Culture Crash: Honda Is About to Have a Toyota-Style Crisis
Even before the Japan quake and tsunami dramatically disrupted its business, Honda was having some problems. They've only gotten worse, and against the backdrop of Toyota's (TM) decline and the resurgence of the U.S. auto industry, it's time to ask: Can Honda pull out of its tailspin? Or is the company that could once do no wrong now unable to do anything right?
Culture is everything
Toyota's problems since its Great Recall of 2010 have stemmed from its vaunted corporate culture. The "Toyota Way" got the company to number one globally, displacing General Motors (GM). But the Toyota Way has only kept it there for a few years, as GM is poised to reclaim its crown this year.
It's perfectly fair to blame the Toyota culture, which is a hybrid of manufacturing and management. For decades, it was in ascent and widely copied. Now, it needs to be reformed and modified. And it's an open question whether Toyota can pull it off.
Honda's cultural problems are different. The carmaker is an engineering-driven enterprise. As Top Gear host Jeremy Clarkson once quipped, Hondas typically feel like they were screwed together "by eye surgeons." This is what consumers have always adored about Honda: they sell vehicles of almost dismayingly high quality and reliability.
Until recently, that is.
So what went wrong?
I trace the decline to the revamped Honda Insight. This car started out as a compact, niche-y, two-door hybrid, and it hit the market before the the game-changing Prius. But, of course, the Prius showed up and has defined the hybrid market ever since.
Honda figured it could use its engineering talent to built a Prius killer that would be cheaper but effectively make no compromises. Brilliant on its face: Prius sales would be stolen (It's a Honda, after all!), and buyers who might have been thinking about an inexpensive non-hybrid could be tempted to upgrade. Presto! A better, cheaper Prius -- and more green drivers on the road!
Sadly, it didn't shake down that way. People thought the new Insight looked like a chintzy Prius -- and worse, didn't feel like a Honda. This unleashed speculation, which I blogged about last year, that Honda was losing its unique ability to mate great engineering to consumer desire.
Let the crushing begin
Now Honda is reporting dismal May sales numbers. The only good news is that the company may be able to restore quake-damaged-and-delayed production by August, ahead of rival Toyota, which expects to be partly offline until the end of the year.
The slide could drop Honda's U.S. market share below 10 percent. Meanwhile, both Ford (F) and GM are assailing a traditional Honda redoubt, the small, fuel-efficient car. For example, GM set out to beat the incredibly successful Civic with its peppy, stylish Chevy Cruze -- and has succeeded! (For now, anyway.) Reviews of the redesigned 2012 Civic, which should have been fawning, have instead been stunningly negative.
As gas prices rise, Honda ought to be feasting, offsetting some of its supply chain-related loses. But it isn't. This is obviously not a good situation for the automaker.
Can Honda reverse the slide?
Honda could be in bigger trouble than Toyota, ultimately. Toyota can move beyond the Toyota Way and run its business in a more aggressive manner -- it jumped all over the Prius recall that was just announced. And this is a recall of Priuses that are pretty old.
Honda, on the other hand, is experiencing something of an existential crisis. If it loses the magic nexus between engineering and marketing... well, it may have to refocus on selling more snowblowers and portable generators. Engineering is the heart of a car company. If it gets broken and you can't fix it, you may have to start looking at building something else.
That's extreme and won't come to pass. But Honda has always needed to loosen up. And now it pretty much has to.
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