Wednesday, October 10, 2012

Honda's string of recalls to tarnish maker’s quality reputation?

It was a busy week for Honda, the maker announcing three separate recalls impacting 1.7 million vehicles – even as federal safety regulators revealed a new investigation that could eventually lead to the recall of yet another 600,000 Honda minivans and SUVs.

The latest developments put Honda firmly on track towards repeating last year’s dubious achievement as the maker to recall the most vehicles in the U.S. market. Of a total 15.5 million vehicles recalled in 2011, 3.8 million of them carried badges for Honda or its luxury brand Acura. This past week’s recalls alone accounted for nearly 45% of last year’s total.

Even before the latest series of recalls was announced, George Peterson, chief analyst with AutoPacific, Inc., warned that Honda “needs to be worried” about the impact the ongoing series of recalls could have on its traditional reputation for building some of the market’s highest-quality products.

The latest service action involves 266,000 Honda CR-V crossovers produced during the 2002 to 2006 model-years.  The National Highway Traffic Safety Administration determined that a switch in the driver’s door could melt if it comes into contact with rain or other liquid, leading to an electrical fire.

The problem could occur even if the vehicle is parked – leading the government safety agency to suggest owners should not use the affected vehicles until repairs are made.  Honda, however, disputed that warning, claiming a fire is likely only if a large amount of liquid somehow enters the door and comes into contact with the switch.

The maker says it knows of four fires caused by the problem, though it has no reports of crashes or injuries.

Honda says customers can inspect their vehicles and the maker says in most cases it will only need to install a cover to prevent liquids from coming into contact with the switch. Official notice of the recall will go out next month, Honda saying inspections and repairs will be made at no charge to consumers.
But the question is what cost the ongoing recalls might have for Honda – beyond the actual price tag for making repairs.

Last week began with word of a recall involving 573,417 Honda Accord and Acura TL sedans due to a potential fire risk.  The maker had previously recalled 52,613 vehicles for the same problem.

Several days later, Honda announced it would recall 820,000 Civic compacts and Pilot SUVs due to a problem that could cause their headlights to unexpectedly fail.  The maker had already recalled 550,000 vehicles for that same problem earlier in 2012.

Then, on Friday, NHTSA announced it had begun a probe of 577,000 older Honda Odyssey minivans and Pilot SUVs because a shift interlock may fail, allowing a motorist to remove the vehicles’ keys without being shifted into Park. If that happens it may be possible for the vehicles to unexpectedly roll, especially if parked on an incline. At least two injuries have been linked to the problem, one involving a motorist whose leg was crushed.

Honda officials have repeatedly said that quality is a key to maintaining their competitiveness in a crowded American market.  And the maker scored the top spot among mainstream brands in the latest J.D. Power Initial Quality Survey which measures “out-of-the-box” quality of vehicles in the market for 60 to 90 days.
Nonetheless, company officials have also acknowledged that the steady stream of recalls could be a problem for their reputation. While senior officials were not available to comment on the latest string of safety related actions, Honda’s top American official John Mendel recently told that last year’s recall of 3.8 million vehicles “was an incredible challenge.”

That’s all the more so, industry experts warn, as the quality gap between manufacturers closes.  While Honda might have been the leading mainstream maker in the 2012 IQS, noted J.D. Power analyst Dave Sargent, key import and domestic players were not far behind.

What’s made the problem worse for Honda has been the poor reception many of its recent products have received – notably the latest-generation Civic, as well as more niche models like the CR-Z and Insight.
Honda is counting heavily on the current launch of its all-new Accord to rebuild its image and momentum.  The brand’s sales have been on a sharp upswing, however, in part driven by Honda’s overall recovery from the March 2011 Japanese earthquake and tsunami that left it short of product for most of the rest of last year.

But having safety related recalls land in the headlines at such an aggressive pace could give some buyers pause to consider other options, analysts like Peterson warn.

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