Executive Remarks from the 2016 Washington DC Auto Show Keynote

John Mendel – Executive Vice President, American Honda Motor Co., Inc. Thank you, Geoff, and good morning everyone. Geoff and his father Jack are...

John Mendel – Executive Vice President, American Honda Motor Co., Inc.
Thank you, Geoff, and good morning everyone. Geoff and his father Jack are longstanding and very valuable members of our Honda and Acura dealer networks and I want to thank you for all that you do for the Honda and Acura brands, and for your leadership of the auto show.
I really appreciate this opportunity to help kick off the 2016 Washington, DC auto show to talk about our vision for the future of mobility and some of the key issues shaping our industry.
It's great to be in DC, especially on the heels of what was a very eventful North American International Auto Show in Detroit last week, where our new Civic was honored as the North American Car of the Year, and where we introduced the all-new 2017 Honda Ridgeline truck, and debuted the Acura Precision Concept model, which sets a new design direction for future Acura models.
And with a record-breaking 2015 behind us, we look to carry our momentum into 2016, with what Merrill-Lynch has identified as the most ambitious new product cadence in the business, including the continued roll out of our 10th-generation Civic lineup, an even more powerful and fuel efficient Accord Hybrid, and the launch of the new Ridgeline and an all-new Odyssey minivan later the year.
Together with the rest of industry, our products are evolving toward new and amazing ideas for the future of mobility, including the areas of the environment, safety, and connected and automated vehicles.
It's a dynamic environment that is creating tremendous opportunity , but also presents serious challenges, not only for those of us making the products and the technologies, but also for those in the policymaking and regulatory arenas.
Competition is first and foremost the driver of innovation. As we all evolve our ideas about industry collaboration  to enable a cleaner, safer more connected mobility future, we must  also evolve our notion of how industry and government work together to facilitate this future.
Honda has long believed in putting the safety of its customers at the forefront of everything we do – like our Safety for Everyone campaign in 2003. So, we applaud the efforts announced last week in Detroit by Transportation Secretary Foxx and NHTSA Administrator Rosekind, including new ideas for advancing safety and new investments to support the highly automated cars of the future.
Today, I want to talk about Honda's vision and efforts in some of these areas, as we continue to advance the safe, clean, fun and connected values of our products.
Honda is a different kind of company, with one of the most diverse portfolios of consumer products in the world. We are a car company, and a motorcycle company, and a power equipment company, and now an aviation company, and more still. But our purpose, and what connects all of these different forms of mobility, has always been the idea of making things that change people's lives in positive ways.
The first steps of Honda began nearly 70 years ago when Mr. Honda attached a surplus engine to a bicycle.  But Mr. Honda didn't set out by thinking "I want to make a motorcycle company." He identified a basic need, personal mobility, and created products to satisfy it.
Step-by-step, the level of technological sophistication grew, eventually creating the Super Cub, the best-selling motorized vehicle in all of human history, and a product that helped Honda start its business in America.
Of course, this is an auto show, so I'm going to keep my focus on that side of our business.
And since we're in Washington, I should add that automobiles and the industry that makes them are absolutely critical drivers of America's economic health and prosperity. There's a reason why President Obama was in Detroit for the auto show yesterday. He rightfully takes pride in the role his administration played in helping our industry survive some incredibly difficult financial times.
Last year, American consumers purchased an all-time record 17.5 million cars and trucks, supporting an immense network of suppliers, of engineers, scientists and researchers in every imaginable field,  and, of course, factories, hundreds of them, both OEM and supplier facilities.
For Honda's part, more than 99 percent of the record 1.58 million vehicles we sold in America last year were manufactured in the region, as we also reached an all-time record of more than 1.8 million cars and light trucks produced in North America. I'll challenge you to find another manufacturer with even close to that kind of local production record.
Last week, I was the lucky guy who got to accept the 2016 North America Car of the Year for Civic, and we also had our new Pilot SUV as a finalist for Truck of the Year. Both of these models were developed here in America and are being produced with the leadership of our local manufacturing operations.
And the new Acura NSX that launches this spring is the only supercar to be designed, developed and manufactured in America. Our new Performance Manufacturing Center in Ohio that builds it is exploring new and potentially game-changing approaches to how we manufacture the cars of tomorrow.
So, the automobile is important, socially, economically, politically, technologically. At the same time, the transportation sector is responsible for more than 25 percent of all man-made greenhouse gas emissions, with cars and light trucks representing the largest share of that number.
And, despite decades of advancements in automobile safety technology and design, traffic collisions account for more than 33,000 fatalities a year in the U.S. alone. And it's especially disconcerting that this number appears to be higher in 2015 than it was in 2014.
These two issues are at the center of our global environmental and safety vision, which is "to create the joy and freedom of mobility and a sustainable society where people can enjoy life." There are a few really key words in there: joy, freedom, sustainability, and life.
As a company and as an industry, we are challenged to make products that deliver joy to our customers while also preserving the environment that sustains us, and protecting us all from harm when we're out on the road.
And I want to take on each one of these in the next few minutes, starting with the environment and Honda's vision for a more sustainable, low-carbon future.
For more than 40 years, Honda has been a consistent leader and innovator in the advancement of low-emissions mobility.
Our vision encompasses both near and longer-term solutions. In the near term, we're expanding the application of advanced and more fuel-efficient engine and transmission technology throughout our lineups.
Last fall, we introduced a new small-displacement, 1.5-liter direct-injected turbo engine on the 2016 Civic Sedan that's helped give Civic more dynamic performance, while earning a class-leading 41mpg EPA highway rating. We have plans to expand the use of small displacement turbo engines on multiple, high-volume models in the years ahead.
We're also applying more fuel-efficient CVT transmissions to virtually all of our 4-cylinder Honda models, and in the days ahead a new 10-speed automatic transmission to some light truck models.
With these technologies, together with improved aerodynamics, vehicle light weighting and more, Honda is achieving top-class EPA fuel economy ratings in virtually every segment in which we compete, and today we have the largest margin of improvement over our CAFE requirements of any full line automaker.
Since 2012, our vehicles have averaged 7 percent cleaner than our requirements, something we have achieved without multipliers, air-conditioning credits or off-cycle credits. Put another way, this 7 percent is like taking more than 300,000 of our vehicles completely off the road – that's a greater reduction in greenhouse gas emissions than any other automaker.
Long-term our focus is on advancing electromotive technology in all its forms: hybrids, plug-ins and battery electrics, and hydrogen-powered fuel cell vehicles, which we see as the ultimate solution to society's environmental and energy concerns.
You'll see us take big steps toward this direction starting this year. In the coming months, we'll launch the 2017 Accord Hybrid with a new generation of our two-motor hybrid system. And we're targeting a significant increase in sales of Accord Hybrid with improved supplies from Japan. We expect hybrid vehicles to comprise roughly 20 percent of our U.S. light duty vehicle mix by 2020.
Also coming this year, and on display here today, is our 5-passenger Clarity Fuel Cell, which will launch in just a couple of months in Japan, followed later this year in the U.S. The Clarity Fuel Cell will have a driving range in excess of 300 miles, refueling times of roughly three minutes, and a fuel cell powertrain that fits entirely under the hood. This allows for greater cabin space and, ultimately, for more flexible use of this platform for other model types.
Today I'm also happy to share some additional details on our plans for the Clarity in the U.S. We will begin retail leasing of the Clarity Fuel Cell to customers in select California markets before the end of this year.
The Clarity Fuel Cell will be priced at around $60,000 with an estimated monthly lease price of under $500. Sales volumes at this early stage of production will be limited.  Over time, we intend to make the Clarity Fuel Cell available for lease andpurchase, with sales volumes and market coverage growing along with increasing vehicle supplies and a growing hydrogen refueling network.
Expanding deployment of fuel cell vehicles requires a clear and steady commitment on the part of local, state and federal governments to support and grow the country's hydrogen fueling infrastructure. California is leading in this area, with 100 stations planned to open in the next few years. Honda is adding its own resources, with nearly $14 million in funding to FirstElement Fuel for up to 12 of those hydrogen stations in California. And we'd like to see other states follow California's lead.
The platform underpinning the Clarity Fuel Cell also will serve as the basis for a next-generation Plug-In Hybrid model that we will launch in the U.S. by 2018. This will be a new, 50-state vehicle in the Honda lineup offering significant improvements in battery capacity and power, more than tripling the all-electric range of the previous Accord Plug-In. This will enable a zero emissions commute for the average American and all-electric driving on the highway.
These next products – Accord Hybrid, Clarity Fuel Cell and a new Plug-In Hybrid – are the first critical steps toward a whole new generation of Honda advanced environmental vehicles that will become a true volume pillar in our U.S. product portfolio in the years ahead.
But, our vision for the fuel cell car and for an electrified, low-carbon society reaches beyond the cars themselves, taking many innovative and interesting forms, driven, in part, by the unique character of our company as a manufacturer of cars and power products.
As one example, this month at CES we showcased our Power Exporter 9000, which will export electricity from a compatible electric or fuel cell vehicle to the household. This role as an emergency or backup power source has tremendous potential to expand the value of the automobile to society.
Last August, Honda began demonstration testing of the Power Exporter at a hospital in Japan. Based on the quality of electricity it supplies, this device is expected to become part of the infrastructure for a stable power supply for medical devices used at emergency centers during a disaster.
Honda also is working on technologies like our Honda Smart Hydrogen Station that utilizes renewable and/or unutilized energy to generate high-pressure hydrogen. These stations already have been installed in multiple locations in Japan.
Our hope is that our energy management technologies will help people "generate" and "use" hydrogen as a main source of energy, as a key step in realizing a hydrogen society and an ultra-low carbon mobility future.
Last fall, prior to the global COP21 in Paris, Honda signed the American Business Act on Climate Pledge, reaffirming our goal to achieve a 50 percent reduction in Honda's total corporate CO2 emissions globally by 2050. This commitment is not just from our production activities, but includes emissions from our products as well, and it's among the most aggressive targets set forth by any automaker.
The 2025 U.S. fuel economy and GHG emissions standards are in line with the goals set forth by the Paris agreement. The auto industry as a whole has made great strides and is on the path to cut new vehicle fuel consumption roughly in half by the year 2025, compared to 2011 levels.
Now, the EPA, NHTSA, and CARB are undertaking a "midterm evaluation" of the 2025 standards. Many things have changed since these regulations were written just a few years ago, not the least of which is the plummeting price of gas at the pump. Honda supports the goals of aggressively reducing CO2 and developing advanced technologies for 2025 and beyond. But it's very challenging to achieve these goals at costs that are manageable for automakers and that result in affordable products our customers will want to buy.
With gas prices below $2 per gallon, people are buying products that make sense for their lives and their pocketbooks. It's important that the regulations acknowledge this reality. The good news is the government is committed to looking earnestly and honestly at the costs, fuel-saving potential, and market acceptance of these technologies as part of the midterm evaluation. We value that commitment, and urge an ongoing, open dialogue between government and industry as this process unfolds.
Another area where we are increasingly seeing good discussion and a careful and transparent approach is in the safety arena. As I referenced earlier, last week, the federal government and a group of 18 automakers including Honda, engaged in productive discussions that resulted in Proactive Safety Principles that will explore new ways to improve automotive safety.
Honda welcomes this opportunity to further improve the recall process and to advance vehicle safety.
One of the four principles seeks to maximize safety recall participation rates. And Honda is one of many OEMs in the midst of the significant challenge of a recall of Takata airbag inflators. For Honda, this is not simply a matter of increasing recall rates, but ensuring the safety of our customers, predominantly involving older model Honda and Acura vehicles.
This is a particular challenge, because older vehicles are often on their second or third owner and can be more difficult to locate. For instance, we analyzed 14 different recall campaigns and where we see completion rates of up to 80 percent for vehicles in the first year of ownership, we found that the percentage declines each year, to about 33 percent in the 9th and 10th year of ownership.
To overcome this situation, our comprehensive outreach has included direct customer contact via letters and phone calls, targeted advertising campaigns, outreach through the media, as well as Facebook and Twitter, and working with Amazon and CARFAX.  We have turned our parts trucks into rolling billboards. And we worked early on with alternative inflator suppliers to increase the availability of replacement inflators. We are even searching salvage yards for recalled inflators to prevent them from being used as replacement parts.
Through all of these efforts, we have replaced nearly 5 million inflators, unprecedented in Honda history, for a recall completion rate of nearly 50 percent, well above the industry-wide completion rate. And while we certainly consider this to be a substantial achievement in little more than a year, we're working urgently to do more. Locating and remedying the remaining 50 percent of vehicles with Takata inflators will be a lot harder than the first 50 percent.
So, we believe the process of identifying and remedying vehicles under recall must evolve. One idea that Honda has proposed is to tie state vehicle registrations to recall databases so that a vehicle cannot be registered until applicable safety recalls have been addressed. This is similar to the way many states require vehicles to pass a smog test before they can be re-registered. The recently passed Highway Bill has a provision for a pilot program to test this concept in up to six states, and we are working to help get states interested in taking up this effort.
And we continue to look for new and better ways of alerting affected customers and getting their affected vehicles into dealerships for repair.
When it comes to safety, the reality is that Honda has always taken a proactive, forward-looking approach to enhancing the safety of our customers. We invested early and significantly in advanced safety research and testing, more than a dozen years ago creating in Japan and in Ohio what remain two of the world's most advanced safety research facilities.
This has resulted in a number of industry firsts, ranging from application of pedestrian safety features on every new vehicle we sell to developing our Advanced Compatibility Engineering body. This ACE body has helped vehicles like Pilot, Accord and Acura MDX earn top NCAP and IIHS safety ratings. And just last week the new Civic became the latest Honda vehicle to join the list with a rating of TOP SAFETY PICK+ from the IIHS.
In addition to creating well-engineered vehicles that protect occupants in a collision, our efforts now are working toward a critical goal we call a "zero collision society", by the year 2050. This includes an interim target to reduce traffic collisions involving our vehicles by half by the 2020 time frame.
We've made the significant commitment in our vehicles of today to offer advanced safety and driver-assistive technologies, that are at the forefront of semi-autonomous driving technology, and that serve as both a technological and perceptual bridge to the highly automated vehicles of the future.
We make AcuraWatch available on every Acura model in our lineup. And we're rapidly expanding Honda Sensing throughout our Honda vehicle lineup. The Honda Sensing suite of technologies includes Autonomous Emergency Braking, which we call Collision Mitigation Braking System, along with all of the technologies you see here.
Honda Sensing is available on every trim level of the new Civic Sedan, the only vehicle in its class to broadly offer such technologies.
While the application of features will vary by vehicle, the suite of technologies is part of Honda's industry-leading effort to advance safety and reduce driver workload. And before this year is through, virtually all of our compact and larger Honda cars and light trucks will be available with Honda Sensing technology.
Automated and connected vehicle technologies carry with them the promise of a truly transformed mobility experience, and we are intent on being at the forefront of that revolution.
We're targeting 2020 for the introduction of highly automated vehicles on U.S. highways. Working toward that goal, we're partners in automated driving research initiatives in Michigan and California. And at the 2014 ITS symposium in Detroit, we demonstrated unique Honda ideas for vehicle-to-motorcycle or bicycle and vehicle-to-pedestrian technologies.
These technologies, along with smart infrastructure and V2X systems are critical enablers for realizing a "zero-collision society". And from a policy perspective, there is an essential need for dedicated radio bandwidth, so called DSRC, to support the smart cars and smart infrastructure of the future.
Regarding connectivity, one thing that we know about today's always-on-the-go consumer, is that they want smartphone-like functionality directly in the vehicle. I'm a "car guy" – but I have to acknowledge that some millennials would probably rather lose their car than their phone.  And all consumers want a more seamless and intuitive in-car connectivity experience.
Complexity, when it impacts the customer, is not a good thing.  Our goal is to create systems that provide an enjoyable user experience while lessening the potential for drivers to divert their attention away from the road.
Toward this end, our Silicon Valley R&D team initiated discussions with Apple and Google years ago with the goal of improving the connected car experience.  To see that conversation turn into advanced connected car technologies, like Apple CarPlay and Android Auto, speaks to the importance of our efforts in this area.
Today, the Honda Civic and Accord, America's most popular compact car and midsize car, offer these new technologies. And you'll see the expanded application to new models launching this year, including the new Ridgeline and Odyssey. And it's only the beginning of our effort to integrate new technology and new thinking into our vehicle designs.
We're not alone. All of our competitors are touting their efforts in this area, which is a good thing. Much of the fundamental technological progress we all hope to achieve requires both a strong cooperative and competitive spirit.
There is a tremendous opportunity for everyone in this space, be it Honda, Ford, Google, Tesla, Apple, or some young inventor no one's ever heard of, toiling away in a garage on the next big thing.
Fundamentally, we're all creators, and we all want to make something better. So, we're engaged with many other leading companies  and researchers in the effort to advance connected car technology while enhancing safety and minimizing driver distraction.
And this takes me to my last point, which also sort of brings us full circle.
Building relationships and creating a stronger, more productive, and more transparent dialogue among industry, government and key stakeholders is an increasingly essential part of this effort to create a cleaner, safer, more connected mobility future.
It doesn't mean we're always going to agree on everything, and it's certain we won't. Realizing our shared goals for the evolution of the automobile and its role in our society will require that we have the courage to think differently, to hear and consider new points of view and, at the same time, to work more cooperatively. That is the tremendous opportunity before us, that also represents a considerable challenge.
For Honda, our ultimate aim has always been, and will always be, to create something new that advances mobility, and makes people's lives better. And to achieve that end, we stand ready to work together within our industry, with technology companies, and with government to create the conditions for a cleaner, safer, connected and fun mobility future.
Thank you for your attention and I hope you enjoy the auto show.
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