Journalist Jeffrey Rothfeder goes behind closed doors in a bid to discover the automaker's global recipe for success
by Ayako Mie of www.japantimes.co.jpNEW YORK – When it comes to business, no one wants to settle for second best. Companies, almost by definition, are always trying to ensure that they are in front of their rivals in terms of market share, sales and brand recognition.
Despite often leading the pack in terms of technological innovations in the industry, Honda Motor Co., a 66-year-old automaker founded by Soichiro Honda, has always been overshadowed by its Japanese archrival, Toyota Motor Corp. So dominant is Toyota’s position in the market that its capitalization is almost three times larger than its nearest domestic competitor.
Perhaps reflecting their respective positions in the market, plenty of books have been published on Toyota — “The Machine that Changed the World” by Daniel Jones, James Womack and Daniel Roos, “The Toyota Way” by Jeffrey Liker and “The Toyota Mindset” by Yoshihito Wakamatsu, to name but a few — but, manuals aside, there have been much fewer books published on Honda and certainly none with much insight into the inner workings of the company.
Veteran business journalist Jeffrey Rothfeder changed all that in July last year, publishing a book titled “Driving Honda: Inside the World’s Most Innovative Car Company” that questioned the conventional wisdom that Toyota sits at the top of the domestic auto industry.
Granted rare, unfettered access to what goes on behind “Honda’s infamously private doors,” Rothfeder argues that the company’s resolute commitment to an unorthodox management style is what businesses around the world should emulate. These management tenets — “decentralization,” “simplicity,” “experimentation” and “unyielding cynicism toward the status quo” — put the company in a better position to localize its global operations.
Furthermore, Rothfeder argues, that Honda’s willingness to encourage risk in addition to respectful disagreement and debate between opposing viewpoints is a philosophy ailing domestic companies could learn from as they try to shake off the fog of deflation that has crippled their operations in recent times — if it’s not already too late.
“I wanted to write about great global companies and people kept telling me about Honda,” Rothfeder says in an interview with The Japan Times.
“Honda in the United States basically became a U.S. company,” says Rothfeder, who was one of the founding editors at Bloomberg and has published numerous books, including “McIlhenny’s Gold,” which dissected the McIlhenny Co. that produces Tabasco on Avery Island, Louisiana.
It took Rothfeder six months to convince Honda to grant him access to the inner sanctum. Once it gave its approval, he spent the next two years interviewing more than 50 of Honda’s current and former employees as well as dozens of industry experts. “Honda thought it was time for its story to be told,” Rothfeder says.
Rothfeder’s praise may now be undermined by recent events in the United States, with the carmaker ordering a recall of defective airbags supplied by Takada Corp., which occurred despite the firm leash the company holds over its suppliers. (“Driving Honda” was published before the first recalls were announced.)
And Honda’s not the only automaker that has been forced to deal with such difficulties in recent years. Toyota, for example, has been forced to recall millions of defective vehicles in recent years, with the carmaker agreeing to pay a $1.2 billion penalty to end a criminal probe into unintended acceleration.
Nevertheless, Honda deserves some long-overdue credit, Rothfeder says.
For a start, Honda put one over its American counterparts before it had even opened a production line in the U.S.
In 1974, Honda launched a four-door Civic that was aimed squarely at the American market. The energy crisis of the 1970s and subsequent emissions regulations required automakers to cut carbon monoxide, hydrocarbon and nitrogen oxide levels by 90 percent by 1975. Honda managed to meet such regulations without having to fit catalytic converters into its Civics, a move that would have reduced pollution but also raised the cost of production as well.
Richard Gerstenberg, chairman of General Motors at the time, dismissed the achievement, saying it could only work on a “little toy motorcycle engine.” He doubted Honda could do the same with a GM car engine.
Yet, the founder of Honda imported a GM vehicle and successfully fitted it with a compound vortex controlled combustion engine, passing all emissions tests put in front of it. In 1989, Soichiro Honda was included in the Automotive Hall of Fame in Dearborn, Michigan — a man who “devastated Detroit’s most lucrative and muscular era with a nonpolluting engine in a tiny car.”
Honda has also led its auto rivals, both at home and abroad, on a number of other occasions in its history. Honda was the first Japanese automaker to produce cars in the United States, opening a plant in Marysville, Ohio in 1982. Honda stunned its competitors again in 1999 and 2002, developing the world’s first hybrid and fuel cell-powered vehicles respectively (although Toyota would eventually get its versions out on the market a little faster).
Honda also has an excellent record of financial health, never once falling into the red since its inception. The company has also recovered well from the global economic meltdown that was triggered by the 2008 subprime loan crisis, nearly doubling its stock price since then. It has allocated more than 5 percent of its budget to fund research and development since 1957, when Honda co-founder and financial officer Takeo Fujisawa first created a R&D division. This percentage is higher than any of Honda’s competitors. However, Rothfeder says, these achievements were always overshadowed by the accomplishments of Toyota, which was able to formulate better marketing strategies.
But this isn’t necessarily a disadvantage, Rothfeder says. The anonymity under which Honda operated tended to create a better environment for innovation.
In “Driving Honda,” Rothfeder takes readers back to Honda’s decision to open a factory in Lincoln, Alabama, in 2000. While the company’s competitors preferred larger towns such as Smyrna, Tennessee, Honda chose Lincoln because it wanted “anonymity and no big-city spotlight or distractions,” Rothfeder writes.
“There is no sign that shows you where the Honda factory is when you are driving up the highway,” Rothfeder says. “If it were in Tennessee, there are signs that say there the Toyota factory is.”
Rothfeder believes Honda’s reticence is derived from an “almost religious regard for internal innovation and individualism, and a concomitant ineptness about promoting its accomplishment.”
“Honda’s work is, first of all, developing workers so that they can be good Honda workers,” Rothfeder says. “They just don’t want to do it in front of everybody else. They’d say, ‘We don’t want to promote ourselves like that.’ “
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http://www.japantimes.co.jp/news/2015/01/03/business/behind-wheel-honda-thinks-outside-box/#.VKgPkcmrEsI
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