Special Report: How Honda lost its mojo – and the mission to get it back

TOKYO (Reuters) – The driver punched the air as his red and white Honda McLaren roared over the finish line. It was Suzuka, Japan, 1988, and Ayrton Senna had just become Formula One world champion for the first time. The McLaren racing team and its engine maker, Honda Motor (7267.T), were unstoppable that year, their drivers winning all but one of the 16 grand prix races.

Off the track Honda had been tasting success, too. In the 1970s, its engineers had raised the bar for fuel efficiency and cleaner emissions with the CVCC engine. In the 1980s, as its engines were propelling Senna to multiple victories, the Civic and Accord cars were redefining the American family sedan. In 1997, Honda became one of the first carmakers to unveil an all-electric battery car, the EV Plus, capable of meeting California’s zero emission requirement.

Jump forward almost 30 years from that Senna moment and Honda is flailing. On the racetrack, the Honda McLaren partnership is in trouble: The team is without a single win this season, and McLaren is losing patience with its engine supplier and speaking of a parting of the ways.

On the road, the Honda fleet has been dogged by recalls. More than 11 million vehicles have been recalled in the United States since 2008 due to faulty airbags. In 2013 and 2014 there were five back-to-back recalls for the Fit and Vezel hybrid vehicles due to transmission defects. Honda has lost ground in electric cars to Tesla and others.

“There’s no doubt we lost our mojo – our way as an engineering company that made Honda Honda,” Chief Executive Takahiro Hachigo told Reuters.

Hachigo joined Honda as an engineer in 1982 and became CEO in June 2015. Now he wants to revive a culture that encouraged engineers to take risks and return to a corporate structure that protected innovators from bureaucrats focused on cost-cutting. To help him achieve this, he says he has tapped into the ideas of a small group of Honda engineers, managers and planners. This group is modeled on the freewheeling “skunkworks” teams that drove aircraft development at Lockheed Martin, computer design at Apple and self-drive technology at Google.

In interviews, more than 20 current and former Honda executives and engineers at the company’s facilities in Japan, China and the United States recounted the missteps that they say contributed to Honda’s decline as an innovator. They also revealed new details of the firm’s efforts to rediscover its creative spark.

They said…

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