality assurance, and sales and marketing.

"Honda believes strengthening the automotive business and reforming it in preparation for the arrival of next-generation mobility technologies are our most critical management tasks. This is a priority," a Honda spokeswoman said in response to questions about the plans.

In the 1980s and much of the 1990s, the name Honda struck terror into the hearts of executives at the big three US carmakers in Detroit because they simply couldn't match its low-cost, efficient, well-built cars.

But after a slew of recalls since 2014 for problems with components such as airbags, sliding doors and engines, Honda's status as a benchmark for quality and efficiency has been seriously damaged - and the quality crisis is hitting profits.

According to five Honda insiders, quality blunders have helped squeeze the operating margin at its global automotive business to 2%-3% - giving it less room for manoeuvre just as bigger rivals are building partnerships and overhauling their operations to become stronger.

That's in stark contrast to Honda's motorcycle business which has already brought its R&D division in-house and has a margin of 13.9%.

In J.D. Power's study of vehicle dependability in the United States, one of Honda's two main auto markets along with China, the Japanese brand fell to 18th place this year from 5th in 2015 and 4th in 2002, its highest ranking.

"These moves we're making today will decide our eventual fate: whether we're going to be in business as an independent player 10 to 15 years from now," a Honda source told Reuters.

'Crazy Complexity'

A senior engineer at a technical centre north of Tokyo in Utsunomiya, where Honda does much of its development, said the root of the problem was the "crazy complexity" of its vehicle range and all the associated engineering processes.

"Quality is acting up," the engineer said. "Honda has created too many regional models, in addition to an array of types, options and derivatives for its global models."

"All that's eating up our profit."

In the United States, for example, Honda's 2020 Accord sedan comes in 13 versions, including three hybrids. GM's rival Malibu has five, though it doesn't have hybrid models.

At the two-day meeting in Utsunomiya, Hachigo and his procurement managers told suppliers to help Honda slash its range of cars and dumb down model types and options.

They called on suppliers to use more common parts, from engines and transmissions to door handles, rearview mirrors and even knobs and switches, according to two people who attended the meeting and slides Honda used in presentations.

Honda's problems stem largely from an aggressive expansion before Hachigo took over in 2015. In addition to so-called global models such as the Civic, Accord and CR-V sports-utility vehicle (SUV), Honda developed a host of regional models which now account for 40% of its global car sales.

They include the Crider sedan in China, the Brio and the Mobilio in southeast Asia, the WR-V in Latin America, which is also now sold in India, the Pilot SUV in the United States and the N-series of micro-minis in Japan.

Its global models, which account for 60% of sales, come with an array of equipment options and vehicle trims that Hachigo, an engineer by training who has worked at Honda since 1982, has called unnecessary product derivatives.

The explosion in the number of regional models had an unintended consequence: the engineering became more complex and the elevated workload led to lapses in quality and costly recalls, two company sources said.

Even though the impact of the Takata airbag crisis had largely subsided by 2017, Honda still put aside 520 billion yen ($4.8 billion) in the 12 months through March 2017 for product warranties and over 450 billion in each of the past two years.

In the four years before the Takata debacle, warranty provisions ranged from 171 billion to 274 billion yen, before surging to 727 billion in the year ending March 2016.

In 2018, for example, Honda recalled about 600,000 cars in China because sludge was collecting in the engines of six models when driven in cold weather while the sliding doors on its US Odyssey minivans started opening while the vehicles were moving.

'Back To The Mothership'

Hachigo flagged some of the issues at a news conference in May, saying he wanted to eliminate two-thirds of derivative products on global models by 2025 and wean Honda off its tendency to go overboard by creating colors, model types and options specific to different regions.

He said he was aiming to cut engineers' workloads by about a third to free up time and resources for Honda's technical divisions to research technologies for the cars of the future.

What Hachigo and senior Honda officials haven't discussed publicly are the planned structural reforms to help its quality and efficiency drive - and the main target is its R&D division, three company sources said.

Besides the quality issues and engineering workload linked to the proliferation of regional models, the advent of new technologies requires Honda's big-spending technical division to act less independently, two sources said.

"In many ways, Honda's tech companies behave much like university labs, and that was fine in years past," the former Honda executive and supplier said.

By putting decision-makers in Honda's Tokyo headquarters, the hope is that the R&D division will deploy capital and human resources more economically.

Honda's R&D and engineering units are expected to spend 860 billion yen this financial year, or 5.5% of expected revenue. Toyota, whose revenue is double, is expected to spend 1.1 trillion yen, or 3.7% of its global revenue, on technology.

Two company sources said Hachigo plans to eliminate the top management roles at Honda R&D and will probably turn some into divisional managers within Honda Motor.

One source said the aim was: "to centralize the company's fragmented, localized decision-making power back at the mothership in Tokyo."

According to the engineer, Honda has also introduced an internal quality target to cut global recalls by two-thirds in the next few years from a crisis level of 6 million in 2017.

It was clear at the two-day suppliers' powwow that Hachigo meant business.

Without naming names, Honda executives discussed exemplary product development projects - and bad ones - so lessons could be learned. It was fairly obvious within Honda's small community of suppliers who was being singled out and they weren't happy, said one supplier at the meeting.

So much so that some skipped golf on day two.

World+Biz

Honda

Comments

While most comments will be posted if they are on-topic and not abusive, moderation decisions are subjective. Published comments are readers’ own views and The Business Standard does not endorse any of the readers’ comments.

Top Stories

  • Chief Adviser Muhammad Yunus and BNP Acting Chairman Tarique Rahman. Photos: Collected
    Yunus-Tarique meeting in London on Friday can be a major turning point: Fakhrul
  • Photo of the recovered weapon on left, photo of an airgun on right. Photos: Courtesy
    Controversy surrounds weapon recovered in Narail: Sniper rifle or airgun?
  • An Israeli soldier passes a bun to Greta Thunberg onboard the Gaza-bound British-flagged yacht ‘Madleen’ after Israeli forces boarded the charity vessel as it attempted to reach the Gaza Strip in defiance of an Israeli naval blockade, in this still image released on June 9, 2025. Israel Foreign Ministry via X/Handout via REUTERS
    Greta Thunberg deported from Israel after Gaza aid boat seized

MOST VIEWED

  • On left, Abdullah Hil Rakib, former senior vice president (SVP) of BGMEA and additional managing director of Team Group; on right, Captain Md Saifuzzaman (Guddu), a Boeing 787 Dreamliner pilot for Biman Bangladesh Airlines. Photos: Collected
    Ex-BGMEA SVP Abdullah Hil Rakib, Biman 787 pilot Saifuzzaman drown in boating accident in Canada
  • A photo showing the former president on his return to Dhaka today (9 June). 
Source: Collected
    Former president Abdul Hamid returns to Bangladesh from Thailand
  • File photo of Eid holidaymakers returning to the capital from their country homes/Rajib Dhar
    Dhaka: The city we never want to return to, but always do
  • Chief Adviser Muhammad Yunus leaves for a four-day visit to the United Kingdom from the Dhaka airport on 9 June 2025. Photo: CA Press Wing
    CA Yunus leaves for UK; discussion expected on renewable energy investment, laundered money
  • Inside the aid ship stormed by Israeli forces on 9 June 2025. Photo: BBC
    Israeli forces stormed aid boat carrying Greta Thunberg bound for Gaza: Freedom Flotilla Coalition
  • Enhanced surveillance at Ctg airport amid rising global Covid-19 cases
    Enhanced surveillance at Ctg airport amid rising global Covid-19 cases

Related News

  • Honda Hornet 2.0: Same spirit, upgraded sting
  • Honda Vario 160 ABS: The commuter that turns heads
  • Revving into the past: JAAB second anniversary celebrates automotive icons
  • Honda, Nissan aim to merge by 2026 in historic pivot
  • Honda, Nissan move to deepen ties, sources say, including possible merger

Features

File photo of Eid holidaymakers returning to the capital from their country homes/Rajib Dhar

Dhaka: The city we never want to return to, but always do

1d | Features
Photo collage shows political posters in Bagerhat. Photos: Jannatul Naym Pieal

From Sheikh Dynasty to sibling rivalry: Bagerhat signals a turning tide in local politics

3d | Bangladesh
Illustration: TBS

Unbearable weight of the white coat: The mental health crisis in our medical colleges

5d | Panorama
(From left) Sadia Haque, Sylvana Quader Sinha and Tasfia Tasbin. Sketch: TBS

Meet the women driving Bangladesh’s startup revolution

6d | Panorama

More Videos from TBS

What's the problem with elections in April? What BNP says

What's the problem with elections in April? What BNP says

29m | TBS Today
Tarique to meet CA Yunus in London on Friday, confirms Fakhrul

Tarique to meet CA Yunus in London on Friday, confirms Fakhrul

1h | TBS Today
Israel has taken the aid ship 'Madeleine' to its port

Israel has taken the aid ship 'Madeleine' to its port

2h | TBS World
Dr. Yunus and Tarique Rahman's meeting will not solve all problems: Mirza Fakhrul

Dr. Yunus and Tarique Rahman's meeting will not solve all problems: Mirza Fakhrul

1h | TBS Today
EMAIL US
contact@tbsnews.net
FOLLOW US
WHATSAPP
+880 1847416158
The Business Standard
  • About Us
  • Contact us
  • Sitemap
  • Advertisement
  • Privacy Policy
  • Comment Policy
Copyright © 2025
The Business Standard All rights reserved
Technical Partner: RSI Lab

Contact Us

The Business Standard

Main Office -4/A, Eskaton Garden, Dhaka- 1000

Phone: +8801847 416158 - 59

Send Opinion articles to - oped.tbs@gmail.com

For advertisement- sales@tbsnews.net