PROBLEMS FOR HONDA IN THE EARLY 2010s

2011 A BAD YEAR FOR HONDA

In 2011, Honda was hurt by from supply disruptions from the March quake-tsunami-nuclear disaster in Japan and recent flooding in Thailand. Global production did not return to normal levels until March 2012. Honda chief executive Takanobu Ito declined to estimate how badly sales were hit or how long it will take Honda to return to pre-disaster sales level of 3.6 million vehicles worldwide. [Source: Mira Oberman, AFP, January 9, 2012]

"2011 was like a jinx," Ito said. There is a superstition in Japan that at some point a person hits a year where they have a bad fortune no matter what they do, he explained. The only way to recover is to go to a shrine and pray. "I went to Nikko shrine on New Year's and had that bad omen taken away from me," Ito said. "Last year we had a big handicap for production due to the shortage of the parts, so we have full confidence that we'll be able to sell the incremental part of the production in this market," he said. [Ibid]

“Honda said vehicle shortages due to quake-related production problems pushed down sales in the United States and Japan. In October 2011, AFP reported: “Honda 31 said net profit for the fiscal first half plunged 77.4 percent year-on-year, as it grapples with the impact of the March earthquake and a strong yen. Honda said its net income in the first half ended September 30 totaled 92.2 billion yen (US$1.17 billion). Operating profit in the period plunged 81.1 percent to 75 billion yen, it said, due to lower sales and production, the impact of raw material price increases and the effects of a stronger yen. Revenue fell 22 percent to 3.6 trillion yen on lower automobile sales "led by decreased production attributable to the impact of the earthquake and unfavorable foreign currency translation effects," the automaker said. [Source: Agence France-Presse, October 31, 2011]

“Honda expects to boost U.S. sales by 25 percent in 2012, after posting a 7.1 percent loss in 2011. Its sales target includes 1.25 million Hondas and 180,000 luxury Acura vehicles. Honda introduced three Acura prototypes at the Detroit show which represent the automaker's focus on "timeless beauty" and sportier styling. Production in the United States was not as badly hit as Japanese operation. [Ibid]

Flooding at Honda’s Plant in Thailand

Automakers were hard-hit by the flooding in major industrial parks in Thailand in the autumn of 2011, particularly Honda. Honda Motor Co.'s plant in Ayutthaya was inundated by floodwater. Helicopter shots of the plant showed submerged cars and facilities. The floods also prevented the automaker from producing parts in Thailand, forcing Honda to cut production at its Japanese and North American plants as well. The company halved output at its plants in the United States and Canada as the flooding disrupted the parts supply chain. [Ibid]

“Honda’s plant in Ayutthaya in Thailand was forced to close in October 2011 and remained shut down for almost six months because of the severe flooding. It did not resume production until late March 2012. Pitak Pruittisarikorn, executive vice-president for Honda Automobile (Thailand), told a news conference the plant should produce 150,000 vehicles in the remaining nine months of 2012 and the target was for output of 240,000 per year. “Thailand remains the most important production base in Asia and Oceania. We want to reassure you that Honda is not moving its production base anywhere else,” he said. [Source: Reuters, April 1, 2012]

“Earlier in March Honda announced it was investing $337 million in a new plant in Indonesia, but Hiroshi Kobayashi, president and chief executive of Asian Honda Motor Co Ltd, said that did not mean it was neglecting Thailand. “Regardless of the floods, Thailand’s market is still increasing. Thailand’s demand is still increasing, so is India’s and Indonesia’s, so why do we have to reduce production here?” he told Reuters. [Ibid]

In September 2011, Honda recalled 936,000 vehicles worldwide, mostly Fit subcompacts, due to a defect with power window switches, and also recalled 310,000 Pilot SUVs in the U.S. Due to defective parts in seat belts.

In August 2011, Honda recalled 2.36 million vehicles in the U.S. and China to fix a faulty bearing in the automatic transmission system.

Honda and the 2011 Tsunami

Honda had to suspend operation at some of its plants both because of earthquake damage and shortages of parts. It was forced to reduce production by about 33,000 vehicles in the two weeks after the disaster. Production in terms of domestic output fell by 63 percent in March 2011, when the earthquake and tsunami occurred. Honda also had to suspend operations at overseas plants because of parts shortages.

In the United States Bloomberg News reported: “Honda guaranteed that March-April orders would be fulfilled for May-June deliveries. Beyond that, the brand has described its ability to fulfill orders as “fluid.” “We knew this was coming. Most dealers around the country would tell you the same,” Carl Bellizia, owner of Cambridge Honda in Cambridge, Mass., told Bloomberg. “It’s an unprecedented disaster, and Honda has done a marvelous job of communicating to the dealers. And we understand they cannot make guarantees.”

Keith Rey, the general manager of Marin Honda in Corte Madera, Calif., told Bloomberg he is operating with healthy inventories of the affected models. “I think it would be news if we were running base supplies similar to the Toyota Prius, which always runs low---8 to 10 days worth and that’s it---but we’re not in that position at all,” he said. “We’ll be down eventually, but that’s not going to change our business model.”

Honda said it wouldn’t be able to reach pre-disaster levels of production until late 2011. Workers took off an extra 14 days in June, July and August because of production reductions due to parts shortages.

Honda’s Strategy to Deal with the High Yen

Mira Oberman of AFP wrote: “Honda will further boost exports of US-built vehicles and expand its overseas production in order to hedge against an "abnormally high" yen, the Japanese automaker's chief said. The Japanese automaker aims to increase local production to about 70-80 percent of the vehicles it sells in each region while importing the rest from various plants around the world, Honda chief executive Takanobu Ito said. [Source: Mira Oberman, AFP, January 9, 2012]

"That's the way we can grow, and that will be the ultimate method to hedge against these kind of currency ups and downs..."In the US, for example, we have already achieved 87 percent of local North American production, which satisfies me," Ito said through a translator. "What I'm asking North America or the US to do is to contribute to other regions such as the Mideast by providing North American production to those regions.” [Ibid]

Honda Bounce Back After the March 2011 Earthquake and Tsunami

Nick Bunkley wrote in the New York Times: “Honda was hard hit by the March 2011 earthquake and tsunami “because it has two major plants on the edge of the quake zone, and many of its suppliers sustained damage or had to evacuate because of radiation concerns. The company delayed the introduction of a revamped CR-V crossover vehicle, and it struggled to build enough of its redesigned Civic compact because dealers already had sold most inventory of the outgoing version. [Source: Nick Bunkley, New York Times, October 13, 2011]

“John Mendel, executive vice president of American Honda, said inventories hit their low point in August 2011 and now were increasing steadily. The backlog of demand means replenishing dealerships is like “trying to fill a bathtub with the stopper open,” with many cars being snatched up as soon as they arrive, he said.”I think people will be back in Honda showrooms in a big way, and I hope the competition has enjoyed our brief respite in terms of inventory,” Mr. Mendel said. “I look forward to seeing them back on the battlefield again soon.” [Ibid]

“To keep shoppers from wandering onto a competitors’ lot and giving rival dealers more confidence, Honda introduced a program called the “Honda Promise,” which allows buyers to lock in a discount on vehicles that are unavailable. Automakers usually offer rebates or special financing on cars and trucks in stock, and the deals generally expire at month’s end. “It’s a great idea and a great program,” said Jason Heard, the general sales manager at Frank Ancona Honda in Olathe, Kan., where September inventories were about two-thirds of normal levels. “Honda’s done a great job at getting us built back up, but dealers always want more cars.” [Ibid]

Woman Sues Honda in Small Claims Court

Linda Deutsch of AP wrote: “A Los Angeles woman who expected her hybrid Honda Civic to be a high-mileage machine wants the automaker to pay for not delivering the 50 mpg it promised. But rather than being one of thousands in a class-action lawsuit, she took her case to small claims court. Experts said Heather Peters has a better chance of winning her case in a court with more relaxed standards and could get a payout many times higher than the few hundred dollars offered to class-action plaintiffs. [Source: Linda Deutsch, AP, January 4, 2012]

“Peters said she's been contacted by hundreds of owners who also want to take their chances with small-claims, where there are no attorneys' fees and cases are decided quickly. "If I prevail and get $10,000, they have 200,000 of these cars out there," said Peters. Peters, a state employee and ex-lawyer, argued that Honda knew her car wouldn't get the 50 mpg as advertised before a judge in Torrance, where American Honda Motor Co. has its West Coast headquarters. As her 2006 vehicle's battery deteriorated over time, it barely got 30 mpg, she said. [Ibid]

“Neil Schmidt, a technical expert for Honda, called Peters' $10,000 claim excessive for her 2006 Civic Hybrid. He said the federal government had required Honda to post the highest mileage the car could get, but said the mileage varies depending on how the car is driven - for instance, if it gets stuck often in stop-and-go traffic. Peters said she would have never purchased the car if she had known that. "The sales force said 50 miles per gallon, but they didn't say if you run your air conditioning and you remain in stop-and-go traffic, you're going to get 29 to 30 miles per gallon," she said. "If they did, I would have gotten the regular Civic.” [Ibid]

“Peters never contacted Honda to complain or express any concern about her vehicle's fuel economy until she sent a letter in late November 2011 and then filed her suit shortly thereafter, Honda said in a statement. In response, Peters said she did not write to Honda's corporate offices sooner because she was repeatedly told by Honda dealers that the company had a strict policy not to replace batteries until the dashboard warning light was lit. [Ibid]

“In a statement, the company also said that it offered to inspect her vehicle and work with her on the findings, but those offers were rejected. Peters called that claim "absolutely false." The company also said it did not believe Peters was deceived. "The window sticker that was attached to her vehicle (as required by federal law) clearly indicated that her mileage would vary depending on driving conditions, options, vehicle condition and other factors," the statement said. [Ibid]

“But if Peters wins, and other Civic owners follow her lead, she estimates Honda could be forced to pay as much as $2 billion in damages. Experts say there are many upsides to Peters' unusual move. "I would not be surprised if she won," said Richard Cupp Jr., who teaches product-liability law at Pepperdine University. "The judge will have a lot of discretion, and the evidentiary standards are relaxed in small-claims court.” [Ibid]

“In February 2012, Peters was awarded almost $10,000 in a California small claims court against Honda. Honda says it is appealing the Peters decision. [Ibid]

Class-action Settlement over Honda Civic Hybrid Mileage Claims Approved

Danny King wrote in the San Diego Union-Tribune: A class-action lawsuit between American Honda Motor Co. and plaintiffs who claimed the Japanese automaker overstated fuel-economy figures on Honda Civic Hybrids has been approved by a San Diego Superior Court Judge. [Source: Danny King, San Diego Union-Tribune, March 21, 2012]

“According to the San Diego Union-Tribune, the lawsuit involves about 460,000 people who either owned or leased 2003 to 2009 Civic Hybrids. The settlement grants the plaintiffs $100 in cash and a credit towards a new Honda of between $500 and $1,000. Honda may end up paying out more than $460 million, including legal fees of more than $8.1 million, the newspaper said. [Ibid]

“The decision was more than four years in the making. The class-action claim stemmed from a 2007 lawsuit by John True, who sued the automaker and alleged that Honda misled him about the Civic Hybrid's fuel economy. Some of the plaintiffs said their Honda Civic Hybrids got as little as 30 miles per gallon, far less than the 50 mpg Honda advertised, and that a software upgrade to the hybrids batteries actually reduced fuel economy further. [Ibid]

“American Honda, in a March 16 statement, said it was "pleased" with the court's decisio, and called it a "fair resolution." Heather Peters, the woman who took her case to small claims course, declined to join the class-action claim because she thought the class-action settlement wasn't fair to Honda owners. Last week, the Associated Press reported that Peters used her small-claims award to appeal to the San Diego Superior Court Judge for the class-action settlement to be cancelled. [Ibid]

Recalls and Problems at Honda in the 2000s

In November 2003, Honda recalled 652,000 sedans, minivans and sport utility vehicles in the United States because of defect that allow the vehicles to roll away even when they were in park with the key removed.

In 2004, there were reports of fires on the Honda CR-V SUVS that occured from oil leaks.

In November 2005, Honda recalled 99,000 Odyssey and Stream minivans to fix their transmissions, which contained a computer glitch that caused components to break down.

In June 2006 Honda announced their recall of 484,626 cars, mostly Odysseys, CR-Vs and Step Wagn models in Japan and China, at a cost of ¥2.73 billion, to replace a faulty ignition switch that could cause their engines to stop.

In September 2008, Honda recalled 580,000 minicars including Acty, Life, That’s Zest, Vamos and Hobio models to replace a defective fuel pump.

In March 2008, Honda announced the recall of 273,000 2004-2008 Acura TLs to address potential fires under the hood and fix problems with their windshield wiper motors.

in January 2010, Honda recalled 646,000 minicars to fix a faulty window switch that could under some circumstances cause small fires

One of Honda’s main missions is reviving the Acura luxury car.

Honda Recalls in 2010

In February 2010, Honda announced a recall of 438,000 cars worldwide to repair a problem with the drivers airbag inflater. Recalls to fix the same problem in 514,000 other vehicles were issued in 2008 and 2009. In May 2010, Honda announced a recall of 167,000 Acura TSX models to repair a power steering hose that could lead to a “smoke or a fire” hazard.

In August 2010, Honda announced a recall of 400,000 vehicles in the United States, mostly popular Accords and Civics, over faulty ignitions that could allow the key to be removed from ignitions without the transmission being in ark.

In October 2010, Honda announced a recall of 127,000 City and new Fit compact in Brazil to fix potential problems with accelerator pedals.

In October 2010, Honda announced a recall of 528,000 vehicles worldwide to fix a defect with the cylinder that hold brake fluid. No injuries or accidents had been reported in connection with the defect, The move was to “prevent the unlikely failure of a seal in the brake master cylinder.”

In December 2010, Honda announced a recall of 35,000 Passport SUVs in the United States to inspect brackets on the rear suspension that could detach and cause an accident.

Honda to Recalls in 2011 and 2012

In July 2012, Jiji Press reported that Honda recalled about 320,000 vehicles worldwide for free repairs due to a defect in a door opening and closing device. The major automaker informed the Land, Infrastructure, Transport and Tourism Ministry that it will recall 10,231 CR-V sport-utility vehicles throughout the nation due to the problem. The cars were produced from November 2011 to last month. Honda will take similar action for about 310,000 vehicles using the same device that were sold in such markets as North America, Latin America and China. Due to the inadequate installation of the device on the driver's side, the door could open unexpectedly when the automatic locks are activated soon after the car starts, according to the ministry. [Ibid]

“In December 2011, Katie Kindelan of ABC News reported: “Honda Motor Co. announced today it has recalled 304,000 vehicles globally because they may contain defective air bags. The global recall affects some of Honda and Acura’s most popular models, including the Accord, Civic, Odyssey and Pilot, over concerns that the vehicles’ air bags could burst in a crash due to defective inflators, sending metal and plastic pieces flying and potentially causing injury or death.Some 273,000 of the cars recalled are in the U.S. and Canada, Honda said. [Source: Katie Kindelan, ABC News, December 2, 2011]

“The recall was sixth recall since 2008 for the same problem, and brings the total number of cars recalled to nearly 2 million. By comparison, rival carmaker Toyota has recalled about 12 million vehicles in the past two years, according to the Associated Press. Earlier in 2011 Honda recalled nearly 700,000 vehicles in Asia and North America citing stalling engines. [Ibid]

“Honda said there have been 20 accidents so far related to the air bag problem, including two deaths in the U.S., both in 2009. The specific list of cars affected by Honda’s expanded recall includes: 2001 and 2002 Accord, 2001 to 2003 Civic, 2001 to 2003 Odyssey, 2002 and 2003 CR-V, 2003 Pilot, 2002 and 2003 Acura 3.2 TL and 2003 Acura 3.2 CL. [Ibid]

In September 2011, Honda recalled 936,000 vehicles worldwide, mostly Fit subcompacts, due to a defect with power window switches, and also recalled 310,000 Pilot SUVs in the U.S. Due to defective parts in seat belts.

In August 2011, Honda recalled 2.36 million vehicles in the U.S. and China to fix a faulty bearing in the automatic transmission system.

Image Sources: Honda except headquarters and motorcycles (Honda via Wikipedia)

Text Sources: New York Times, Washington Post, Los Angeles Times, Daily Yomiuri, Times of London, Japan National Tourist Organization (JNTO), National Geographic, The New Yorker, Time, Newsweek, Reuters, AP, Lonely Planet Guides, Compton’s Encyclopedia and various books and other publications.

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© 2009 Jeffrey Hays

Last updated October 2012

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