Honda tears up its old product plan

Honda Motor Co. is reviewing its entire lineup with the aim of building less expensive and more fuel-efficient vehicles, Honda CEO Takanobu Ito says.

In the case of some next-generation products--including the crucial Civic platform used on a variety of vehicles worldwide--that means making major changes to vehicles already well along in the development process.

"We are taking more time to rethink the new Civic and all our models," Ito told Automotive News through an interpreter. "We had to revisit our development work and planning to comply with the change in the environment."

Smaller, lighter Civic

Specifically, Honda executives told Civic designers and engineers to make the car smaller, lighter and more fuel efficient than originally designed, said Tsuneo Tanai, COO for automotive operations.

Tanai said that before Lehman Bros. imploded in September 2008 and intensified the global financial crisis, Honda already was concerned about rising oil, steel and aluminum prices.

But Lehman Bros.' collapse and the global economic meltdown that followed prompted Ito to act. In December, his mandated re-evaluation led to killing Honda's V-8 and rear-wheel-drive programs.

Now, Tanai said, Honda is focusing on reducing weight on all its platforms and expanding its hybrid powertrain technology to more vehicle lines.

It also has added electric vehicles, which Honda initially opposed, to bump up the Honda fleet's fuel efficiency and lower its emissions.

The next Civic originally was planned to be larger than the current model, but now its exterior will be smaller. Honda aims to create a perceived sense of increased roominess inside without increasing the vehicle's overall size.

Making such midstream changes can be costly and cause significant delays in releasing a new product. Maintaining its product cadence will be difficult, as the redesigned Civic is due to arrive in less than a year if Honda follows a typical five-year cycle.

Ito and Tanai declined to talk about launch timing for the Civic or other vehicles. However, Ito said: "The team is struggling. We are injecting more manpower to meet our target."

Delaying the Civic platform would have a ripple effect across Honda's lineup, as other vehicles share the Civic's basic architecture: the CR-V and Element, Japan's Stream small minivan and Europe's FR-V.

Tanai is confident Honda is making the right choice. In May 2008, when gasoline prices peaked and consumer confidence was slumping, Honda hit a sales record for the Civic, beating even the Ford F-series pickup, the perennial U.S. sales leader.

"We perceived that U.S. customers are sensitive to the external environment, and their response is very direct. We felt we needed to take this into account," Tanai said through an interpreter.

The "Lehman shock," as Ito calls it, also caused Honda to re-evaluate its pricing strategy, to make its vehicles more affordable.

"The easiest option would be to make products cheaper, but we have to not only cut the price but also maintain the highest quality," Ito said. "This applies to all models, but the biggest is the world Civic."

By Mark Rechtin- Automotive News