In a hybrid world, Honda counts on traditional engines

TOKYO — As an engineering student in the 1960s, Takeo Fukui picked the analysis of nitrogen dioxide emissions as his senior thesis with one goal in mind: joining Honda Motor to get a foothold in the world of racing.

He made the cut — but, as luck would have it, Honda pulled out of racing that same year, in 1969. Founder Soichiro Honda had decided the company should focus on improving its engines to cut emissions for an increasingly green-minded public.

Forty years later, Fukui leaves behind a similar mandate as he vacates his president's post this month, having yanked Honda out of Formula One racing six months ago.

He will be succeeded by Takanobu Ito, who marks a break from previous Honda presidents. He never worked on the CVCC engine project that cemented Honda's image as an engine company first and foremost. Fukui and other predecessors were known for devising engines and building cars around them. Ito is a chassis expert.

While auto executives talk about the dawn of a new century of automobiles as gasoline-electric hybrid cars enter the mainstream, Fukui says traditional internal combustion engines will remain at the core of Honda's efforts. "You can't improve the hybrid system without working on engines, " he told Reuters.

If Fukui is right, Honda has a good shot at keeping its edge in the global auto industry.

Honda got its start in postwar Japan knocking together engines for bicycles, then motorcycles and eventually lawnmowers, generators and cars. It's the world's top engine maker by far, making more than 20 million a year.

It was Honda's CVCC engine that, back in 1974, made the Civic the first car to clear emissions standards under the U.S. Clean Air Act on engine performance alone, without add-on emissions-scrubbing technology. That put Honda on the map overnight and prompted juggernauts such as Toyota to come knocking for help.

Experts agree competitive engines are a prerequisite for developing a good hybrid system. "It's not as simple as buying the hybrid system and mounting it on a car; refining the engine is extremely important," said Takahiro Fujimoto, a manufacturing expert at the University of Tokyo.

Staying ahead in the hybrid race will be vital for Honda, which so far has weathered the economic downturn better than rivals with an unbroken string of profits since its founding.

As fuel economy standards tighten, J.P. Morgan Securities expects the global hybrid market to expand by 23 times, to more than 11 million vehicles in 2020, accounting for 13 percent of total sales.

Still, Honda is not without its Achilles heel, even in the field of today's internal combustion engines.

In many European markets, the regulatory focus on carbon dioxide rather than nitrogen oxide emissions has made diesel-engine cars popular while sidelining gasoline-electric hybrids, placing diesel powerhouses such as Volkswagen, Peugeot and Renault in pole position. Honda had planned to launch clean-diesel cars this year but delayed, partly because of the difficulty of lowering costs.

Honda also eventually will need a different hybrid system because the current version, mounted on the new Insight hatchback, has just one electric motor that would be insufficient for a much larger car.

Honda's simple hybrid system is relatively cheap. But, unlike Toyota's, it's limiting because it cannot be applied to plug-in hybrids, seen as the next phase for fuel-saving cars.

Fukui acknowledges that competition will heat up. But his confidence is palpable as he prepares to pass the baton to the next generation of leaders and engineers.

"In future, hybrid cars will need many types of combinations of transmissions and systems. And if you look around, there are probably only two manufacturers that develop the transmissions, hybrid systems and motors all in-house," Fukui said, referring to Honda and Toyota. "In motorbikes, the transmission is inside the engine. It practically is the engine. That's why for us, outsourcing the production of transmissions is unthinkable. And this is going to be a huge strength for us as hybrids evolve."