TOKYO — Honda has racked up its best profits in a half-century of existence and earned a quality ranking that U.S. automakers can only wish for.
So why is Honda's former president calling the No. 2 Japanese automaker "inferior" and "headed downhill"?
Nobuhiko Kawamoto, Honda's president from 1990-98, said he felt "a sense of crisis" for Honda because its growth has always been precarious as it tries to keep up with Toyota, Japan's top automaker. Kawamoto, who now acts as adviser and director at Tokyo-based Honda, is also concerned about a reshuffling of the company's top management.
Honda Motor Co. does have its problems. Despite booming sales in the United States, where Honda makes 60 percent of its sales, sales are plunging at home in Japan, a notoriously finicky and brand-conscious market. And the tide of strong sales is expected to turn soon in North America, where analysts say purchases have been inflated by rebates and other discount campaigns.
Honda president Hiroyuki Yoshino announced his resignation last month, earlier than expected, in what was widely interpreted as a concession of a need for younger leadership to rev up the company image at home and ride out growing global competition.
Yoshino, 63, said he was getting too old and insisted his hand-picked successor, 58-year-old Takeo Fukui, the former head of Honda's North American manufacturing operations, should steer the automaker's three-year strategy that is being set up this year.
Kawamoto said the timing of the change wasn't right, and that Yoshino should have waited until Honda was back on a path toward steady growth before handing over his job.
Kawamoto acknowledged he was worried about Fukui's ability to maintain strong morale among his workers to keep up with Toyota, which has twice as many workers and dealer showrooms nationwide as Honda has. Toyota also has a wider variety of models including trucks.
"We're an inferior company compared to established companies like Toyota," he said. "Honda is headed downhill."
Honda is clearly outmuscled by Toyota, the world's third-largest automaker. Toyota has ambitions to control 15 percent of the global market by around 2010, which would put it neck-and-neck against Detroit-based General Motors Corp., the No. 1 automaker in the world.
And Honda appears particularly small next to its rivals at a time when all the world's automakers have been merging or forming alliances to boost profits by producing more cars.
Besides Toyota, Honda is the only Japanese automaker that has avoided stock ownership alliances with foreign automakers. Yoshino said fighting to maintain Honda's independence had been his biggest achievement during his tenure.
Kawamoto is concerned that Honda won't be able to keep up its recent solid performance. The automaker posted its best-ever profits in its history for the fiscal year ended March 31 of 427 billion yen, the equivalent of $3.6 billion. That was an 18 percent increase from the previous year.
And Honda scored higher than U.S. automakers in a key quality study this month of 2003 models, trailing only Toyota, Porsche and BMW in the annual report from J.D. Power & Associates.
Honda's management is more confident than Kawamoto.
"Technology is what got us this far, so it will be technology that we'll be counting on under Fukui," Honda chairman Yoshihide Munekuni said. "He is the kind of man that clearly moves toward his goal. A company should never lose its youth and vitality."
But this year is almost certain to be tough for Honda. Besides an anticipated slowing of North American sales, Honda's business stands to be hurt by the falling U.S. dollar, which reduces the value of its overseas earnings. The dollar has dropped below 117 yen, reflecting a belief among traders that the United States favors a weak dollar to help its own exports.
And Honda is struggling at home. For the quarter ended in March, Honda sold 221,000 vehicles in Japan, down 10.5 percent from the same period a year ago.
The Toyota Wish minivan and Corolla sedan clinched the top best-selling spots in the Japanese market in April, dethroning the Honda Fit, which had been No. 1 for nearly all of last year.
The Fit, which is not sold in the United States but is sold as the Jazz in Europe, won buyers here with its 54 miles a gallon mileage and roomy interior despite its small size.
These days, six of Japan's top 10 best sellers are now Toyotas. Toyota controls 42.3 percent of the Japanese market to Honda's 15 percent.
"The Fit effect has peaked out," said Hitoshi Onishi, auto analyst at Cosmo Securities Co. in Tokyo. "Producing hit after hit is just impossible to sustain."