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Procurement Strategy: Honda Optimizes Operational Structures, Product Lineup, and Partnerships

Honda has been actively reviewing its procurement strategy in order to achieve both cost and technology competitiveness and quality assurance. As one of the steps, Honda announced with GM in September 2020 that they will work together to share automobile key components in the North American market. The automaker also made organizational changes in April 2020, including the dissolution of the procurement headquarters. In 2021, Honda plans to integrate the management of three affiliated companies and Hitachi Automotive Systems to form one of the biggest global mega-suppliers that can compete in the CASE market.

Honda and GM have agreed to start collaborative work at the beginning of 2021. So far, Honda has been working with GM in the next-gen technology areas, such as autonomous driving and electrification. However, they have decided to further expand the alliance to the existing technologies, such as gasoline engines and HEVs. They are also planning to share platforms, including engines and electric powertrains, for their North American models. It is expected that Honda will provide engines to GM whereas GM will build vehicles for Honda. In addition, they are considering a joint purchase to efficiently reduce costs. Honda aims to improve the profitability of the current sluggish automobile business in the US through the joint purchase with the US automaker giant.

In the organizational and operational structural changes in April 2020, Honda integrated organizations and functions, such as Production Operations, Purchasing Operations, R&D, and Engineering into one, Automobile Operations. With this unified structure, Honda intends to accelerate efficient Monozukuri from development to mass-production.

Honda has announced a tender offer in September 2020 to make Keihin, Showa, and Nissin Kogyo a wholly-owned subsidiary, and Hitachi Automotive Systems will take the lead in the management by March 2021.

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