A Sudden CEO Leadership Change at Honda and Another Reinforcement of the New Product and Operations Grounded CEO
In the wake of continued challenges involving quality glitches and mass product recalls, Honda Motor Company announced today that is current CEO will step-down in June to make way for a new breed of leadership.
Takahiro Hachigo, a trained engineer and currently a managing officer within China, will replace Takanobu Ito as president and CEO in late June. Mr. Ito has led Honda since 2009, at the height of the global recession.
According to reporting from The Wall Street Journal, this executive leadership change comes at a critical juncture for Honda, which is being challenged by Nissan Motor for the number three brand leadership for the U.S. market, and amid continued product recall actions involving airbag inflators produced by supplier Takata Corporation. Honda has been one of the brands most affected by the defective airbag inflator quality crisis, and in October, top executives took on salary cuts to demonstrate responsibility for quality problems.
Reportedly, company insiders were taken by surprise by the timing of this announcement, and the choice of a younger executive promoted over those executives expected to be considered as the next Honda CEO. The global auto company further indicated that several directors who ranked higher than Mr. Hachingo would retire. In a released statement, Mr. Ito stated: “Honda is ready to make a new leap forward. To do this, Honda needs to be led by a new, younger team.”
Mr. Hachigo’s experience includes stints in product design, production operations, and procurement, which provides yet another example of a trend for new senior management appointments involving executives with product and supply chain management prowess. According to Honda’s announcement, Mr. Hachigo’s previous experience includes roles as a vice-president of Honda Motor Technology- China, representative of development, purchasing and production- China, president and director of R&D in Europe, general manager of the Suzuka manufacturing facility production operations , general manager of purchasing and vice-president of R&D in the Americas.
This resume adds further evidence of the new importance of global-based experience, including operational experience within China.
In December of 2014, BMW appointed new replacement CEO Harold Kruger, with a background in operations, engineering and manufacturing. A year earlier, General Motors rocked the global automotive industry by appointing the first ever female CEO, Mary Barra, who had risen through the GM ranks in roles in manufacturing, engineering, product design and other leadership positions. Mrs. Barra has since experienced a baptism of fire involved in GM’s massive product recall incidents.
This trend extends beyond the automotive industry, with product management and supply chain experience in the current CEO’s of Apple, Home Depot, McCormack Foods and other firms large and small.
There is an adage that one data point is interesting, two consistent data points are more interesting and three or more consistent data points is obviously a sign of a trend. For the global automotive industry, the new trend for senior management is showing a common denominator for sensitivity and grounding in product design, operations and global supply chain management leadership.
The year 2015 may well be a watershed year as this new generation of product design and operations background CEO’s continue to take the leadership helm. For global supply chain ecosystems across the automotive industry, these are, by our Supply Chain Matters lens, encouraging signs.
© 2015, The Ferrari Consulting and Research Group LLC and the Supply Chain Matters blog. All rights reserved.
In the previous Supply Chain Matters commentary, we called attention to Procter & Gamble’s latest challenges related to strong currency headwinds and the need for more agile business and supply chain strategies. Today, the Wall Street Journal published an added byline article related to P&G’s ongoing challenges, specifically David Taylor, the reported senior executive who has emerged as the top contender for the ultimate CEO position at P&G. As we have pointed out in other commentaries, this path to the CEO role includes a background of supply chain operational experience.
According to the article, Taylor began his 34 year career at P&G as a production manager that produced diapers and sanitary napkins. By his early thirties, he was a plant manager. Then there was a career twist. Sensing the P&G corporate culture, Taylor ascertained that the road to broader P&G leadership responsibilities needed to include sales and marketing experience. Taylor elected to abandon his plant manager role, and opted to an entry-level assistant brand manager for the Pampers brand.
The rest is obviously a stellar executive track record rising in the ranks of marketing. In 1998, Taylor departed for China to oversee haircare, tissue and paper towel business along with antic-counterfeiting initiatives. In 2001, he assumed a Vice President role in Geneva overseeing P&G’s family care brands. In 2003, he returned as Vice President of family care for North America and by 2005 was running the global business. Taylor is credited with making the rather difficult decision to shed P&G’s pet food business.
On February 1, Taylor will assume leadership for P&G’s overall beauty businesses and according to the WSJ, will become responsible for 43 percent of P&G’s overall sales and nearly half of its profits.
We however want to highlight for our readers, the most revealing portion of this WSJ article:
“Current and former colleagues say the complicated balancing act of managing the machinery and employees inside manufacturing plants has given Mr. Taylor superior leadership and interpersonal skills”
The takeaway for our readers, especially young aspiring students, is that even if a corporate culture values the path toward senior leadership primarily from a background in sales, marketing or even engineering, operational and supply chain focused leadership skills do indeed provide important competencies. If Mr. Taylor ultimately is chosen as P&G’s next CEO, he will bring such skills and understanding of supply chain to that leadership role.
We have noted such supply chain experience in the current or soon to be CEO’s of Apple, BMW, Home Depot, McCormack Foods and other firms large and small. Supply chain experience can indeed provide a path to top. Skills developed either in baseline leadership, cross-functional and cross-business leadership, operations, supplier or product management lend themselves to broader management skillsets, particularly when such experience spans multiple global assignments.
Thus, for our student readers, take comfort in the continual evidence that skills acquired in supply chain focused roles do matter for career progression.
Throughout the summer and especially in September of 2014, we featured a number of Supply Chain Matters commentaries reflecting on yet another series of Apple supply chain product introduction ramp-ups, and specifically whether the Apple supply chain ecosystem and its internal supply chain teams could yet again pull rabbits out the hat proverbial hat and deliver on business expectations for the all-important holiday fulfillment quarter.
Specifically in our mid-September commentary we noted:
“Over the coming weeks, as the marketing and sales machine cranks-up consumer motivations to buy, the supply chain will deal with the realities of limited supply, production hiccups and product allocation conflicts among various channels that invariably come up in such situations.”
We further declared:
“While some supply chains are challenged with collaborating with sales and marketing on stimulating and shaping product demand, Apple has the current challenge of meeting very high expectations involving an outsourced supply network with many moving parts. They have pulled miracles in the past, and the stakes get even higher.”
Yesterday after the stock market close, Apple announced financial results for its fiscal first quarter ending in December, and the results were staggering, along with the business headlines. The Wall Street Journal headline story today was titled: Apple Delivers Quarter for the Ages.
Apple reported net income of $18 billion for the quarter, was described as more than 435 of the companies within the S&P 500 Index each made in total profits. But the supply chain headline was fulfilling all-time record customer demand for 74.5 million new iPhones. This was up 46 percent from the same holiday fulfillment quarter a year ago, reflecting a lot of pent-up upgrade demand for the new iPhone6 models. In its reporting, the WSJ equated such volume output to more than 34,000 phones per hour, around the clock.
Gross margin was reported as 39.9 percent, nearly two percentage points higher than last year’s similar period. Once more, average sale volume for the iPhone increased to $687, nearly $50 higher than a year ago.
Apple also managed to double its iPhone sales volumes within China during the quarter despite delayed availability slipping to mid-October from the scheduled simultaneous September product launch.
Readers who followed our Apple commentaries should recall that the iPhone6 incurred its own set of production ramp-up challenges including a last-minute design change involving its larger screen displays. There was the usual production yield challenges associated with the fingerprint scanner and with the LCD displays themselves. We called attention to a TechCrunch report that cited sources in September indicating that Apple had already contracted air freight capacity anticipating to flood channels with last-minute shipments.
All was not spectacular news regarding Apple’s latest performance. Sales of the iPad were reported to be down 18 percent from the year ago period. The long-anticipated iWatch availability has now slipped to April of this year. However, these do not take away from the extraordinary performance of the Apple supplier ecosystem, and in particular, its contract manufacturers who had to successfully support the four month production and fulfillment ramp amidst the production challenges.
The Apple supply chain did indeed again pull rabbits out the hat. It performed to enable an expected business outcome, despite operational challenges.
We extend our Supply Chain Matters Tip-of-the Hat recognition for such performance. Let’s hope that the supply chain ecosystem will share in similar financial rewards.
In the commercial aerospace sector, both Airbus and Boeing both declared that they each exceeded operational targets for 2014. However, the supply chain ecosystems for each of these manufacturers have continual challenges to perform even better in the months to come.
Today, Airbus announced that it achieved a new record of 629 aircraft deliveries in 2014, representing an increase for the 13th consecutive year. That compares to the 626 aircraft delivered during 2013.
The breakdown of deliveries consisted of:
490 A320 model aircraft
108 A330 aircraft
30 A380 super jumbo aircraft
Initial A350 XWB to launch customer Qatar Airways
Airbus was challenged at the last minute in delivery of the launch A350 but overcame issues of customer customized equipment needs to make its 2014 milestone.
On the inbound customer demand side, the aerospace provider booked 1456 net orders from 67 customers making its year-end backlog to be 6386 aircraft valued in excess of $919 billion. If the Airbus supply chain were to continue to support and sustain its current shipment volume performance, the current order book represents in excess of 10 years of production.
Airbus program development highlights in 2014 included the maiden flight of the rather popular A320neo which is currently scheduled for operational certification in Q3, and first customer delivery in Q4 of this year.
Last week, Boeing announced that it had achieved delivery of 723 aircraft, a record for the most commercial aircraft delivered in a single year. That compares to 648 aircraft delivered in 2013. The breakdown of deliveries included:
485 737 program aircraft
99 777 program aircraft
114 787 Dreamliner program aircraft including the first 787-9 launch model.
Similar to Airbus, Boeing was challenged with December deliveries of 787’s and other wide body aircraft because of a supplier shortage of premium seating. All three of Boeing’s final assembly facilities each set new milestones for aircraft delivery volume. On the inbound side, Boeing booked 1432 net orders bringing its year-end backlog to 5789 aircraft, a declared all-time high. The company recorded 1355 net orders in 2013. If the Boeing supply chain were to continue to support current shipment volume, the current order book represents in excess of 8 years of production.
Boeing program development highlights included the launch of the 787-9 in 2014 and the planned assembly of the first 737 MAX scheduled for this year.
No doubt, the supply chain and product management teams and ecosystems of both Airbus and Boeing went the extra mile in successfully achieving each of the 2014 operational milestones. We extend our Supply Chain Matters Tip of the Hat recognition for their efforts, and hopefully, bonus goals were achieved and compensated.
Moving forward, 2015 brings expectations of even greater operational performance coupled with the needs to scale-up delivery cadence to even higher levels. As noted in a previous commentary, commercial aerospace supply chains exist in good and not so good news realities. All of the current backlogged customer orders need to be delivered to airline customer expectations for timing, anticipated reliability and performance. Once again, there is a very strong reliance on the performance of the extended supply network and in solid operations and risk management.
Congratulations to all.
Over the remaining few days of December various supply chain teams will be hard at work supporting end-of-year shipment and revenue milestones. Most supply chain teams are aware that completing key milestones, whether financial, business or management focused, are critically important for compensation and career considerations.
In many cases, singular parts or component assemblies can likely be a cause for multiple end-item shipment delays. We are fairly confident that many of our readers residing in manufacturing, retail or service supply chains can well relate to this situation.
Thus, we were not at all surprised to have run across a Bloomberg published article indicating that Boeing and Airbus production and supply chain teams are working to ensure that 2014 end-of-year and program production and shipment milestone targets are fulfilled. The December challenge stems from France based Zodiac Aerospace, a supplier of upscale lie-flat airline seats. Certain deliveries for both the new Airbus A350 and Boeing 787 Dreamliner have requirements for the luxury seats which according to Bloomberg, can cost upwards of $200,000 each because of expensive finishes and complex mechanics. They are described as the “Ferrari” of airline seats. This author appreciates that analogy.
For Zodiac Aerospace, a month-long labor stoppage within a Texas production facility that ended in late October coupled with backlogged engineering teams working with airlines for final seat design approvals have led up to the current challenges. The supplier is attempting to resolve all late deliveries and return to a normal schedule by mid-2015, but as is often the case, planning teams have been working to move deliveries of other new aircraft that can be completed to December customer delivery. The article cites American Airlines as an example, who now expects to take delivery of its initial 787 during Q1-2015 rather than this month. American also needs to secure FAA approval to utilize these innovative seats within its new 787 fleet.
The 2014 shipment milestone for the Boeing 787 is 110 aircraft. Airbus encountered a sudden and unexpected delay in delivery of the first A350 to launch customer Qatar Airways because of an unexplained reason. Commercial aerospace supply chain and S&OP teams are thus behind the scenes and hard at work resolving last-minute snafus while working with various customers to move-up or re-schedule deliveries.
When the stakes are high, the individuals and teams that maneuver the various moving parts of the supply chain do matter. While technology can provide helpful tools, in the end, it’s the brainpower, creativity and tenacity of individuals that deliver the bacon.
No doubt all will done to insure December milestones are accomplished.
We share a wise holiday and New Year’s resolution- express your thanks to the planning, execution, procurement and product management professionals that are often called upon to be the last-minute enablers of customer fulfillment.
Supply Chain Matters has previously called attention to executives with supply chain focused leadership experience ascending to higher levels of senior management. Our last commentary of this nature focused on the ascendancy of Mary Barra as CEO of General Motors.
Now, BMW joins such ranks with the announcement that Harald Kruger will take over as CEO in May 2015. BMW’s current CEO Dr. Norbert Reithofer will step down from the CEO slot a year earlier than planned, because of upcoming changes in German law related to the composition of Supervisory Boards.
According to a BMW Blog posting, Kruger stood out as the most likely board member to step- up and take the reigns for the next era of leadership at BMW. In its announcement, BMW indicates that Reithofer would move to head the supervisory board of the auto maker, while production executive Harald Krüger would become the BMW’s new chairman.
Similar to the prior background of Mary Barra, Krüger is an engineer by training, and his previous background within BMW includes roles within manufacturing, product planning and management as well as human resources. A review of his CV of indicates that he began his career in the Technical Planning and Production division and from 1993-1995, worked as a project engineer for plant assembly at the Spartanburg South Carolina production facility. From 1997-2000, Krüger was the head of the Strategic Production Planning department in Munich, and served later positions as Director of Engine Production in the UK and Director of Technical Integration. He he was also responsible for brand management of the MINI, BMW Motorrad and Rolls-Royce brands. Since April of 2013, Krüger has served as Director of BMW Global Production.
According to reporting by The Wall Street Journal, Krüger at 49 years old would become the youngest CEO of any major car maker and signals a “generational change” for BMW leadership. That was obviously another criteria.
Once again it is great to observe that those who served under the umbrella of supply chain, manufacturing or product management operations can have a path for becoming CEO.
These are executives who know that supply chains do matter.