Honda CEO Fukui Steps Aside

In the latest corner office adjustment, Japanese automaker Honda is tapping Takanobu Ito, its former R&D chief, to be its new leader

By Ian Rowley

Senior managing director of Honda Motor Takanobu Ito (L) listens to President and CEO Takeo Fukui (R) during a press conference on February 23, 2009. Ito will replace Fukui in June to struggle with falling sales amid the global economic downturn. TORU YAMANAKA/AFP/Getty Images

Another Japanese auto chief is moving aside. Amid plunging sales, Honda (HMC) President and CEO Takeo Fukui announced on Feb. 23 he will hand over leadership of the company to Takanobu Ito, chief of automobile operations, in June. The departure of Fukui, who has been boss at Honda for six years, is the latest of several corner office moves as Japanese car companies struggle to cope with dwindling sales in the U.S., Europe, Japan, and China. In January, Toyota (TM) announced its decision to replace President Katsuaki Watanabe with Akio Toyoda, grandson of the company's founder. In November, Mazda (MZDAF) said Takashi Yamanouchi would succeed Hisakazu Imazu. Legendary Nissan (NSANY) President Carlos Ghosn remains in the job but has relinquished some responsibilities recently as he balances leading the Japanese automaker and its major shareholder Renault of France.

Honda says the change had been planned and isn't related to the company's recent disappointing results. Indeed, speaking at a press conference in Tokyo, the 64-year-old Fukui explained that taking into account the harsh environment facing automakers, he had even considered staying on longer; ultimately, though, he decided the younger executive—Ito is 55—is ready for the top job. "It is very important to have a generational change in management every few years," said Fukui, who will stay on at Honda as a director and adviser. When asked to describe Ito in one word, Fukui replied "tough."

The new boss will certainly need to be. "I don't envy [Ito] at all," says Yasuhiro Matsumoto, an analyst at Shinsei Securities in Tokyo. For automakers, "it's the most difficult environment for a century."

Scaling Back

In line with all Japanese car companies, Honda is reeling from a combination of falling sales and the strong yen. Last year Honda had seemed to be weathering the storm far better than most Japanese automakers, but now it, too, is suffering. During the current financial year ending in March, Honda expects its net earnings to fall 87%, to $860 million. That's certainly better than the terrible red ink at other automakers. However, for the final quarter of the fiscal year (January through March), the company is likely to lose $2.7 billion, its first quarterly loss in 15 years.

And with sales showing few signs of recovery during 2009, many of Fukui's last acts as chief have focused on cost-cutting. In December, a solemn Fukui announced a string of measures aimed at trimming outgoings. Among them, the company will delay by at least one year a new flagship plant in Yorii, outside Tokyo, and a minicar plant in western Japan.