Honda's Horrible Summer Continues

Why The vaunted Japanese automaker is misfiring

Honda Motor Co. continued its long hot summer of bad news by announcing a recall of 2.49 million vehicles worldwide to repair a software problem that could damage the automatic transmission.

The large recall comes a week after Consumer Reports said it would not recommend the redesigned 2012 Honda Civic, a car Americans have come to think of being synonymous with quality and reliability. It also comes three months after the company issued a recall of more than 800,00 recalls for mis-deploying airbags--a recall that included vehicles that the company thought it had already fixed.

The new recall includes 1.5 million vehicles in the United States, 760,000 in China and 135,142 in Canada. Globally, the recall affects four-cylinder Accord sedans for the model years 2005 to 2010. The company is also recalling vehicles in parts of Europe, South America, the Middle East, Puerto Rico and Mexico.

In the United States and Canada, the recall also includes the CR-V crossover for the model years 2007 to 2010 as well as the small SUV Element from 2005 to 2008.

Without updating the software, Honda says, the automatic transmission in these vehicles could be damaged if the driver quickly shifts between gears. That might cause the engine to stall or make it difficult to put the car into park. The software update will take about a half-hour, but customers may have to leave their cars at Honda dealerships for a longer period.

No stranger to transmission issues

Despite the company's well-known prowess in engine development, Honda is no stranger to transmission problems. Consumer Reports' 2010 reliability survey showed "major problems" with transmissions on the 2001–3 Acura MDX and TL, the Honda Odyssey and to a lesser extent, Accord, according to Anita Lam, the magazine's automotive data program manager. has had around 2,300 complaints about transmissions on 2001–3 Accords, Civics and Odysseys, far more than about any other component, he said. Honda has been very defensive in responding to customer complaints about transmission problems for the last decade, prompting some critics to call the company arrogant.

Honda has also recalled hundreds of thousands of 2001-2003 Honda and Acura models for airbag issues since 2008, and last May the automaker began re-recalling those vehicles. Honda initiated an inspection of 833,000 vehicles for airbags that deploy with too much pressure, which could lead to metal fragments passing through the airbag cushion material. This defect has resulted in 12 injuries and one death since 2010.

Market misfires

Despite the solid sales of Civic, Accord and the CR-V crossover, Honda has also had some market misfires with products in the last few years, such as the Honda Crosstour, Insight Hybrid and Ridgeline pickup, begging the question of whether Honda has lost its mojo.

And those duds were all out before Consumer Reports knocked the new Civic. The company has said it disagreed with the influential U.S. consumer magazine's assessment. John Mendel, executive vice president of sales for American Honda Motor Co., sent an email to dealers noting that "sometimes you disagree even with those for whom you have the greatest respect.... We fundamentally disagree with their suggestion that Civic doesn't rank among their recommended small cars."

Financially, Honda took a big hit in the first half of this year due in large part to the earthquake and tsunami in Japan last March. Revenues fell 27% in Honda's first quarter, and its operating profit nearly disappeared.

But its always-efficient operations is helping it to mount a speedy recovery. Honda raised its full-year profit forecast by 18 percent on a quicker-than-expected recovery from the March 11 earthquake. The company could post net income of 230 billion yen ($2.96 billion) in the year ending March 31, 2012, compared with an earlier forecast of 195 billion yen, it said in a statement.

Still, Honda can't afford to have a misfire on Civic. The Civic and Accord account for 83% of Honda's passenger car sales in the first half of 2011. Civic also accounts for a fifth of the more than 3 million vehicles Honda sells annually.

Bottom Line: Honda is still one of the steadiest automakers in the world. And its strength remains durable, well-performing engines. But besides its quality issues with transmission, the company seems to have lost its way a bit as far as producing vehicles that have aesthetic appeal on the whole. It's one thing to produce a pickup, the Ridgeline, that doesn't sell. But if the CR-V crossover (the best seller in the segment) has the same kind of chilly reception as the Civic, the company should probably think about shaking up the management who greenlighted those designs.

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