Honda presses suppliers for sweeping cost cuts

Japan's Honda aims to cut more than $9 billion in costs over the next four years and has instructed suppliers to drastically reduce their prices, according to internal documents and one person familiar with the matter.

The plan is one of the most striking examples yet of how Japanese automakers are scrambling to deal with intensifying competition from China. BYD and other Chinese electric vehicle makers are capturing sizable market share in Southeast Asia, Latin America and Europe, powered by advanced software and battery technology — and prices that are by far the industry's lowest.

Honda, the world's largest motorcycle manufacturer, is trying to fix its struggling car business. It expects EV-related losses to ultimately total more than $12 billion, one of the biggest hits among global automakers, and is now shifting its focus to gasoline-electric hybrids. In May, it reported its first-ever annual loss as a publicly traded company.

The maker of the CR-V sport-utility vehicle now is apparently aiming to save 1.5 trillion yen ($9.4 billion) by 2030, according to a Reuters review.

This story is based on a Reuters review of internal company documents and interviews with two people familiar with the matter, both of whom declined to be identified because the information is not public.

In a written response to questions, a Honda spokesperson declined to comment on specific cost-reduction targets or details of discussions with suppliers.

The automaker was working with suppliers globally to improve competitiveness and reduce costs, including through the use of standardized parts, the spokesperson said.

Spring meeting

In the spring of this year, Honda managers met with major suppliers at a convention center in Utsunomiya, a city north of Tokyo near the automaker's R&D facility, according to the documents and the people involved. It was not clear how many suppliers attended.

Honda managers briefed suppliers on the plan and said it would also look to source more components from Chinese suppliers, according to the people familiar with the matter. Each supplier was later presented with company-specific targets to cut costs.

Honda is aiming to reduce costs by 30 percent in three key parts categories: pressed and forged components, electrical parts and parts related to software-defined vehicles, according to the documents. Such a reduction would allow Japanese suppliers to better compete with Chinese rivals.

Honda's direct suppliers, or "tier-one" suppliers, were also asked to review how they procured materials and were urged to make use of standardized parts sourced from second — and third-tier suppliers to help keep costs down, the documents showed.

Honda managers also asked suppliers to expand their own use of Chinese-made components where possible, according to the documents.

The cost-reduction targets were "extremely large" and it was not immediately clear whether they would be achievable, one of the sources said.

Before the spring meeting, Honda had not given the impression that it needed aggressive cost cuts. Now, the situation appeared to leave "no room for delay", the person added.

On Monday, Honda and Nissan said they would jointly develop standardized electronic control units for SDVs and aim to roll out an architecture built around them from the 2029 financial year.

Honda CEO Toshihiro Mibe won support for his reappointment to the company's board in June. He has faced pressure from former executives to step down over the company's performance.

Last year, Honda and Nissan ended merger talks that would have created one of the world's largest automakers.

In addition to Chinese competition, Honda and other automakers are being squeezed by US President Donald Trump's import tariffs and higher labor expenses. They also face the growing need to invest in research and development of technology as cars become more advanced, raising costs across the industry.

REUTERS