Japanese automaker Honda’s CEO Takanobu Ito has announced he will step down later this year as the company suffers multiple setbacks that have dented its brand image.
The 61-year-old makes way for little-known insider Takahiro Hachigo, a 33-year veteran of the firm’s research and development, procurement and manufacturing divisions.
The move comes amid falling sales and damaging recalls caused by defective airbags. This has led to a delay in launching new models and a drop in profit projections. All this as competition with Nissan heats up in the all-important North American market.
As CEO, Hachigo’s goal is to step up development of products and technologies. He also intends to make major a major organisational restructure that will move away from its US-centric approach. Honda has also scrapped its sales target of 6 million cars a year.
Resignations at the corporate top are rare in Japan. The stepping-down of Honda CEO Takanobu Ito, saying that it is “time for a new, young leader” shocked many. Ito’s replacement, Takahiro Hachigo, is relatively young and skips several corporate rungs to assume the CEO position. But the move may not be as revolutionary as investors hope.
Ito was a change-maker, who grew sales 28 per cent and pushed for more global, efficient and cost-effective sourcing and technologies. Quality issues may have been inevitable growing pains, but Honda’s fumbling of consumer complaints, safety issues and subsequent massive recalls signals a need for a cultural shake-up.
With its reputation for safety in tatters, placing an engineer like Hachigo at the helm may feel reassuring for Honda. The brand has traditionally put its engineering credentials at the forefront: a 2006 Accord ad claimed it was the ‘Swiss watch’ of cars. Today, functional product benefits are non-differentiating. Craftsmanship is the latest evolution in the car industry.
Honda needs to go beyond tried-and-true approaches to repair its image. The brand must elevate its communication to connect with its target’s values. There is, however, still room if Honda chooses to position itself as the Japanese market’s ‘social engine’ car brand.
Compared to the West, CEOs in Japan tend not to have the same power and leadership, unless they are the owner of a private company. Many CEOs, older ones especially, enjoy being in the position without a strong vision, and avoid taking risks until they retire.
Honda — an innovative company since its launch — is an exception, and has had relatively strong leaders. Takanobu Ito did a good job in revamping and stabilising the business after the Lehman crisis. He was unfortunate to have to face consecutive recall issues in 2014, and was obliged to step back whether or not these issues were because of his business objectives.
We do not know how good incoming CEO Takahiro Hachigo’s business sense is, but there is potential as he brings a new perspective. He seems to have a good understanding of the automotive industry and the importance of global business to care about consumer needs. These are important qualities for Honda to be a leading company.
I believe humanity plays a crucial role in determining a good leader. He seems to have it. Being relatively young for a Japanese CEO will not be seen negatively, as long as he has his own vision and passion in the mid- and long-term. The challenge will be how much he keeps current policies, while adding something unique to re-establish the brand.