Ex-President Says Honda ‘Inferior,’ ‘Headed Downhill’

Honda has racked up its best profits in its half-century history and earned a quality ranking that U.S. automakers can only wish for.

So why is the former president of Honda Motor Corp. calling the No. 2 Japanese automaker “inferior” and saying it’s “headed downhill”?

Nobuhiko Kawamoto, Honda’s president from 1990 to 1998, said he felt “a sense of crisis” for Honda because its growth has always been precarious as it tries to keep up with Toyota Motor Corp., Japan’s top automaker. Kawamoto, who now acts as advisor and director at Honda, also is concerned about a reshuffling of the company’s top management.

Honda, whose U.S. operations are based in Torrance, does have its problems.

Despite booming sales in the United States -- about 60% of the company’s total -- Honda is losing ground at home in Japan, a notoriously finicky and brand-conscious market. And the tide is expected to turn soon in North America, where analysts say sales have been inflated by rebates and other discount campaigns.

Honda President Hiroyuki Yoshino announced his resignation last month, earlier than expected, in what was widely interpreted as an acknowledgment that younger leadership is needed to rev up the company image at home and ride out growing global competition.

Yoshino, 63, said he was getting too old and his hand-picked successor, 58-year-old Takeo Fukui, the former head of Honda’s North American manufacturing operations, should steer the automaker’s three-year strategy that is being set up this year.

Kawamoto said the timing of the change wasn’t right, and that Yoshino should have waited until Honda was back on a path toward steady growth before handing over his job.

Kawamoto acknowledged that he was worried about Fukui’s ability to maintain high morale among his workers to keep up with Toyota, which has twice as many workers and dealer showrooms. Toyota also has a wider variety of models including trucks.

“We’re an inferior company compared with established companies like Toyota,” he said. “Honda is headed downhill.”

Honda is clearly out-muscled by Toyota, the world’s third-largest automaker. Toyota has ambitions to control 15% of the global market by 2010, which would put it neck-and-neck with Detroit-based General Motors Corp., the No. 1 automaker in the world.

And Honda appears particularly small next to its rivals after a series of mergers and alliances.

Toyota and Honda are the only Japanese automakers that have avoided stock ownership alliances with foreign companies. Yoshino said maintaining Honda’s independence was his biggest achievement during his tenure.

Kawamoto is concerned that Honda won’t be able to keep up its recent solid performance.

The automaker posted its best profit in its history -- $3.6 billion -- for the fiscal year ended March 31. That was an 18% increase from the previous year.

And Honda scored higher than U.S. automakers this month in a key quality study of 2003 models, trailing only Toyota, Porsche and BMW in the annual report from J.D. Power & Associates.

Company executives are more confident than Kawamoto.

“Technology is what got us this far, so it will be technology that we’ll be counting on under Fukui,” Honda Chairman Yoshihide Munekuni said. “He is the kind of man that clearly moves toward his goal. A company should never lose its youth and vitality.”

But this year is almost certain to be tough for Honda. Besides an anticipated slowing of North American sales, Honda’s business stands to be hurt by the declining U.S. dollar, which reduces the value of its overseas earnings.

And Honda is struggling at home. For the quarter ended in March, Honda sold 221,000 vehicles in Japan, down 10.5% from the same period a year ago.

The Toyota Wish minivan and Corolla sedan clinched the top spots in the Japanese market in April, dethroning the Honda Fit, which had been No. 1 for nearly all of last year.

The Fit, which is not sold in the United States but is sold as the Jazz in Europe, won buyers with its mileage of 54 miles per gallon and roomy interior despite its small size.

These days, Toyota has six of Japan’s top 10 sellers. It controls 42.3% of the Japanese market compared with Honda’s 15%.

“The Fit effect has peaked out,” said Hitoshi Onishi, auto analyst at Cosmo Securities Co. in Tokyo. “Producing hit after hit is just impossible to sustain.”