Honda to overhaul sourcing method for emerging markets push

[AVANTI R5]

Honda Motor Co will overhaul its sourcing strategy by ditching its one-spec-fits-all method on global car models to better compete with Hyundai Motor and others in emerging markets, an executive said on Tuesday.

Honda, Japan's No.2 automaker, has until now used a common blueprint for components on cars built and sold globally for efficiency's sake, and to offer consumers around the world the same specifications for those models.

But Masaya Yama****a, head of Honda's purchasing operations, said that strategy was outdated and making some of its cars unnecessarily pricier in China, India and other regions at a time when South Korea's Hyundai and others were boosting sales with cars that were a better fit for local consumers.

"Hyundai has become a very tough competitor for us and they're growing at an incredible pace, along with Chinese and Indian automakers, because they're looking at components from a new angle," Yama****a told Reuters in an interview.

"The stereotype used to be that the cheap prices came from lower quality, but that's no longer the case. We need to operate with a brand new standard for components," he said.
By coming up with several different blueprints on vehicle components, Honda would aim to slash purchasing costs on the next-generation Fit subcompact, one of its best-selling models, by about 20 to 30 percent in emerging markets, Yama****a said. The fully remodeled Fit, expected around 2012 or later, would be the first car to reflect the new sourcing method, he said.

Honda builds the Fit, called Jazz in some markets, in Japan, China, India, Thailand, Indonesia, Britain and Brazil, and currently uses the same design and materials for most components in all seven countries.

That means components must meet the highest common denominator for specifications, leading to steep costs, he said.

"For example, if we were designing a cup, we're designing one that could withstand the intense heat in India all the way up to the freezing weather in Canada, and that's a waste."

BROADER SELECTION
Yama****a said automakers were now able to choose from a broader selection of competitive parts makers in many Asian markets thanks to the expansion of Western suppliers, the entry of Hyundai's Korean suppliers and the improved quality of homegrown parts makers in emerging markets.
"Doing business with new suppliers is helpful in giving us fresh ideas for designing parts," Yama****a said. "In the long run, this kind of competition will also be good for Japanese parts makers that we've done most of our work with so far."

Japanese suppliers are already under intense pressure to slash costs, disadvantaged by a strong yen.
Honda has said there was little the automaker could do in the near term to avoid currency-related losses.

But Yama****a said Honda had asked some of its domestic suppliers to shift production of components manufactured and used in Japan to their Asian factories to lower purchasing costs.


"We usually wouldn't do this for the duration of a vehicle's model cycle, which is typically about five years, but we've asked some suppliers to do this," Yama****a said.
"If the dollar continues to trade around 85 yen, it's inevitable that the import ratio of parts will rise."
(Additional reporting by Kentaro Sugiyama; Editing by Joseph Radford)

http://www.reuters.com/article/idUSTRE68K0OT20100921

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[The Dome]

Masaya Yama****a

[SCRAPPYDO]

So it sounds like Honda is going to be looking for cheaper vendors for parts. It really sounds like they are repeating the same mistakes GM and Ford did in the 80's. While GM and Ford are all making common chassis cars, Honda wants to do the opposite. Weird.

[Eyeflyistheeye]

Originally Posted by SCRAPPYDO

So it sounds like Honda is going to be looking for cheaper vendors for parts. It really sounds like they are repeating the same mistakes GM and Ford did in the 80's. While GM and Ford are all making common chassis cars, Honda wants to do the opposite. Weird.

And GM and Ford are rolling out such innovations as DCTs/6ATs in their little cars, while Honda doesn't even want to put a 6AT in the new Odyssey unless you pony up $40k for the Touring version.

Part of the reason Honda sucks so much lately is that instead of selling one good car worldwide like Lexus and Infiniti do, they create a bunch of North American exclusive models like the Ridgeline and TL.

[SkiWrex]

The Japanese have gotten lazy about their cars, they have the same mentality the American companies had back in the day "We own the market, so we can do what we want." They'd better start keeping pace with the innovations GM, Ford and Hyundai are using or they're gonna lose a lot of market share.

[Eyeflyistheeye]

Originally Posted by SkiWrex

The Japanese have gotten lazy about their cars, they have the same mentality the American companies had back in the day "We own the market, so we can do what we want." They'd better start keeping pace with the innovations GM, Ford and Hyundai are using or they're gonna lose a lot of market share.

I think for all the pillorying they get, Toyota is still the most innovative Japanese company, because they had a 6AT first in a midsize sedan, the Tundra was innovative, but they find themselves with the bugaboo of quality issues since they expanded too far too fast.

Honda's just coasting off of their reputation. The Accord V6 is a piece of crap, the automatic is gimped while the manual gets the same mileage as the Coyote Mustang.