New Honda CEO to focus on R&D

Takanobu Ito, newly named as the next president and CEO of Honda Motor Co., will redouble the company's focus on research as it grapples with a global market meltdown.

Honda presidents traditionally cut their teeth at the automaker's cherished development subsidiary, Honda R&D Co. Ltd. Current President Takeo Fukui, 64, headed the operation in 1998, and Ito, 55, was in charge from 2003-05.

But in his new role, Ito will return as president of Honda R&D in April. And he will keep that job after he takes the helm of Honda Motor in June. Ito will be the first man running both Honda Motor and R&D since Nobuhiko Kawamoto in 1992.

Fukui called the doubling up a way to streamline decision making at a time when quick reaction to volatile markets is key to survival. Honda won plaudits last year for rapidly shifting its North American production toward more small cars as demand for big vehicles wilted.

"The next couple of years will be difficult. And in order to push through, we need speedy decision making and a compact leadership," Fukui said at a news conference here today announcing the management reshuffle. After June, Fukui will stay on as an adviser to the board.

In the black

Honda expects operating profit to plunge 81.1 percent to 140 billion yen ($1.51 billion) in the fiscal year ending March 31. Unlike much of the world auto industry, Honda expects to remain in the black. Toyota and Nissan are among those revising their outlooks to losses.

R&D is the key to future growth, but budgets are getting cut as automakers slash expenses. Honda is among those cutting its original r&d budget for the fiscal year ending March 31. But it will still be spending 1.2 percent more than last year.

Tatsuo Yoshida, an auto analyst at UBS Securities, says it makes sense to give an r&d veteran such as Ito direct oversight over production and development.

"In this kind of environment, r&d money is scarce and it has to be spent cleverly," he said.

Ito, now a senior managing director, joined Honda in 1978 in r&d. His projects included the all-aluminum unibody NSX sports car.

He later came to the United States as executive vice president of Honda R&D Americas. There he led development of the MDX crossover.

Tough outlook

After returning to Japan, Ito became president and director of Honda R&D Co. And he later polished his production credentials as the general manager of Honda's factory in Suzuka, Japan.

Fukui oversaw an era of expansion at Honda, including the addition of a plant in Indiana and the launch of the redesigned Insight hybrid, regarded by some experts as the best challenge yet to Toyota's Prius.

But he hands the wheel to Ito at a dangerous time.

Honda's vehicle sales in the United States, its most important market, tumbled 27.9 percent to 71,031 units in January. And its market share slid to 9.4 percent, from 10.8 percent.

Aside from plunging demand, Honda also is fighting a surging yen. The yen's rise undermines Honda's international profits and makes Honda's exports from Japan more expensive.

The Japanese currency traded around 93 per dollar today, not far from a 13-year high near 87 per dollar hit in January. Fukui has called the range unsustainable and has warned that Honda may move more operations--including r&d centers--overseas to counterbalance the foreign exchange hit.

Dealing with the crisis

Fukui, a motor racing fan who announced in December his firm would pull out of Formula One racing, steps down at a critical time for Honda.

Automakers everywhere are grappling with plunging sales, and Honda will be fighting an uphill battle against losses in the new business year beginning in April, as a strong Japanese yen adds to the pain when profits are repatriated.

The Japanese currency traded around 93 per dollar today, not far from a 13-year high near 87 per dollar hit in January.

But thanks to its more cautious and measured business approach, Honda is still expecting to stay in the black for the year ending March 31, unlike rivals Toyota Motor Corp. and Nissan Motor Co.

With sales crumbling in the main markets of the United States, Europe and Japan, Fukui reluctantly pulled out of Formula One racing to channel the funds instead to the development of a new generation of cars.

He also resisted building a car factory in Russia when most rivals took the plunge when sales there were soaring last year. Car sales in Russia have since reversed, falling by double-digits in the past few months.

Reuters contributed to this report.

By Hans Greimel- Automotive News