Honda bets on new hybrid technology to revive momentum

TOKYO Wed Sep 12, 2012 11:56am EDT

A logo of Honda Motor Co is reflected on a roof of a vehicle at a Honda dealer in Kawasaki, south of Tokyo July 31, 2012. REUTERS/Yuriko Nakao

A logo of Honda Motor Co is reflected on a roof of a vehicle at a Honda dealer in Kawasaki, south of Tokyo July 31, 2012.

Credit: Reuters/Yuriko Nakao

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TOKYO (Reuters) - Plenty of people think Honda Motor Co (7267.T) is not the kind of daring, risk-taking company it once was. One of them is Takanobu Ito, who just happens to be the Japanese automaker's chief executive.

His solution? A simple, gasoline-electric hybrid technology which he believes will set a new standard for fuel efficiency and recapture the success of the CVCC engine 40 years ago, which helped transform Honda from a small company into a global leader.

Carmakers, battling to stand out in an industry hammered by over-capacity and weak demand, are looking for an optimum balance of gasoline and electricity to propel cars after Toyota Motor Corp's (7203.T) triumph with the Prius hybrid.

Initially tentative in embracing the technology, Honda believes it has found the right formula with a revamped version of its "one motor" hybrid system.

"We believe we have reached a point with hybrid technology ... where we can provide game-changing technology and products," Ito told Reuters on Wednesday.

"We believe that rivals will definitely follow us."

Honda's new hybrid system will power the next generation of its cars and could be introduced in the remodelled Fit subcompact car by late 2013 in Japan, according to people close to the company.

Honda introduced its "one motor" hybrid system in 1999. It is currently used in models including the CR-Z compact sports car and the Fit subcompact, also known as the Jazz.

RECAPTURING FORMER GLORIES

Since becoming chief executive in 2009, the 59-year-old Ito has pushed Honda to come up with its own hybrid technology and repeat the successes of its hard-driving founder.

Soichiro Honda championed advances such as fuel-efficient CVCC engines with cleaner tailpipe emissions in the 1970s, and saw them adopted by carmakers including Toyota, Ford and Chrysler.

Honda needs that kind of a booster again.

Hit in 2011 by a Japanese earthquake and tsunami and floods in Thailand that wrecked its production network, the company also suffered a lackluster launch for the 2012 Civic, which some criticized for an uninspired design and a bumpy ride.

It is now counting on the new Accord mid-sized car, its core model for the U.S. market which was launched there this month. Ito said the car's engine, transmission and platform have all undergone improvements, though it still lags behind Nissan's Altima in fuel efficiency.

Ito also sees the next Fit series as key to improving the company's performance. For the North American market, the Fit will be built in Mexico and will go on sale in the spring of 2014, sources close to the firm said.

Developing new technologies is costly and Honda, which spends about 500 billion yen ($6.4 billion) in R&D annually, does not rule out alliances.

"We absolutely won't reject an alliance if we can work together with another company in a way that leads to our customers being more impressed with Honda's products," Ito said.

"But if we are just going to put onto our product an advanced technology that another company has developed, then Honda engineers will be deprived of the joy of involvement, so that is not the way to go."

(Additional reporting by Yoko Kubota; Editing by Mark Potter)

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