HONDA'S TAKAHIRO HACHIGO: Performance will surpass 2018

TOKYO — Honda Motor Co. and its CEO, Takahiro Hachigo, both celebrated 60-year milestones this year. Hachigo was born in May 1959, and three weeks later, Honda established American Honda Co. in Los Angeles as the Japanese company's first overseas subsidiary. Today, Honda and Hachigo still lean on the U.S. as the carmaker's most important market.

American Honda posted a modest U.S. sales increase through October, but it bucked the market's overall decline and helped the parent company keep a 6.1 percent operating profit margin.

But changing times mean changing tactics. To keep earnings flowing, Hachigo is overhauling everything from product development to production. The effort means forging more loose partnerships to tap new technologies, while passing on capital tie-ups that might undermine Honda's independence.

Hachigo, speaking through an interpreter, talked with Chief Content Officer Jamie Butters and Asia Editor Hans Greimel in October about the U.S. outlook, ambitions for the Acura brand and preparations for his successors. Here are edited excerpts.

Q: How do you see the U.S. market shaping up, this year and next?

A: We believe overall demand will be somewhere around 17 million units, plus or minus. Against that backdrop, I believe our performance will slightly surpass that of 2018, and I hope we can end at 1.6 million units. Regarding 2020, there are several lingering uncertainties. But given the fact we will be introducing several model changes, I have hopes for these new models.

What uncertainties?

I believe the automobile market will be stable, meaning we will stay at around current volume. We're not expecting dramatic growth, we expect to keep the current levels and grow steadily from there. But we have to monitor the proportion of light trucks to passenger cars, as well as uncertainties surrounding the global economic environment.

How will Acura achieve its stated U.S. annual sales target of 200,000 vehicles?

Whether we reach 200,000 units is just a result of our efforts toward the Acura brand. At the 2016 Detroit motor show, we introduced Acura as the "Precision Crafted Performance" vehicle, and we have been working on that since. Last year, we launched a full-model change based on that with the RDX. Last August, we introduced a Type S concept car, and we will be infusing this concept into different models in the coming years. If Type S is well received by customers, it will help raise overall brand appeal. Through such actions, I believe we will be able to get there.

Honda wants two-thirds of its global sales to come from electrified vehicles by 2030. What is your road to electrification in the U.S., where demand for hybrids and EVs is still undeveloped?

I believe hybrid vehicles will play a critical role. In the U.S., Honda has been working toward environmentally friendly vehicles for years and improving fuel efficiency ever year. The objective is not electrification, per se, but improving fuel efficiency. And we believe hybrid vehicles are the way to abide by different environmental regulations. In the U.S., we manufacture and sell the Honda Insight and Acura hybrid vehicles. And next year, we plan to launch a hybrid CR-V in North America.

What about full-electric vehicles?

Are there really customers who truly want them? I'm not so sure because there are lots of issues regarding infrastructure and hardware. I do not believe there will be a dramatic increase in demand for battery vehicles, and I believe this situation is true globally.

There are different regulations in different countries, and we have to abide by them. So it's a must to continue r&d. But I don't believe it will become mainstream anytime soon.

What is Honda reaping from its investment in Cruise, the autonomous driving company?

We have a small equity investment in Cruise. Basically, we are not very active or aggressive in getting involved with Cruise's business management. There is no personnel exchange. There is a division of labor between the two parties. Cruise is in charge of platform, which means they cover the chassis as well as the power unit and components related to steering. And Honda is in charge of nonplatform, which encompasses two areas — interior-exterior design and engineering.

At the end of the day, I hope we are able to learn from this endeavor.

Were you disappointed that Cruise decided to delay its launch of a commercial service this year?

We have only a small equity investment in Cruise, so we leave the short-term business completely up to Cruise. I am in no position to be vocal about what is evolving at this point. But they are in alignment with their mid- to long-term plan, so I trust them and don't have any dissatisfaction.

Can you update us on Honda's road map for introducing autonomous driving?

Honda's overarching objective is to make cars accident-free. To achieve this, we need to reduce human error from human decision-making, and we need to relieve driving fatigue and make driving more comfortable. Thus, we are focusing on Honda Sensing, and we will improve each and every element of Honda Sensing as we go forward.

Right now, concerning the technologies, we have well-established know-how in automatic lane changing and also in hands-off steering. We have established these technologies, but at the same time, you have to think about what the social demand is and what legal environment we have to operate in. Now is the time for us to ponder how we can introduce these services to the market.

We are looking at the right timing and the right vehicle model.

How does Honda plan to position these technologies?

Our plan is to cascade Honda Sensing down to mass-market models such as the Civic and Accord. Instead of going for a setup that requires expensive radars or lidars, we would like to develop these functions in an affordable price range.

When it comes to Level 3, you will need a more expensive ADAS system to realize this. We will be cautious in trying to identify what vehicle model will be optimal for this in North America. So I don't have any timeline or any vehicles decided for Level 3 autonomous driving.

What are some industry myths that are widely believed, but which you know to be untrue?

Honda is top notch in the U.S. regarding fuel efficiency. But since we do not have a high profile in the EV area, I hear opinions to the effect that we are lagging behind in the technology, or not adhering to new regulatory requirements. And I think it's such a pity to read such articles.

Japan's auto industry is consolidating. How much longer can Honda remain independent?

Basically, we do not have any intention of having a capital tie-up. The reason is, once we have a capital tie-up, that other party will have some voice in our management, which means in some instances, we may not be able to move in the direction we want.

So how will we survive in this environment? One example is our relationship with GM, which is a win-win collaboration and not a capital tie-up. We work together on hydrogen fuel cell stacks, electric car components as well as Cruise. We are open to these kinds of partnerships.

We would like to be capital-independent. As long as we can keep coming up with new proposals, I believe that given our company's size, we can continue to have a viable business in the future.

Next year, Honda launches a new global vehicle architecture. Can you update us on specifics, such as cost savings, performance enhancements and manufacturing flexibility?

The production side, development side and partners will all derive merits. The concept is to divide the architecture into different zones. So that means man-hours can be reduced. We aim to reduce development man-hours by 30 percent by 2025.

We will be able to simplify and also make production more efficient. By 2030, we want to reduce internal factory costs by 10 percent.

You have been CEO since May 2015. How much longer will you stay at the helm, and what are you doing to groom successors?

I'd like to refrain from answering the first question, because I alone cannot make a decision as to how long I keep my current position. Regarding the second, we are having discussions within the board of directors on this matter, and we are nurturing successors. There are many people who embody the Honda DNA, so there is no shortage of potential successors.