After Civic bruising, Honda fights for its soul

The future of Honda Motor Co may rest with a pair of contrarian Japanese car engineers working from a drab Tokyo suburb with a hotline to the boardroom. Their mission: just say no.

Honda's creative directors Toshinobu Minami and Yoshinori Asahi are out to kill any mediocre car designs rumbling down the pipeline. In short, they have been told to stop anything like the 2012 Civic, a cheapened redesign that prompted critics, consumers and rivals to wonder how Honda had so badly lost its way.

Inside Honda, in both Japan and the United States, that same question has also been asked with urgency. Honda, many say, slipped into designing cars by committee in recent years and drifted away from the iconoclastic ambitions of its founder. Honda had become boring.

"Somewhere along the way, we lost the ability to express ourselves more freely," Asahi told Reuters. "We have a lot of designers here, and when we ask ourselves, 'Which Honda car would we want to buy?' Sometimes, some of us draw a blank."

That's a startling admission at a company long praised for the quality and durability of its vehicles -- a company that caught U.S. automakers flat-footed in the 1970s with inexpensive, fuel-efficient cars like the original Civic.

Touted four decades ago for its CVCC engine that boasted cleaner tailpipe emissions -- as well as inspiring the Civic name -- Honda has trailed with advances such as six-speed transmissions and direct fuel-injection systems.

In recent years, Honda's "car guys," the engineers that built the automotive upstart into a powerhouse, were overshadowed by the "bean counters," financial executives more willing to cut corners on vehicle content to shore up margins, insiders say.

That approach looks good on a spreadsheet, but it also carries the risk of a backlash. Consumers can turn on a debased version of a popular car and the resulting publicity can burn a brand -- a lesson GM, Ford and Chrysler all learned the hard way in the slide to crisis in 2008.

Ironically, Detroit's willingness to settle for also-ran status in small-car quality created the opening for Honda in the 1970s and 1980s. Now, analysts and industry executives wonder whether Honda can rekindle the underdog ambition of founder Soichiro Honda.

Changes at Honda can't come soon enough after a terrible year. Slow to recover from the earthquake and tsunami in Japan a year ago, Honda's U.S. sales tumbled 7 percent in 2011. By contrast, Nissan bounced back with a 14 percent sales gain to almost match Honda's market share.

Nissan, in particular, has made it a mission to overtake Honda in the United States and has closed the gap since 2010.

Meanwhile, Hyundai Motor Co and its affiliate Kia Motors Corp have overtaken Japanese automakers as the benchmark for value-for-money. The Koreans have also taken advantage of a favorable exchange rate to install pricier fuel-saving technologies and other extras while Japanese brands struggle to offset the debilitating impact of a strong yen.

"Honda somehow managed to get very, very far away from their engineering discipline," AutoTrends Consulting President Joseph Phillippi said, adding it could take three years for Honda to show it has turned the corner in car development.

A financial rebound could come quicker, though. Honda has not given detailed forecasts for the fiscal year starting April, but executives see U.S. sales up by as much as 25 percent in 2012.

Honda's earnings remain supported by a strong finance arm and its leading motorcycle business. In addition, the automaker is taking steps to shift more production to North America to shore up profitability.

In another move that shows the importance Honda attaches to getting it right in the United States, the board last month promoted North America chief Tetsuo Iwamura to become the No. 2 global executive, the first time that job has been based outside Japan.

But behind the scenes, the battle for Honda's automotive soul is being played out in places like Asahi and Minami's sprawling third-floor studio in the Tokyo suburb of Wako. If the upscale Aoyama neighborhood that houses Honda's headquarters can be likened to New York's Fifth Avenue, then Wako would be a dreary town in New Jersey.

Since September, when they were promoted to fix Honda's car designs, Asahi, 47, and Minami, 44, have been working from Wako with a mission to shake things up. Both worked in the early 1990s on the fourth-generation Accord, a bigger Honda that won praise for its simplicity and a near-indestructible four-cylinder engine.

"He hates doing what he's told to do," Asahi says of his partner with approval. "Just like me."

Minami says it's a struggle to get Honda's designers to shed a conservatism born of the consensus-building approach typical of Japanese corporate culture. "I want designers to be heard at the company, but for that I need them to stop playing nice and compete more fiercely with each other," he said.

Out of favor
"Playing nice" has already taken a toll on Honda.

Last summer, Consumer Reports magazine savaged the redesigned Civic for a low-quality interior and choppy ride. It dropped the car from its recommended list and ranked it next to last among 12 compact sedans tested. It was the first time the Civic had failed to make the list since the buyer's guide was launched in 1993. As a brand, Honda lost its coveted top spot in the magazine's annual report on quality this week.

"(It was as if they said) 'OK, we've got the marketplace. We're going to put in cheap interiors. We're not going to keep up with engine technology," said David Champion, senior director at Consumer Reports' auto test center.

Honda executives realize their mistakes.

"We should have been more aggressive," said Honda's top engineer, Yoshiharu Yamamoto. "The Civic is a cornerstone. And to have that car get the feedback that it did, we have to take that to heart."

John Mendel, Honda's U.S. sales chief, has argued fallout from Consumer Reports' poor review has been minimal, pointing to the Civic's segment-leading sales in recent months. For the first two months of 2012, Civic's U.S. sales were up 45 percent.

But industry research firm TrueCar.com says incentives on the Civic have more than quintupled since its debut last April to almost $1,900 per car in January, suggesting sales are being driven by attractive deals.

Mendel acknowledges Honda cut costs on the Civic interior because it believed back in 2008 that consumers would want a cheaper small car at a time when the economy was sliding into a deep recession. Instead, rivals including Hyundai, Ford and GM all found American consumers ready to spend more for small cars with richer interiors, quality sound systems and extras like navigation and heated seats.

"We missed a trend," Mendel said. "We zigged, the market zagged a little bit. We did some things that we thought were less important to the consumers."

Honda is rushing a redesigned Civic to market late this year, essentially a facelift to protect the image of a car that is key to both Honda's future and heritage.

The Civic is the model that famously put the then little-known Japanese automaker on the map in 1972. With a base price of around $12,000 in today's prices and a slogan that emphasized its no-nonsense engineering - "It will get you where you're going" - the Civic was a hit with Americans looking for a fuel-sipping small car in the wake of the first oil price spike.

The Civic now accounts for one of every five of the three million-plus cars Honda sells worldwide.

"They erred by taking the content out of the vehicle," said Mike Shaw, who owns Honda dealerships in Texas and Louisiana. "The bean counters probably did take over. They now have been overruled. That's an encouraging sign."

Industry observers and insiders said Civic's large U.S. following -- 9 million sold -- tempted Honda to stick with a design that wouldn't alienate repeat buyers.

Missing 'Mr. Thunder'
Honda has always thought of itself as an engineering firm -- its formal name in Japanese translates to Honda Technology Research Industry -- and its CEO has always been an engineer.

To avoid boring redesigns, Honda has had a long-standing policy of not letting engineers lead development of the same model twice. The idea was to encourage project leaders to "compete" with the previous version.

"The structure was there, but maybe not the culture behind it," Minami said. "None of us, including top management, has ever worked with Soichiro Honda. It's a totally new generation."

During his reign, engineers lived in fear of Soichiro Honda's surprise visits, which typically ended in deafening rants against mediocrity that earned him the moniker "Mr Thunder."

He retired in 1983 and died nine years later. Many outside Honda say the company could really benefit from the aggressive drive he championed.

"Soichiro Honda was definitely the opposite of a bean counter; he was like the automotive Steve Jobs," said Bob Lutz, a former GM vice-chairman and one of the industry's best-known "car guys," referring to Apple's late visionary leader.

"He was always for technical progress and 'Don't tell me it's too expensive'," said Lutz, speculating Honda engineers no longer had the founder's voice ringing in their ears. "If they did, they would definitely have better technology and better styling. They've just lost it."

'Behind the screen'
Honda executives want to shatter that view. Yamamoto, the R&D chief, has a message for designers: worry less about what other departments may want. "I want them to work more freely."

In the past, Honda designers didn't need permission to veer off script. They often banded together to work in secret on an alternative version of a car when unhappy with the approved blueprint. Going "behind the screen," as it was called, often had the tacit backing of managers who felt it upheld the spirit of Soichiro Honda.

Asahi knows the power of going "behind the screen" first-hand. In the late 1990s, he began dreaming of an open-top sports car for Honda and spent his days drawing out models even though he was assigned to focus on car interiors. A rushed clay model that he developed with a group of like-minded designers outside work hours became the prototype for the S2000, a zippy roadster launched in 1999.

"I've personally seen a lot of these dreams become a reality at this company," Asahi said. "That's why under the new Honda, I want to draw out the guys who have that kind of passion and make cars that way."

Honda's creative duo now have a direct line to Chief Executive Takanobu Ito. Frustrated with the pace of decision-making at Honda, Ito has put himself in charge of Honda's car operations, splitting the core of the company into three units headed by engineers: the Acura premium brand, mid-sized vehicles and small cars.

Analysts say the first true test for the "new" Honda will come with the redesigned Accord due later this year. The Accord is Honda's best-selling vehicle and previous generations made the Japanese automaker's reputation for easy-to-drive, smartly engineered cars with good fuel mileage.

"It has to be a home run," said Lars Luedeman, head of Grant Thornton's auto advisory practice. "It's their bread and butter, a very high-margin vehicle."

Unlike the Civic, the next Accord will be equipped with Honda's newest engines and transmissions -- technologies the company hopes will make its cars the most fuel-efficient in their class by 2015. It will be the first time in a decade Honda has overhauled the Accord's engine.

Rivals have watched Honda's missteps with private glee.

Nissan even ran a commercial last August which shows a loaded Nissan car carrier being driven past a frustrated Honda dealer in a poke at its rival's low inventories due to last year's Japanese earthquake and Thai floods.

For Asahi and Minami, the pressure is on. They must ensure the next generation of Honda vehicles wow consumers. "What we need to do is to raise the quality of the output by such a high margin that it will shut everybody up," said Asahi.

To that end they have already sent numerous projects back to the drawing board, they said. "The tension when we did that -- it was like all the air was being sucked out of the room," Minami said. "But that is our job."

Copyright 2012 Thomson Reuters.

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Honda frets about civic mileage judgment

A car manufacturer of the worst nightmare. Honda is worried that it could out there be more Heather Peters, order it in small Sue advertising due to mileage claims.

By Paul A. Eisenstein, msnbc.com of mysteries

Honda is for a possible flood of legal challenges bracing, if the California courts maintain that a recent judgment a award of almost $10,000 to woman who claims that 2006 civic delivered promised hybrid significantly lower fuel consumption as the manufacturer you.

Heather the only Honda is by no means the owner window sticker upset through the gap between the mileage on the civic and what the car actually in use. But they decided a very different approach to other owners, many of whose legal claims in a class action were now consolidated in a court in San Diego.

The 46-year-old Peters, himself a former lawyer, decided to take their dispute to a Court of small claims procedures in a suburb of Los Angeles. During Peters says she realized that that they lost to additional fuel costs and a lower buy-back value if the money that she insists in able to gather all, she felt, that she would always have a better chance of a sensible choice in the small claims procedure.

Such dishes are usually used for smaller disputes - and she that the individual can sue a multinational company, without overlooking a group of legal experts - or invoices that would far exceed the maximum exposure that ranges runs the use of lawyers, which means bar normally from $2,500 to $15,000 depending on the State.  In California the CAP is $10,000 and Peters received $9.867 this month by superior court Commissioner Douglas Carnahan.

Before the trial the Civic Hybrid owners complained that while her car at 50 miles per gallon was assessed, "do they not say, if you do your air conditioning and you remain in the stop-and-go traffic, you, 29, will get 30 miles per gallon."

In court, a Honda representative, technical specialist Neil Schmidt, was that it was not the company to blame. He argued that written just the numbers set Honda by the EPA, the Government fuel-economy tests carried out.

"We have no other choice," Schmidt said.  "We have put the numbers on the label."

The EPA restricts only manufacturers such as Honda, at the upper end. You can book any number on the car so called Munroney sticker above what the Government has been achieved tests. But a manufacturers such as Honda can a smaller number, it decides to do so. With regard to competitors probably their own figures to maximize, if at all only a few car manufacturers always with anything other than the EPA release gone. The part is noticed Dave Sullivan, an analyst at AutoPacific, Inc., as it was thought in general this legal using the Federal Republic numbers cover,.

But the argument can no longer keep.  Honda the only manufacturer is not suing optimistic mileage numbers. Others, including Toyota, have also put legal heat. The EPA has now its own testing procedures in order to fight. In 2008 it completely revised its processes in a strong jump in mileage figures for gas-electric vehicles such as the Honda Civic Hybrid led.

Peters said the ruling in their small claims suit "a victory for Honda Civic owner everywhere." She created in the meantime other owners not convince a website, "DontSettleWithHonda.org," settlement to adopt a proposed class-action lawsuit, which is governed on an other California judge in March. This agreement would only $100 to $200 in cash each owner along with a $1,000 discount certificate good for purchase of another product offer Honda.

Critics have frustrated argued that the settlement really is a possibility, the Japanese manufacturer, owner again in its showrooms. The case of plaintiff lawyers have also been criticised as they are, get a profit of $8.5 million for their work.

A statement by Honda said, "we do not agree with the judgment in this case, and we want to raise an objection against the decision." The timing this ground of appeal is uncertain.

But a source in the company said that manufacturer is clearly concerned about the possible precedent, which can be set when the Peters case is allowed, are available. It raises the possibility, could that hundreds of Civic Hybrid owners, see little to gain from the class action settlement and more opportunities in taking into account their own claims of the local small courtroom claims.

The industry also attention is a Ford Executive said, asking, be identified not by name. While automakers routinely complain the legal climate they pull a class action suit often countless local suits.  And small claims actions put a strict limit on their legal authority that usually a potent tool in resolving consumer complaints.

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Honda scrambles to revamp Civic

ROMULUS, Mich. — Honda is scrambling to revamp its Civic just eight months after a new version hit showrooms, and critics say it's an admission that the compact car fell short in quality and handling.

The revamp, to come by the end of 2012, is rare because new models aren't usually overhauled for at least three years. Honda executives say they're simply trying to stay ahead in an increasingly competitive small-car market.

The move comes as small car sales are on the rise in the U.S., and more people choose them because of worries about gas prices and car payments. Compacts also are no longer the cramped econoboxes of the 1980s and 1990s, and they have many of the same amenities as larger cars.

The new Civic was panned by critics when it started arriving at dealerships April 20. Consumer Reports magazine said it was less agile than its predecessor, and its interior quality was worse. The magazine refused to give the Civic its coveted "Recommended Buy" rating, saying that the braking distances were long and it suffered from a choppy ride. The car's sales ranked fourth among U.S. compacts from May through November.

The previous Civic, which came out in 2005, was known for its sporty driving, high-quality interiors, lack of noise and excellent braking, says David Champion, senior director of auto testing for Consumer Reports.

"The new one seems to have fallen apart in those areas," says Champion, who thinks that Honda cut costs with the 2012 version.

Honda also recalled more than 1,000 of the 2012 Civics because a fuel line could leak due to a manufacturing error.

Honda has told dealers a reworked Civic will arrive before the end of next year. The car starts around $16,000, and a base model with automatic transmission gets 32 miles per gallon in combined city and highway driving. Its price and fuel mileage are about the same as its competitors.

American Honda President Tetsuo Iwamura said Tuesday that the company will improve the Civic's drivability, but he stopped short of saying exactly what the company will do to the rest of the car.

"It's about how do we get two or three laps ahead of the competition," says American Honda Executive Vice President John Mendel.

In the past two years, the usual compact-car race between the Honda Civic and Toyota Corolla became a free-for-all that included high-quality entries from Chevrolet, Ford and Hyundai.

The competition will be good for buyers because companies will offer better small cars and could discount them as the competition heats up, Mendel said. He said Honda would continue to show restraint on discounts, selling its products based on their value rather than price.

The battle between the Civic and Corolla for the rank of top-selling compact in the U.S. was also upset by the March 2011 earthquake and tsunami in Japan. The disasters disrupted production, and utput was again hampered by flooding in Thailand in the summer.

Honda production only recently returned to normal, and Mendel doesn't expect dealers to be fully restocked until March.

At the same time, the competition has rolled out new models like the well-received Chevrolet Cruze, Hyundai Elantra and Ford Focus.

From May through November, the only full months that the new Civic was in showrooms, the car's sales were nearly 109,000. The Cruze led the way at almost 140,000, followed by the Corolla at 118,000, and the Elantra at 110,000.

But last month, with supplies moving toward normal after the earthquake and floods, the Civic led all compacts in sales, according to Autodata Corp.

Despite the criticisms, the Civic still has a strong following of loyal customers, says Jeff Dyke, executive vice president of operations for Charlotte, N.C.-based Sonic Automotive Inc., a dealership chain that includes Honda dealers.

"I can't keep one on my lot," he says.

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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Consumer reports pans new Honda Civic

TRAVERSE CITY, Michigan - Honda Motor Co. new small sedan dropped civic LX steeply in the consumer reports reviews rates and no longer good enough on the publication list "recommended", will be the consumer magazine said Monday.

The civic dropped to market the small sedans in the United States of "very good" in the previous consumer reports reviews, and has been tested with next- to -last 12 models.

Consumer reports criticizes new civic for a choppy ride and excessive noise, but on the plus side, said that it receives the second-best fuel efficiency, small sedans, behind only the Toyota Corolla.

"While other models like the Hyundai Elantra have to be revised is the civic gotten better, so much so that fallen ranks now it is at the bottom of its category", said David Champion, senior director of consumer reports auto test center in Connecticut.

The Elantra was ratings for small sedans of the Magainze.

American Honda said in a statement that it did not agree is his small sedan, with the consumer reports rating been the predecessor models often top rated by consumer reports.

"In almost every respect completely redesigned 2012 civic is a step forward," said Honda. "The new civic is the small car customers, including fuel efficiency, safety and reliability are important in areas,."

Consumer reports said in a statement that competition among the small sedans with new entries in this year has intensified.

It said models redesigned focus Ford scoring "excellent" and contain KIA Forte.

The new Chevrolet Cruze was it well but was criticized for its fuel consumption.

The civic scored Jetta, which is redesigned for 2011 next- to -last among dozen small sedans tested before the only Volkswagen.

"Some older design small sedans, such as the highly efficient Toyota Corolla, the spacious, quiet Nissan Skyline and sporty MAZDA3 remain competitive," said consumer reports.

Copyright 2011 Thomson Reuters.

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Other models reduce the production of the new civic, Honda

DETROIT - Honda Motor Co., warned that Monday, the it popular U.S. dealer behind the models such as the civic bottlenecks are compact this summer because of the parts of Japan's earthquake damage.

It said that normal production may not return until the end of the year.

Honda is cut significantly production of the new civic 2012, the sixth most popular car in the United States, by the summer, if not longer.

In addition version of CR-V of small SUV will be delayed the 2012 by at least one month this fall. Make up to shortages, Honda will make the 2011 version.

Both vehicles are in North America, but like other automakers, Honda must cut production because it is running out on Japanese imports of chips, sensors and other parts. Japanese plants that produce them have been on 11 March earthquake damaged or hindered by power outages.

Almost all the major car companies had idle factories bottleneck. Honda, Toyota Motor Corp. and Nissan Motor Co. have hit particularly hard. Supply companies are scrambling to make their parts from elsewhere, but set up alternative factories will take months.

Honda, which makes sold 80 percent of the vehicles in North America plants in the region, also said that it can import only a limited number of Japan of of cars built in the United States which means that traders do not fit subcompact, and the CR-Z, Insight and civic gas-electric hybrids can order until later in the year.

"Our goal is to normalize production at some point to the end of the year," wrote John Mendel executive Vice President of sales for American Honda, traders, memo.

Bottlenecks are also cut supply with some Acuras, Honda's luxury cars. Traders are not the TSX small car and wagon and the RL order large saloon until later in the year, the memo said.

The deficiency come as gasoline in the United States hit $4 a gallon in 13 States is time. -Drives, the models typically up-saving fuel sales of Honda and Toyota.

Honda spokeswoman Christina RA conceded that the production cuts could send some buyers to other brands, but she said that some buyers wait, could be ready.

"We certainly production beef things can get once back to normal," she said.

Honda sold almost 67,000 civics to March, by 21 percent compared to the previous year. Rose to 58 percent sales of CR-V, which ranks No. 11 in U.S. sales, just over 57,000 by March.

Some industry analysts think production cuts by Japanese automakers could help, General Motors, Ford, Chrysler, Hyundai and other car manufacturers affected by parts shortages not so hard.

GM, Ford and Hyundai have far better entries in the compact car market than in the past, and buyers who have purchased a Honda or Toyota automatically would be, may end try other brands.

Mendel's memo said Honda jobs would have to use some color pigment in Japan were produced due to missing certain shiny. RA said the colors are types of red, blue, dark grey and white.

Last month Honda said production in its 10 US and Canadian car factories would significantly slow down in at least early may bottleneck. The company still says, none of its 21,000 North American factory workers will be dismissed. Toyota has made similar movements in North America.

Separately, a Toyota remains motor factory in Huntsville, Ala., for lack of electricity. Alabama was devastated by tornadoes Wednesday and spokesman Mike Goss said Toyota is not sure if the plant is open again.

The plant makes engines for the tundra and Tacoma pickup trucks and the Sequoia SUV.

Goss said factories, which assemble the vehicles are so far unaffected. The pickups are IND in San Antonio, Texas, while the Sequoia Princeton, is formed.

Copyright 2011, the associated press. All rights reserved. This material may not be published, broadcast, rewritten or distributed.

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