The transient power of dreams

Will those mooted logistics jobs be as skilled and well paid as those at Honda? I doubt it and often wonder what happens when there simply aren’t enough real high-value-added jobs to go round and our economy, as former BMW boss Bernd Pischetsrieder once put it: ‘is based on you cutting each other’s hair.’

It’s a similar story at Honda’s Formula 1 engine works in Milton Keynes, where by the end of the season Japanese knot-weed will be pushing up through the car park as Honda ends its fourth-ever involvement in F1 to reach for what it calls ‘carbon neutrality by 2050.’

Is Honda on the retreat? In the case of the UK, most certainly. It first officially imported cars here in 1972 starting with the Civic and by the Eighties it was on a high, working with Rover and winning on the race track with McLaren. The Civic, with its reliability and strong used values, was going gangbusters with the buying public as did CR-V, the first soft-roader.

Looking back, Honda’s fierce independence, its engineering-lead product development, its idiosyncratic model range and its refusal to enter into heavily discounted markets such as fleet sales and one-day hire businesses, look quirky rather than far sighted. Obviously, retail price maintenance was astounding, but selling around 50,000 cars a year meant fixed costs are spread thickly over each sale and it’s difficult to think of a quicker way to piss off buyers than Honda’s on/off/on/off Civic estate model strategy, or for that matter the disappointment and fuzzy commitment epitomised by the Honda Insight, which in its 2009 second generation had a sales curve that looked like an anvil thrown off a cliff. To think that car could have been a better Prius…

There was so much great stuff as well, such as the 2001 Jazz, one of the most reliable cars on the planet, brilliantly designed and engineered and a best seller even if it was mostly to pensioners. What about the Civic Type R, a series of go-faster hot hatches, or the Eighties Civic CRX and the 1997 buzz-bomb Integra Type R?

The original NSX supercar even attracted the admiration of Gordon Murray and still stands alone amongst its contemporaries, yet who remembers its complicated hybrid replacement in 2016? Ever seen one on the road?

So, what about Europe? It’s hard to avoid the conclusion that Honda is managing its decline. For years the company has under supplied the market with an often highly eclectic model mix. The fourth-generation 2004 Legend with its super complicated rear-drive system, for instance, seems like a weird cheese dream. I’ve never, ever seen one on the road, yet I drove one at the launch in Japan, or did I?

Or what about the first HR-V, billed as ‘The Joy Machine’ at its 1999 launch. This ugly but reliable crossover bed blocked the ‘wacky & slow-burning’ slot in the Honda UK line up at the expense of the far more meretricious Element, a big, stripped-out SUV based on the CR-V, which captured hearts in the US between 2003 and 2011.

You might say the same of the Honda e, a charming but tiny and impractical battery-electric run-around launched last year with all the range of a squirrel on a string. Honda didn’t want to make this car, it was bounced into it, and it has privately admitted it will make a loss on each one sold.

Sales in Europe from a high of 264,009 in 2008 have been in freefall since Lehman Brothers (2008) and the 2011 Fukushima nuclear disaster along with the Thailand floods which kiboshed a lot of Honda’s suppliers. There was a brief rally in 2016, but in 2019 Honda shifted just 123,277 cars in Europe and the company’s market share has fallen equally steeply. Analysts blame a lack of sales drive, badly targeted and poorly supplied product, and a lacklustre set of dealers.

And the world? Strategy wise, these days Honda is a Japanese and North American company; decisions come out of the respective headquarters buildings in Minato, Tokyo, and Torrance, California. Traditionally, engineers hold sway at Honda and tend to build what they’re interested in, which doesn’t always exactly coincide with what the market wants. Ken Keir, former vice president of Honda Motor Europe, acknowledged as such, saying that Honda’s model range lacked continuity because it is ‘led by its research and development team rather than marketing – and I wouldn’t have it any other way.’

Nobuhiko Kawamoto was Honda’s chief executive from the death of founder Soichiro Honda in 1991 to 1998. A brilliant engineer, great company and a terrific communicator, he was the last Honda chief who reached out to the media and customers. He broke at least some of the engineers’ stranglehold on product development, organised the business into three divisions (cars, motorcycles and power products) and pulled out of Honda’s second period of F1 involvement in 1992 to concentrate on research into fuel-cell vehicles.

Whether that was wise remains to be seen, though the distance of Honda US and Japan from Europe, together with the company’s innate inward-looking conservatism, meant it was wrong-footed by a series of European developments: the growth of diesel engines, stringent CO2 emissions regulations which penalised the high-revving, non-turbo engines Honda had specialised in and finally the almost mandating of battery-electric cars because of the speed of CO2 reductions despite the commonalities between fuel cell and battery electric propulsion.

It’s been said that Honda’s trump cards are its motorcycle and small engine division, each of which reputedly make more money than the automobile operation. Yet each of these isn’t immune to the electrification revolution and Honda’s painstaking development cycles and caution has made it slow to develop battery-electric alternatives.

Nor has America been a source of abundance recently. In last year’s Covid fall out Honda was almost 20 per cent down compared to rivals, which had pegged falls to single figures. Joe Biden’s electrification programme, while modest, leaves Honda vulnerable. It has pinned its hopes on a joint development project with General Motors, the first results of which are likely to be a new fuel cell and a large-car battery drivetrain known as Ultium due in 2024, which is a bit late to be contesting Tesla.

In April newly appointed chief executive, Toshihiro Mibe, (like Kawamoto he came from Honda’s R&D division) announced an end to petrol and diesel engine production by 2040, the commitment to R&D spend of $46 billion (US) in the next six years ‘regardless of fluctuations in our sales revenue’, and the adoption of solid-state battery technology by the second half of this decade. But still a lot of questions remain. Does that combustion engine commitment include power products and motorcycles? What if America is slow to adopt EVs and what about Japan’s heavy dependence on hybrid drivetrains where EV sales are less than one per cent of the total?

Last year strong rumours emerged that a concerned Japanese government was trying to engineer a tie-up between Nissan and Honda. It didn’t come to anything, especially when the boards of then respectively Japan’s second and third largest car makers sat down and examined the deal under a magnifying glass, but the anxieties about Honda remain. Fierce independence doesn’t alter the fact that it has to answer to someone. In recent years the company’s revenue and EBITDA (Earnings before Interest, Tax, Depreciation and Amortization) have virtually flat-lined and earnings per share are down from $5.3 in 2018 to $3.6 last year.

There are three Hondas in the English household and I still absolutely believe in the company’s engineering virtuosity, its far sightedness and its determination. I once asked a Japanese friend who works at Honda about jet packs as personal transport. ‘No question is too stupid to be discussed at a very senior level at Honda,’ he replied.

But I worry about Honda’s engagement with the rest of the world over the past decade; at times it has appeared out of touch and leaden footed.

Once asked about the future of the motor industry, Soichiro Honda said; ‘In the future there will be half a dozen car companies… and Morgan.’ Whether one of those six companies will be Honda seems very much in the balance.