Takata’s Deepest Betrayal

There’s been a lot of betrayal in the automotive industry over the past few years. Consumers have been betrayed by car makers that failed to identify, report or anticipate problems or that deliberately misled their customers. But no betrayal was deeper than that of Takata and the ongoing airbag recall effort. And Takata’s primary victim was Honda.

Approximately 34M vehicles from more than 30 brands (and another 7M worldwide) have been identified as being subject to the Takata recall in the U.S., related to airbags that can explode and expel shrapnel capable of injuring or killing drivers. It is nearly impossible to identify a car brand untouched by the recall other than Volvo, which dodged this recall bullet thanks to its relationship with Takata competitor Autoliv. Even Swedish neighbor Saab fell victim to the recall, most likely due to its partial and then full ownership by GM prior to its ultimate bankruptcy.

But no brand has suffered a more severe blow than American Honda Motors. But the blow was as much psychic as it was financial and logistical, for Honda has long prided itself on its research acumen and its unique supplier relationships.

Having just finished reading “The Honda Way” by Jeffrey Rothfeder the prospect of Honda being blind-sided so miserably by a supplier, even such an important one as Takata, is almost unthinkable. Rothfeder details Honda’s extensive onboarding and vetting process for new suppliers – and the steady engagement with those suppliers to improve processes and reduce costs throughout the life of the relationship.

Honda is known to embed engineers at manufacturing facilities for its suppliers, according to Rothfeder, and the company isn’t above diving into the financial records of its suppliers to better identify and root out inefficiencies. These close ties have proven to be beneficial to both Honda and its suppliers. As trust and cooperation flower between Honda and its supply chain partners both organizations generally flourish.

Other car makers have equally strong ties to Takata. GM has been known to direct smaller Tier 2 suppliers to engage with Takata, making Takata something of an agent for GM. But no car maker snuggles up to its partners, like Takata, in as intimate a fashion as Honda.

So it is painful that Honda stands as the leading victim of the Takata recall with 10.7M Honda and Acura vehicles affected, nearly one third of the total for all brands. Rothfeder’s “The Honda Way” was completed and published before the Takata recall crisis unfolded, so Rothfeder is forced to cover the event in an Afterword.

He writes, in part: “Honda has a rigid program of monitoring supplier activities closely and demanding annual improvements in quality and output. This policy has been in place for decades and results in a somewhat unorthodox relationship between Honda and its suppliers, one in which Honda essentially molds the companies that it buys parts and components from in its image, fusing its culture and operational practices with the suppliers’ to produce real collaboration.

“This approach was undone in Takata’s case for two reasons: Takata had an excellent perceived safety record throughout the auto industry, and Takata’s products were viewed as too proprietary and complex – unlike other parts, like electrical components, headlamps, engine components, and so on – for the automaker to diagnose potential problems. In taking this stance, Honda essentially gave Takata a free pass that few of its other suppliers enjoyed.”

The result for Honda is equivalent to the impact of the Tohoku earthquake and tsunami of 2011 which interrupted production for Honda and other car makers and suppliers. Honda recovered from the earthquake and tsunami – closely collaborating with suppliers to ensure they retained their personnel and operational readiness during the downtime in order to be prepared when production roared back to life.

The recall tsunami has brought with it a similarly forthright response. The difference is that recovery in this instance is heavily dependent on Honda’s dealer network. More than any other car maker, Honda and its dealers have embraced the challenge to track down affected cars to complete the recall work.
I have seen the outreach efforts by Honda dealers first hand. My mother recently sold her 2003 Honda Civic. She described the multiple calls she received from her Honda dealer trying to get the vehicle in to do the recall repair. Honda dealers generally have embraced the effort to round up customers and pull them in for recall work – with one dealer in particular standing out – Kuni Honda in Colorado – which instituted an aggressive program of early morning and after hours recall work on behalf of their customers.

Even the efforts of the most determined dealer networks, such as Honda’s, face serious headwinds in trying to get potentially dangerous airbags off the roads. Consumers either can’t be bothered, or don’t take the matter seriously enough.

The Takata recall experience has taught the industry that the responsibility for customer and vehicle engagement by car makers and their dealers extends well beyond the point of sale. It has also taught us all that there is no free pass and that supplier relationships are forever, or at least for as long as the vehicle remains operational.

Takata betrayed an industry with its dangerous airbags. But no car maker felt that betrayal more directly and deeply than Honda.

Roger C. Lanctot is Associate Director in the Global Automotive Practice at Strategy Analytics. More details about Strategy Analytics can be found here: https://www.strategyanalytics.com/access-services/automotive#.VuGdXfkrKUk