At a two-day gathering for Honda's suppliers in March, Chief Executive Takahiro Hachigo sounded the alarm.
At the Hotel Higashinihon in Utsunomiya, Hachigo told them the Japanese automaker was facing a crisis after a string of costly recalls and other quality blunders and it needed to plot a new course, according to two people who attended the meeting.
"Decades ago, localisation ... was the buzz word and our tech center independence was a key driver for innovation," said a former Honda executive who now is the head of one of its suppliers. "Those days are over."
In the 1980s and much of the 1990s, the name Honda struck terror into the hearts of executives at the big three U.S. carmakers in Detroit because they simply couldn't match its low-cost, efficient, well-built cars.
But after a slew of recalls since 2014 for problems with components such as airbags, sliding doors and engines, Honda's status as a benchmark for quality and efficiency has been seriously damaged - and the quality crisis is hitting profits.
According to five Honda insiders, quality blunders have helped squeeze the operating margin at its global automotive business to 2%-3% - giving it less room for manoeuvre just as bigger rivals are building partnerships and overhauling their operations to become stronger.
In J.D. Power's study of vehicle dependability in the United States, one of Honda's two main auto markets along with China, the Japanese brand fell to 18th place this year from 5th in 2015 and 4th in 2002, its highest ranking.
A senior engineer described Honda's problem as "crazy complexity," where too many regional models, types, options and derivatives were "eating up our profit." Honda's 2020 Accord sedan comes in 13 versions, including three hybrids. GM's rival Malibu has only five.
"Quality is acting up," the engineer said. "Honda has created too many regional models, in addition to an array of types, options and derivatives for its global models."
In the United States, for example, Honda's 2020 Accord sedan comes in 13 versions, including three hybrids. GM's rival Malibu has five, though it doesn't have hybrid models. At the two-day meeting in Utsunomiya, Hachigo and his procurement managers told suppliers to help Honda slash its range of cars and dumb down model types and options. They called on suppliers to use more common parts, from engines and transmissions to door handles, rear view mirrors and even knobs and switches, according to two people who attended the meeting and slides Honda used in presentations.
In the four years before the Takata debacle, warranty provisions ranged from 171 billion to 274 billion yen, before surging to 727 billion in the year ending March 2016.
In 2018, for example, Honda recalled about 600,000 cars in China because sludge was collecting in the engines of six models when driven in cold weather while the sliding doors on its U.S. Odyssey minivans started opening while the vehicles were moving.