After 41 years, Honda's Mendel drives off

by admin March 27, 2017 at 10:41 am

Forty-one years can teach you a lot about the auto industry — including when it’s the right time to go out on top, retire to a California ski resort town and start your own distillery.

On Saturday, April 1, John Mendel will do just that, after a 12-year run as head of American Honda’s vehicle operations and an expansive career in the industry that included a long lap at Ford and a pit stop at Mazda. He’ll be succeeded by Jeff Conrad.

A steady hand at the helm of American Honda since 2004, Mendel, 62, helped steer it through some of the brand’s most difficult storms. Among them:

• The Japan earthquake and tsunami in March 2011 that devastated Honda’s supply chains and took several years to recover from. 

• A product malaise that began before the Great Recession and continued afterward, culminating in the poorly received 2012 Civic. 

• The Takata airbag crisis, an industrywide debacle that struck Honda hardest, with 10 U.S. deaths linked to the airbag defect occurring in Honda vehicles. 

Through it all, Mendel channeled Honda’s commitment to sales discipline, avoiding the heavy incentive spending — sometimes to dealers’ dismay — and fleet sales that many brands reflexively turn to in tough times. Together, they forged a product-centric sales strategy that tempered the industry’s up and down cycles.

“The temptation is strong” to try to squeeze out an extra sale for the sake of bragging rights or market share, Mendel told Automotive News. “But if it flies in the face of your long-term strategy, then it’s really a distraction.”

There were some puzzles even Mendel couldn’t crack.

Acura remains an albatross. Having struggled to settle on an identity throughout Mendel’s tenure, it remains a bit player in the luxury space. That could change now as Acura expands beyond the U.S. and positions itself to command more resources from Honda in Japan. “I see very bright days ahead for Acura,” he said.

As the industry looks ahead to a future of autonomous or shared vehicles, Mendel said the nearer term bears watching, too. “The changing dynamic in the industry that will affect it the most in the next 10 years is really around how people buy cars,” he said. “I think that the access to information, the access to online shopping, those kinds of things will have a more dramatic impact much sooner than autonomous vehicles.”

Post-Honda, Mendel will combine his passion for skiing and his interest in distilled spirits. Visitors to California’s Mammoth Lakes resort town, where Mendel has long had a home, now will find him running Devil’s Creek Distillery with one of his sons.

But like most auto industry lifers, he plans to do some consulting on the side.

Mendel was on one of the final transcontinental business trips of his tenure at Honda last week when he spoke by phone with Staff Reporter David Undercoffler.

Photo credit: BLOOMBERG

Q: In this industry, people don’t necessarily stick around at one company as long as you did. What made that possible? 

A: I think Honda has given me the opportunity to succeed, as it does all its associates. And I think that, candidly, I have been very, very lucky. Earthquake and tsunami notwithstanding, Lehman shock notwithstanding, the company has been very accommodating, very supportive of the strategy that we’ve put together to try to get to success. 

We look at consistency and stability as a good thing, and we don’t always try to pull the plant up by the stalk out of the pot every day to see if it’s growing. It’s letting the strategies mature and letting the execution actually happen. So I would also say the company has responded in kind in terms of valuing the commitment that I made to Honda and the stability that I brought.

Honda has been beating the retail-over-fleet sales drum for years, but now others seem to have finally taken notice. Why don’t more automakers share that practice? 

Well, it’s a long-term view versus a short-term view. The temptation is strong to grab a headline, grab a quick one, the “It’s only just one more, gosh, that’s so close, let’s just grab that one. I know it’s off-strategy, but let’s do it.” 

But if it flies in the face of your long-term strategy, then it’s really a distraction. I certainly would never pooh-pooh someone else’s strategy, but I think that ours has been one of really intensely believing and living that focus on not doing anything to disappoint or to shake the trust that the customer puts in you. 

We believe that no one should buy a vehicle cheaper than the customer who’s buying them one at a time. That’s going to help drive your [thinking] around whether you do fleet business. And I’m not here to say it’s good business or bad business. It’s just bad for our business model that anybody would go in the market and buy a car cheaper than our customers could. 

So when you look at everything you do through that lens, residual values, retained values for the customer, total cost of ownership, convenience, it becomes pretty clear.

Are crises like Takata, where an issue with one supplier suddenly affects tens of millions of vehicles across the industry, increasingly inevitable? 

If you draw the line and say you go from 50 lug nut manufacturers to one, and the entire industry uses them, certainly. You get a bad batch, or heat treating or something goes wrong, certainly you could have that. 

I think, though, there will come some stasis in the business, if not in economic terms, in terms of quality where the overdependence on a single source especially around safety-type things becomes a disadvantage. I don’t know whether that can be legislated. I don’t think it can. But I think there has to be some balance there that multiple sources are going to have to be found for most things, particularly around safety items.

What do you say to a dealer who is looking 20 years into the future, when potentially fewer people will be buying and servicing cars, thanks to autonomy and car-sharing and the like? 

Just as I would have underestimated the change in the industry 20 years ago by trying to predict what it would look like in 2017, we can under-predict or over-predict the impact of things like driverless cars or autonomous vehicles, etc. Rather than trying to predict what it’s going to look like, the better answer is really how quickly you can change and how quickly you can adapt the business model. That’s where the survivors will be. 

The bigger issue near term is how people buy. The changing dynamic in the industry that will affect it the most in the next 10 years is really around how people buy cars. I think that the access to information, the access to online shopping, those kinds of things will have a more dramatic impact much sooner than autonomous vehicles or body shops. People still do want service. We’re not quite where we are with cellphones, where if something happens, you take it in and they give you a new one. Cars are kind of meatier pieces with more user-replaceable parts.

Honda is firing on all cylinders with a product-led resurgence. Why hasn’t Acura been able to match that success? 

One of the issues is that Acura up until now has been a U.S. brand and not a global brand. So when you think about the resources that can be brought to bear on core vehicles like CR-V, Accord or Civic that sell 500,000 to a million vehicles a year globally, your product development decisions become not only more important but incrementally more friendly. 

Acura traditionally has been sold primarily just in the U.S., and therefore when you amortize significant product decisions over just U.S. volume — and by the way, this would go the same way for Audi or Mercedes — you’re less able to do it. 

That’s the brass tacks of it. The good news is that as we have expanded Acura into China and the Middle East and Russia and other places, we’ve now been able to garner the more global resources to fill in that product deficit. And it gives us an opportunity to now expand the portfolio and focus on building strength in the core models for Acura. 

So ILX, TLX, MDX, RDX, obviously NSX, which probably wouldn’t have happened if it were just going to be an Acura only in the U.S. But because of the global volume, you could question even global volume and say it’s relatively low volumes, but it made that vehicle possible. 

As we’ve expanded that, garnered the commitment of the resources for global Honda, I see very bright days ahead for Acura. It’s been a while coming, and I’m certainly no stranger to that, but I do see a bright future for it.

With Toyota in the middle of a restructuring and move to Texas, does Honda have the right North American structure between its brands and r&d efforts? 

I think we do. We’ve always been quite a bit leaner than most everybody else. We also don’t have a shadow management system that others have had — and that’s not a reflection of Toyota — but different people structure differently. We don’t have the luxury or don’t believe we need the luxury of having people who do nothing but watch or keep an eye on somebody else. (Laughs) Everybody is fully employed and engaged in a specific job. So we think we do have the right structure.

So folks in Japan are happy with both the physical structure and the organizational structure? 

I don’t know if we spend a lot of time thinking about the structure as much as we think about the outcome we want. If you know where you want to go, the path becomes pretty clear. We try to do that with the organization as well.

From a product standpoint, what are Honda’s weak spots, or what’s missing altogether from its lineup? 

I’d be hard-pressed to say that anything we’re making right now is not fresh or cold. I’d have to say more about where I personally would love to think that Honda could showcase its penchant for building stuff that runs like it stole the day — an S2000 or an S3000 or an S3500 or something that really showcases all the capabilities of Honda in design, in manufacturing and everything else. 

S2000 was a surprise for the 2000 model year. It was this thing that was never supposed to last more than a few years, and that was the genesis of the name: Surprise for 2000. I’d love to see another surprise S-something. There’s always a surprise in the works. I’m never astonished at the times I’ll walk by a bay or something in r&d, and somebody will close the door quickly on the front end of something that I know isn’t of this world. Those things always exist in the background. 

The great news is I just spent a couple of days in Tokyo and had the good fortune to have a dinner with our senior leadership of Mr. [Takahiro] Hachigo [global CEO of Honda] and Mr. [Toshiaki] Mikoshiba [CEO of American Honda] and Mr. [Seiji] Kuraishi [executive vice president of Honda Motor], and I know that the same passion that burns bright in Undercoffler and Mendel for that spirited, fun, unique sort of surprise vehicle that showcases everything burns just as brightly in their chest as well. 

So I think that time will prove me right in saying that there’s another surprise in your future, whether it’s an S2000 or something different. 

We’re always going to be cooking something in the back of the kitchen, which when it’s done will be magnificent.

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