Summary of Honda CEO Speech on Organizational Changes
Honda management has made decisions on the operational structures we will adopt for the next fiscal year and beyond. As a part of our ongoing efforts to advance our automobile production network and capability on a global basis, we also decided to make some changes to our automobile production operations in Europe.
<Operational Structure changes>
In light of the rapid changes in our business environment, we decided to make some organizational changes in our motorcycle, automobile and power products businesses.
In 2010, we started an initiative to strengthen collaboration among different divisions in the areas of sales, production, development and purchasing.
And since 2014, production, development and purchasing divisions have been sharing one workplace at Kumamoto Factory and developing products in collaboration.
In the meantime, if we look around our market environment, competition versus manufacturers from China and India, in addition to competition against Japanese, European and U.S. competitors, is further intensifying. Moreover, we must continue complying with environmental regulations which are getting more stringent in every country. We also have to undertake more initiatives to expand into new markets for the future. There is no question that our business environment is changing more dramatically than ever.
In light of such circumstances, we need to further increase the unity of our motorcycle business as a whole and increase the speed of our operations, so that we can enhance the competitive strength of our motorcycle business.
To this end, in order to advance our existing product development system and enable more coordination and collaboration among sales, production, development and purchasing divisions beyond their boundaries, we will consolidate our Motorcycle Operations and Motorcycle R&D Center into one organization.
Under this new organizational structure, we will fully integrate the entire process involving new models – from the planning and conceptual phase through development, initial production and mass-production – and secure our global competitiveness by increasing not only product appeal, but also cost competitiveness, quality and the speed of development.
The automobile industry is currently undergoing a major turning point.
For Honda to survive, we must continue offering products which fulfill the needs of our customers, and we need to do so more promptly than ever before. At the same time, we must continue creating new value for future generations. To this end, we will strengthen our automobile business structure.
First, in order to respond more speedily and flexibly to changes occurring to our business environment, the Executive Vice President who is a Representative Director of the company, will serve as the Chief Officer of Automobile Operations, governing the entire automobile operations. Through this change, we will enable our automobile operations to make decisions more promptly.
Moreover, we will create two new positions directly beneath the Chief Officer of Automobile Operations, namely Executive in Charge of Automobile Operations and Executive in Charge of Automobile Sales.
The Executive in Charge of Automobile Operations will be responsible for the planning and execution of global strategy and new mobility services through collaboration across sales, production, development and purchasing. And the Executive in Charge of Automobile Sales will be responsible for the pursuit of globally optimized sales strategies from the perspectives of both regional and business operations in order to further strengthen inter-regional coordination and collaboration for existing businesses, which has been one of our top priorities.
With the addition of these two positions, we will strengthen all functions in each area of focus.
To be more specific, the Executive in Charge of Automobile Sales will develop and execute sales strategies which are more efficient, but that also enable us to fulfill the needs of our customers more accurately in each region. Such strategy includes the utilization of common product lineups among different regions where we find similar market needs and/or environmental regulations.
Furthermore, in order to deepen collaboration with Automobile Operations, Honda R&D will newly establish the Automobile Center which will specialize in the development of automobile products.
Power Product Business:
During the last several years, we have been working toward the creation of new energy business. And now that we have achieved a good prospect, we will add energy business to the area of responsibility of Power Products Operations to accelerate our initiatives.
Then, we will expand the concept of our power products business and continue pursuing it under a new concept of “life creation business.” This renaming of the business represents our intention to evolve our business as a function to create new value for “mobility” and “daily lives,” which includes our existing power products business as well as new businesses for the future, including energy business.
Research & Development:
Honda R&D has been pursuing two different missions. One is to create new value for the future and the other is the timely development of highly-competitive products.
To further strengthen both areas, we decided to reorganize Honda R&D in such a way that the advanced technology research and product development will be pursued by separate organizations with a clear division of roles, so that they can focus on their respective areas.
More specifically, we will reorganize Honda R&D with the Innovative Research Excellence, a new center of excellence which will focus on innovative mobility technologies for the future and the creation of advanced technologies; the Automobile Center, which will specialize in the development of automobile products; the Digital Solution Center, which will pursue development while utilizing digital technologies mainly on our automobile products; and the Life Creation Center, which will work in collaboration with Life Creation Operations in the area of product development.
<Changes of the Global Automobile Production Network and Capability>
In light of the acceleration of electrification, we have been making changes throughout our global automobile production network based on our direction to “optimize production allocation and production capacity on a global basis.” In fact, we have already been making steady progress in Thailand, Japan and Brazil.
Moreover, in the midst of major changes we continue to face in each region, including changes in market trends and tightening of environmental regulations, we are making progress in establishing a production system and capability which will enable us to accelerate electrification of our products, particularly in China, the U.S. and Japan, where high production volume is expected.
On the other hand, in Europe where it is essential for us to enhance our lineup of electrified vehicles, we determined that it is difficult to do so with locally produced products in the region from the perspective of competitiveness and other factors. Therefore, we decided to fully utilize the global production resources of Honda to deliver highly-competitive products to the European market.
In particular, based on the direction of strengthening inter-regional collaboration that I mentioned earlier, we will strategically strengthen the foundation of our business in Europe, including electrification, through collaboration with our operations in China, where the direction of environmental regulations is similar to that of Europe. This will include utilizing a common product lineup.
Moreover, our automobile production plant in the U.K., Honda of the U.K. Manufacturing or HUM for short, is currently supplying one model, the Civic Hatchback, to global markets. However, with due consideration of the global production allocation for the future, we intend to produce it in other regions including North America, starting from the next-generation model.
Based on those evaluations, we will begin consultation with associates in the direction toward discontinuing automobile production at HUM in 2021. Moreover, as with the case of HUM, we made a decision to discontinue the production of the current version of the Civic Sedan at our automobile production plant in Turkey in 2021, as well.
In Europe, where CAFE regulations continue to be more stringent, we will strengthen the Honda brand as a leading company in addressing environmental challenges by attaining our goal to “make two-thirds of our automobile sales electrified” by 2025, which is 5 years ahead of our current global target year of 2030.
With these initiatives, we will continue making steady progress in strengthening our business structure in each of Honda’s business areas, which are motorcycle, automobile, life creation and HondaJet.