A Big Shakeup at Honda As Quality Woes Persist

By Markets Fool.com

The latest quality embarrassment for Honda: It had to stop sales of some versions of its new 2016 Civic because of a problem with the 2.0 liter engines. Image source: Honda.

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Honda on Tuesday announced a series of senior management changes as new CEO Takahiro Hachigo continues to put his stamp on the company amid lingering concerns about quality.

What's happening: It's a sweeping list of changes that appears intended to clear Honda's top ranks of older-generation executives who were put in place by former CEO Takanobu Ito. Three of Honda's directors, its corporate auditor, and seven senior executives will retire as of April 1.

Among the executives who will be replaced: Honda's research and development leader, its top executive in North America, and its product chief.

What it means for Honda: Ito resigned last June after Honda was hammered by a series of quality problems. Those included an embarrassing series of recalls in its home market of Japan and a surprising slip in the influential J.D. Power Initial Quality Study in the U.S., with Honda falling behind not only arch-rival Toyota, but also both General Motors and Ford.

After taking over as CEO, Hachigo promised to "create a new Honda," reorienting the company with a global perspective and pushing for more innovative and appealing products.

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But Honda's quality problems have continued. Most recently, earlier this month, Honda had to issue a "stop sale" order on models of its new-for-2016 Civic equipped with a 2.0 liter four-cylinder engine. The problem involves improperly installed snap rings on the engine's piston pins that could cause the engine to abruptly stop working. About 34,000 vehicles are affected.

Another of the moves seems intended to address Honda's sales slump in the U.S. While the small CR-V has been selling very well, sales of Honda's mainstay sedans, the Accord and Civic, have both been sluggish. Overall sales for the Honda brand in the U.S. rose just 2.6% last year, with sales of the Accord and the small Fit both down year over year.

The incoming new Honda North America chief, Toshiaki Mikoshiba, was previously the head of Honda's relatively small European operation. He replaces Takuji Yamada, who will apparently retire.

What it means for shareholders: It's another sign that Hachigo (and Honda's board) are determined to make changes in an effort to get the company back on track and aligned for long-term growth. Generally speaking, that's a good thing. But it may be a while before we know how this latest executive shuffle will work out.

What's next for Honda: Hachigo is scheduled to give a press conference on Wednesday, February 24. He may give more details on the thinking behind the management shakeup. Stay tuned.

The article A Big Shakeup at Honda As Quality Woes Persist originally appeared on Fool.com.

John Rosevear owns shares of Ford and General Motors. The Motley Fool owns shares of and recommends Ford. The Motley Fool recommends General Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.