Honda's CEO gears up for next hybrid race

By Chang-Ran Kim, Asia auto correspondent

TOKYO (Reuters) - When CEO Takeo Fukui says he would spend $10 billion to rack up a Formula One victory for Honda, you get the sense that he really means it.

Under Fukui's five-year leadership, Honda Motor's (7267.T) car sales have jumped by a third and profits by an even bigger margin to a record $5.8 billion last year.

But it's the lack of an F1 win that sticks in the craw of the 63-year-old former engineer, who joined Honda precisely because it was the first Japanese automaker to enter the world's premier motor sport.

Fukui just doesn't like to lose.

"When it comes to F1, our score is zero. It kills me," Fukui, once an amateur racer himself, told a small group of reporters last week. "If I could fix it with a trillion yen I would, but it's not a problem that money can solve."

The Tokyo native is taking that same fierce competitive streak to the battle against giant Toyota Motor (7203.T) in gasoline-electric hybrid technology.

Toyota beat Honda to the hybrid market by two years with its Prius in 1997. The vastly improved second-generation Prius in 2003 became an instant hit, helping Japan's top automaker win a reputation overnight as the frontrunner in green technology.

Honda's own efforts have been stop-and-go. After launching the Insight two-seater in 1999, Japan's No.2 automaker discontinued sales of two underpowered hybrid models, leaving the gasoline-electric Civic and hybrid sales at a fraction of Toyota's.

Honda detailed plans last week to change that. Using technological advances that would make its hybrid system cheaper and more profitable, Honda will roll out three affordable hybrid cars over the next few years.

With gasoline prices going through the roof, Honda hopes to sell about 500,000 hybrids a year by 2015 -- nine times what it sold last year -- rivaling Toyota's own goal of boosting hybrid sales to a tenth of its total sales after 2010.

"We're losing the image game in Japan to Toyota, and that's tough to take," Fukui said, before adding that he believed Honda's environmental cachet was still superior to Toyota's in the United States, the world's biggest market.

Fukui knows what it feels like to persevere in the face of failure and end up winning big.

He got his first taste soon after joining in 1969, when Honda was mainly an engine and motorcycle maker. The first job assigned to Fukui was reducing toxic exhaust emissions from car engines -- a project that legendary founder Soichiro Honda had recently placed at the top of his priority list.

After Fukui failed several times, the late Honda, who headed R&D at the time, berated the young engineer, telling him to think out of the box, Fukui remembers.

It was sound advice. In 1974, Fukui flew to the United States for a government test that certified the vehicle based on the new CVCC engine as the first to clear the U.S. Clean Air Act based on engine performance alone.