HMC Honda Motor Co Ltd

By Eric Pfanner 

TOKYO-- Honda Motor Co., already coping with large safety recalls over quality glitches and faulty air bags, said on Monday its chief executive would step down to make way for a low-profile engineer with extensive international experience.

The Japanese auto maker said Takahiro Hachigo, a 55-year-old managing officer based in China, will succeed Takanobu Ito, 61, as president and CEO by June. The timing of the news conference and the choice of Mr. Hachigo, who was promoted over more prominent executives, were unusual for a corporate culture that frowns on surprises.

The shift comes at a crucial juncture for Honda, which after failing to take advantage of Toyota Motor Corp.'s stumbles in the U.S. five years ago, now is being challenged for its top five position in the U.S. by Nissan Motor Co. Last year, Nissan's share of U.S. sales was 8.4%, less than a percentage point behind Honda, and it has been gaining ground in hot-selling sport-utility vehicles.

Honda has been hurt by stumbles in the U.S., Japan and China. Its popular Civic sedan was redesigned for 2013 after a year-earlier revamping received poor reviews in the U.S. for using cheap materials and a lack of improved fuel economy. Its Japanese sales this year were hurt by delays with the launch of a new Fit subcompact. In China, Honda's 2014 sales were up just 4.1% in a market that expanded by 7%, widely missing an earlier sales forecast.

In October, Mr. Ito and other top executives took pay cuts to show responsibility for quality problems with Honda models such as the redesigned Fit, which dented sales. Honda also is the car maker most affected by the recall of millions of older vehicles equipped with air bags from Takata Corp. that have been linked to six deaths around the world. Its vehicles account for more than half of the about 25 million recalled for suspect air bags.

Honda has joined an auto industry group investigating what caused the air-bags to explode with too much force. Takata has linked the air-bag failures to hot and humid climates, but hasn't been able to pinpoint a defect.

Mr. Hachigo pointed to his international experience, which has included stints in the U.S., Europe and China, at a news conference here on Monday. Little-known outside the company, Mr. Hachigo has worked in areas including vehicle design, production and purchasing.

"I did have wide-ranging experiences over the years, and I believe I can make that useful for the future of Honda," Mr. Hachigo said on Monday.

Mr. Hachigo said dealing with globalization and developing vehicles with what he described as a more "challenging spirit" would be his two priorities.

Analysts said Mr. Hachigo has his work cut out for him. In addition to competitive challenges in its namesake brand, the auto maker has largely missed the luxury car boom. Its U.S. Acura sales last year rose just 1.5% compared with BMW's 9.8% increase and a 13.7% increase for Toyota's Lexus brand.

In January, the car maker cut its profit guidance for its fiscal year ending in March, citing costs from the air-bag recalls. Some of the air bags have exploded with too much force during deployment, sending metal shrapnel into the passenger compartment.

Honda's weak performance contrasts with that of Toyota, which rebounded from its recall problems by focusing on quality and is earning record profits amid sales growth and a weak yen, which lifts the value of overseas sales when converted into the Japanese currency.

Mr. Ito "encouraged the company to push products out more quickly," said Jeremy Acevedo, an analyst with research firm Edmunds.com. But in doing so, some releases such as the Honda Civic and Acura ILX have "come up short," he added.

"Acura has been one of those brands that has had a fairly public fall from grace," Mr. Acevedo said. Honda's new CEO "needs to really breathe some life back into the brand."

U.S. Honda dealers say quality problems at its plant in Celaya, Mexico, combined with delayed new-model launches, have only added to the car maker's troubles. In October, Mr. Ito took a pay cut to acknowledge responsibility for a series of recalls on its hybrid Fit subcompact car sold in Japan.

"We've had some really bad issues with introductions," said one Honda dealer.

Still, a number of initiatives spearheaded by Mr. Ito are coming to fruition. By March 2016, the company plans to introduce a new version of the Acura NSX sports car equipped with a hybrid gasoline-electric engine.

"Honda is ready to make a new leap forward," said Mr. Ito. "To do this, Honda needs to be led by a new, younger team."

Also on Monday, Honda said several directors who ranked higher than Mr. Hachigo on the company's organization chart, including senior managing officers Takashi Yamamoto and Yoshiharu Yamamoto, would retire.

Honda disclosed the management changes after the Tokyo Stock Market closed on Monday. Its shares fell in early Tokyo trading on Tuesday, losing 1.3% to Yen3,878 ($32.61) after falling less than 1% on Monday.

Mr. Hachigo joined Honda in 1982 and worked in vehicle development, including on a U.S. version of the company's best-selling Odyssey minivan and its second-generation CR-V, a popular compact sport-utility vehicle.

He was based in the U.S. from 2004 to 2006.

Mr. Ito, who took over the top job in 2009 during the depths of the global financial crisis, steered Honda through shocks such as Japan's 2011 earthquake and tsunami, and grew global sales by nearly a third. He expanded Honda in emerging markets and shifted production from Japan to overseas sites.

Yet in contrast to rivals, especially Nissan, Honda's corporate culture has remained more inward-looking. Analysts said the appointment of Mr. Hachigo could change that. "There's some acknowledgment here from Honda that it plays on a global field," said Christopher Richter, an analyst at brokerage firm CLSA. "He does bring a lot of attributes that could be useful for Honda right now."

In 2012, Mr. Ito announced a target of nearly doubling Honda's annual sales to six million vehicles by the year ending in March 2017, but recently he has backed away from that goal.

While the timing of the shift disclosed Monday was a surprise, the length of Mr. Ito's tenure wasn't unusual. His predecessor as president, Takeo Fukui, served for six years. Before that, Hiroyuki Yoshino held the post for five years. Mr. Ito becomes an adviser to Honda and will remain on the company's board.

Yoko Kubota contributed to this article.

Write to Eric Pfanner at eric.pfanner@wsj.com

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