A Humbled Honda Is Making Some Fast Changes

Kiyotsugu Uchida is Honda's dream customer. A 24-year-old software salesman in Tokyo, he's on his second Honda, a two-door Accord coupe. It's an import--from Ohio. He loves the car's handling and Honda's sporty image. "It feels great to drive a Honda," he says.

But lately, such testimonials aren't heard quite as often. Honda Motor Co., often cited as a model of innovation, has lost its edge. Laboring with a bit of a bureaucratic paunch, it's being overtaken by Japanese rivals such as Mazda and Nissan when it comes to leading-edge design. "I need an exciting model to bring customers into my showroom," laments Kazuhiko Urayama, sales manager for a Honda dealer in Tokyo.

That's clear at home, where Honda's market share in 1990 slid to 7.3%, from 7.9%. In the U. S., its No. 1 market, Honda's share of the passenger car market dipped from 9.2% at the end of 1990 to 8.8% during the first quarter of 1991--though that represented a half-point improvement over the first quarter a year ago. And the Accord is still well-regarded, though Honda had to add dealer rebates of up to $900 on the model to clear out its swelling inventory. All of this hurts: Analysts expect Honda's pretax profits for the year ended Mar. 31, due out in May, to drop 8%, to about $527 million, and they may skid an additional 10% this fiscal year.

All disconcerting, to be sure. So Honda President Nobuhiko Kawamoto is taking some fairly drastic steps. In March, he reorganized the company into separate car, motorcycle, and power equipment divisions. And for the next two or three years, he will personally handle day-to-day management of the auto division--abandoning for now Honda's vaunted group decision-making style. Unlike Toyota or Nissan, where a president or department head usually breaks an impasse, Honda has always been the most zealous advocate of consensus management.

$10,500 RAGTOP. Instead of consensus, however, the unintended result was bureaucratic paralysis. Just one example: The 1990 Accord flopped in Japan largely because of its lackluster design. Hundreds of feuding engineers and salespeople couldn't agree on the styling--and the result was less than inspiring. "Instead of working together, people were thinking `me first,' " says Kawamoto.

Together with his deputies, Shoichiro Irimajiri on production and Yoshihide Munekuni on sales, Kawamoto is now storming through Honda. And numerous refreshing changes are on the way. In Japan, the company will roll out a two-seat, $10,500 ragtop in May, according to auto trade magazines. Honda's Civic, the gas-stingy compact, and the sportier Prelude are both due for a full model change this fall. A new American-made Accord wagon is selling well stateside--and in early April went on sale in Japan.

Will it be enough? "This is a critical year for Honda," says Takashi Kamiya, auto analyst for Daiwa Institute of Research in Tokyo. But given its venerable record of engineering excellence, it would be wise not to expect Honda to stay in the slow lane for long.

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