Fueled by steady growth in sales and earnings since the start of the decade, Japanese auto makers are pouring record sums of money into research and development. In this first installment of a 4-part series, Ward’s discusses trends with Honda R&D chief Masaaki Kato.

TOKYO – Known for its engine-development prowess, it comes as no surprise the main thrust of Honda Motor Co. Ltd.’s research and development activities remains squarely on improving powertrains – including making the next leaps in hybrid-electrics, clean diesels, flex-fuel engines and fuel cells.

At the 2007 Tokyo Motor Show, the auto maker displayed its first hybrid sports car concept, the CR-Z, and showed off its upcoming i-DTEC clean diesel engine. At the Los Angeles auto show in mid-November, it rolled out a new version of its FCX Concept fuel-cell vehicle.

Masaaki Kato, president and CEO of Honda R&D Co. Ltd., tells Ward’s in an interview at the Tokyo show that reducing emissions – chiefly carbon-dioxide – is at the top of the auto maker’s agenda, given emerging government mandates worldwide. And while he says hybrid-electric powertrains aren’t the be-all-end-all for the Japanese auto maker, he does see the technology continuing to proliferate over the next 10 years.

Kato, 58, served as president of Honda Mfg. of Alabama LLC and Honda of the U.K. Mfg. Ltd. before assuming his current position in April, in which he oversees the activities of some 13,000 engineers around the world. Here are excerpts from the interview:

Ward’s: What are Honda’s main research priorities in the coming five to 10 years?

Kato: Protecting the environment is our biggest theme. Of course, safety is also important, but we must reduce CO2 and exhaust emissions by improving fuel efficiency of our current internal combustion engine lineup, developing hybrid systems and clean diesels, etc.

Ward’s: What is Honda’s 10-year forecast for hybrids?

Kato: Hybrids are not our ultimate goal. Our ultimate goal is hydrogen-powered fuel-cell vehicles or battery-powered cars. So the energy source will ultimately be hydrogen or electricity. Hybrids and diesels are transient systems.

That said, we think hybrid sales could represent as much as 25% of Honda sales by 2017.

Ward’s: Will Honda introduce a Prius-type hybrid system?

Kato: We’re putting our efforts on reducing the cost of our one motor (integrated motor assist) system. We want to bring costs down to less than half of current levels.

R&D Spending by Japanese Auto Makers
(in billions of yen)
2002 2003 2004 2005 2006 2007
Toyota 672 682 755 813 891 950
Honda 437 449 468 510 552 580
Nissan 300 354 398 448 465 490
Mazda 88 91 91 96 107 112
Mitsubishi 105* 69 64 62 57 NA
Suzuki 60 76 87 90 92 103
Fuji 60 58 53 47 51 NA
Daihatsu 33 34 40 48 46 48
Note: Years indicated are fiscal year. 2007 is estimated. NA is Not Available. *Includes Mitsubishi Fuso. Source: Credit Suisse Securities (Japan) Ltd.

Ward’s: By when?

Kato: By 2009, when we introduce a new compact hybrid in the 1.3L to 1.5L range. (Honda plans to build 200,000 units of the new model, in addition to Civic and Accord hybrid production, which during the first nine months of 2007 totaled 41,000 units.)

Ward’s: Honda still hasn’t announced plans to introduce a lithium-ion battery-powered electric vehicle. Do you have one in the works?

Kato: We’re still in the development stage. The technology, particularly the battery technology, isn’t ready in our opinion.

Ward’s: When do you think it will be ready, five years?

Kato: We still have to reduce battery size, weight and cost. Thus, I think it will take longer.

Ward’s: But Nissan (Motor Co. Ltd.) says its lithium-ion battery should be ready by 2013 and a mini-EV like the Pivo2 (Nissan’s main concept car at this year’s Tokyo show) by 2015.

Kato: Lithium batteries will be ready from a technical standpoint in the next few years, but they will still have lower energy and power density than gasoline engines.

Ward’s: Speaking of which, what sort of fuel-efficiency gains in internal combustion engines do you envision over the next 10 years – that is, without battery support or hybridization?

Kato: Just through normal, evolutionary improvements in valve trains, combustion, friction and aerodynamics, I believe we can raise fuel efficiency by 25% from today’s levels.

Ward’s: Switching to continuously variable transmissions, where Honda has been an industry leader, are you planning to expand into higher torque ranges like Nissan, which has a 258 lb.-ft. (350 Nm) unit on the market, and also introduce them outside Japan?

Kato: We have no plans at present.

Ward’s: Honda also has been a leader in introducing all-wheel-drive technology, with the RDX, MDX and RL in the U.S. and the Legend in Japan. What sort of market potential do you see for this technology? (Honda engineers have indicated they will probably introduce two more AWD models by 2010.)

Kato: It is very useful on snowy and slippery roads. But it is also a fact that 4-wheel-drive cars are less fuel-efficient than 2-wheel-drive models.

Ward’s: Then you believe the technology is limited to niche and sporty cars?

Kato: Yes.

Ward’s: As Honda moves forward, what is the biggest problem facing your research organization?

Kato: Again, reducing CO2. This will require considerable resources, both manpower and financial, and we’ll have to find ways to allocate these resources so as not to adversely impact our new model programs.

Ward’s: With respect to advanced safety technologies, when do you expect to introduce these more widely, particularly outside Japan, where Honda already has begun marketing such technologies as collision mitigation brakes, lane-keeping assist and night vision? In Japan, Honda has installed its collision mitigation brake system on the Inspire, Elysion, Odyssey, Crossroad, CR-V, Stream, Civic, Step Wagon and Legend. Its lane-keeping assist system is available on the Accord, Accord Wagon, Legend and Inspire. Night vision currently is available only on the Legend, while active front lighting is available on the CR-V, Legend, Elysion and Odyssey in Japan and Acura RL and Legend overseas.)

Kato: We’ve already introduced collision-mitigation brakes and lane-departure assist overseas (on the Acura RL, Legend and CR-V in the case of collision mitigation brakes and the Acura RL, Legend, Accord and Accord Tourer in the case of lane-departure assist). But as for expanding sales, it will happen gradually, much like it did with airbags. When airbags were introduced in the early 1980s, they were very expensive and limited primarily to luxury cars. Today, even (0.66L) minicars are equipped with airbags. Similarly, I believe lane-keeping systems, like airbags, will eventually come down in price. But it will happen gradually.

Ward’s: Taking the new Fit as an example. Do you think lane-keeping and frontal-crash avoidance will be adopted in 10 years?

Kato: Yes. At least as an option.

Ward’s: Turning to another subject, Honda, unlike Toyota, does not possess a strong “keiretsu” or supplier group. Does this pose a problem as you try to share development costs with suppliers?

Kato: No. We work successfully with many global suppliers including Denso (Corp., Toyota Motor Corp.’s largest affiliated supplier).

Ward’s: But in Honda’s case, your leading electronics supplier, Keihin Corp., isn’t especially strong. Do you think you may have to provide more support to Keihin, both financial and technical?

Kato: Yes.

Ward’s: In the diesel field, Honda has announced plans to introduce a Tier 2 Bin 5 engine into the North American market in 2009. Nissan recently disclosed that it is developing a Tier 2 Bin 2 unit. Is Honda also working on a Tier 2 Bin 2 diesel?

Kato: For the moment only Tier 2 Bin 5. We are focusing on getting that engine into production.

Ward’s: Is Honda’s current platform lineup adequate to meet your future product requirements? Or might you have to increase platforms? (Honda currently has six global and regional platforms including the Fit, Civic, Accord, U.S. Odyssey, Elysion and CR-V, plus two 0.66L minivehicle and two sports car platforms in Japan.)

Kato: We surely don’t want to increase platforms. Models, perhaps. But in the case of platforms, fewer is better. Managing platform numbers is a critical management issue for us.

Ward’s: Looking to the distant future, when do you think fuel-cell vehicles will become affordable for mainstream consumers? In the past, Honda said it hoped to bring costs down to levels of an upper-grade Accord, thus to around ¥4 million ($35,000) by 2020. Is that still attainable?

Kato: I think so. But it all depends on if we succeed in bringing down costs.

Ward’s: And a production version of the FCX Concept, when will you introduce that?

Kato: In 2008. But like with the current FCX, sales will be limited.