Honda may cut US output on port woes as sales goal dropped

[TOKYO] Honda Motor said it may halt some US production due to the nine-month labor dispute at West Coast ports, one day after citing quality issues for a decision to scrap its target of 6 million annual vehicle sales.

The Japanese automaker has yet to decide on trimming US output, or on what models or plants might be affected, Akemi Ando, a spokeswomen, said today at a company event in Asahikawa, Japan. Honda won't set a global sales target in its next midterm plan, chief executive officer Takanobu Ito said Friday, because pressure to reach the 6 million objective contributed to lapses in quality that led to record recalls last year.

Honda cut profit forecasts for the second time in as many quarters last month after recalls tied to flawed Takata air bags and the new hybrid systems in its best-selling Fit compact car and Vezel SUV. The Tokyo-based carmaker's worst quality issues in decades have derailed plans to introduce new models, led Ito to take a pay cut and triggered the projection of Honda's first profit drop in three years.

Beset by the biggest quality problems under his stewardship, Ito, 61, has said he will bring the company back to basics and signaled that Honda will no longer pursue business expansion as its main target.

Mr Ito said Friday the company has no intention of rescuing Takata financially and will work with the company to identify the root cause for the air-bag flaws in order to end the crisis.

Mr Ito has sought inspiration in Honda founder Soichiro Honda, who used to stand on a tangerine box to exhort employees to make good products, by replicating the ritual with workers in November in Japan.

Honda called back 5.4 million vehicles last year in the US to replace air bags made by Takata, in which it has a 1.2 per cent ownership stake. The devices use ammonium nitrate as a propellant and can rupture during deployment and propel metal shards at passengers, and have been linked to four fatalities in the U.S. and the deaths of a pregnant woman and her unborn child in Malaysia.

While the Takata recalls affected at least nine other carmakers, scrutiny of how Honda responded to the flaws led to the US government slapping the company with a record US$70 million fine for failing to report more than 1,700 death and injury incidents to regulators over 11 years.

Mr Ito said the automaker started using inflators by Autoliv and Daicel because Takata was too slow in producing replacements to be used in the investigative recalls. The majority of the supply will be from Autoliv and Daicel and Honda will shift from using inflators that use ammonium nitrate-based propellant, such as those made by Takata, he said.

Honda's quality problems go beyond the defective air bags. The carmaker has called back the Fit - its top-selling model - five times since its introduction in late 2013, and recalled its Vezel crossover three times. Those fixes delayed the roll-out of other new vehicles by as long as six months. Tetsuo Iwamura, Honda's executive vice president, said the recalls have led to a cut in domestic sales forecast by 40,000 units in the current fiscal year.

After the fifth Fit recall, Honda created a new position of executive officer in charge of auto quality and appointed Koichi Fukuo to take charge. Fukuo will concurrently serve as an executive vice president of Honda R&D Co., Honda's largely independent research arm, to strengthen quality assurance within the development process, the company said at the time.

Fukuo denied a report today by Mainichi newspaper that Honda may trim its model line by as much as 20 per cent.

Honda R&D President Yoshiharu Yamamoto said today his biggest concern remains the Takata air bag issue, as the root cause hasn't been identified and additional recalls are still possible. Honda has learned it must strengthen communication with suppliers to get better control of product quality, he said.

"Honda is Soichiro Honda - he was a man with flaws, so Honda has flaws too," said Jeffrey Rothfeder, author of the book "Driving Honda." "If they have made mistakes they deserve to be blamed for, they are going to turn on them pretty quickly and they will fix them."

BLOOMBERG