Honda Motor Co., Ltd.

views updated

Honda Motor Co., Ltd.

founded: 1948

Contact Information:

headquarters: no. 1-1, 2-chome
minami-aoyama, minato-ku tokyo 107-8556, japan phone: 81-3-3423-1111 fax: 81-3-3423-0511 url: http://www.honda.com

OVERVIEW

Honda Motor Co. ranks among the world's top 10 automakers. The Tokyo-based manufacturer also claims 30 percent of the world's motorcycle market, making Honda the world's top motorcycle maker. Banking on its beginnings as an engine producer, Honda also commands a global presence in power equipment, ranging from snow blowers to lawn mowers to outboard motors.

Honda maintains research and development (R&D) facilities and manufacturing plants around the world. After reading the warning signs of a shaky Asian economy in the late 1990s, Honda accelerated the company's expansion of its manufacturing operations in North America. Long known for its efficient engines, the company continues to work on building low-emission vehicles.

COMPANY FINANCES

In fiscal 1998, which ended March 31, Honda posted net income of $1.96 billion on revenue of $45.06 billion, compared with a net of $1.78 billion on revenue of $42.65 billion in fiscal 1997. In fiscal 1996, Honda reported net earnings of $666 million on revenue of $39.98 billion, compared with net income of $711 million on revenue of $45.82 billion. In fiscal 1998, automobiles accounted for 79 percent of the company's total sales, while motorcycle sales generated 13 percent of total revenue and power products brought in the remaining 8 percent.

The 1998 revenue increase largely can be attributed to the fact that Honda sold more cars in North America and Europe, both regions where the local currencies had strengthened considerably against the weakening yen. Increased sales abroad and the favorable currency exchange rate also pumped up profits for the company.

HISTORY

Soichiro Honda, a race car driver and a patent-holding mechanical engineer, founded the Honda Technical Research Institute in Hamamatsu in 1946. Honda started out in business by making motorized bicycles powered by war-surplus engines. The popularity of the motorized bike financed the design and production of Honda's Atype bicycle engine in 1947. The company incorporated as Honda Motor Co. in 1948. Backed by a private investor, the company made its first motorcycle in 1949. Honda quickly followed that introduction with a revolutionary engine that doubled the horsepower of the four-stroke engine.

Riding that engine innovation, the company increased sales and attracted greater financing throughout the 1950s. Honda established offices and factories throughout Japan and moved its head office to Tokyo. By the end of the decade, Honda had won all of the most prestigious motorcycle racing honors in the world.

The company went international with the establishment of American Honda Motor Co. in 1959. The American subsidiary sold its small lightweight motorcycle for just $250, undercutting heavy U.S.-made machines that ran around $1,200. Global expansion continued in the early 1960s with the founding of Honda Deutschland GmbH in Germany, Honda Benelux in Belgium, and Asian Honda Motor Co. in Thailand.

The first Honda automobile was introduced in 1962. In 1965 Honda further expanded its product line with the introduction of the E300 portable generator. The rest of the 1960s and the 1970s were a time of expansion for both automobile and motorcycle models. Plants were also set up around the globe, including Belgium, Malaysia, and Mexico. Honda introduced the Civic compact in 1972, just in time to reap the benefits when gas-guzzling cars lost favor with the American public during the oil crisis of 1973. For the next four years running, the Civic won first place in the now-important U.S. fuel economy tests.

The 1980s continued the trend of new products and racing victories. In 1985 and 1986, the Honda Accord was named Japanese car of the year. Throughout the 1980s Honda's R&D continued creating new products and automobile technologies, like the first in-hub motorcycle anti-lock braking system and the Honda Traction Control System.

During the late 1980s and early 1990s Honda aggressively developed new products and technology. It was also a time of accolades. In 1989, two years before his death, Honda's founder, Soichiro Honda, became the first Asian inducted into the American Automotive Hall of Fame. The Honda Accord became the best-selling car model in the United States in 1989 and once more grabbed top honors in the U.S. Customer Satisfaction Index. The next year, Honda's new president was named Automotive Industry magazine's "Man of the Year."

The early 1990s brought continued success. In 1992, Honda announced the first joint venture to manufacture motorcycles in China. Honda overtook Chrysler in 1993 to become the third largest seller of cars in the United States. Then Honda started to lose market share.

Taking heed of the warning signs of a shaky Asian economy in the late 1990s, Honda stepped up the company's plans to expand its manufacturing operations in North America. Honda's motorcycle division started investing heavily in Asia, where a strong demand for motorbikes led to an increase in sales for Honda. The depreciation of the yen boosted the company's overall performance during 1997. In a ground-breaking move that won the envy of other carmakers that year, Honda introduced one frame that can be adapted for numerous models.

FAST FACTS: About Honda Motor Co., Ltd.

Ownership: Honda Motor Co. is a publicly owned company traded on the New York Stock Exchange.

Ticker symbol: HMC

Officers: Yoshihide Munekuni, Chmn. & Representative Director; Hiroyuki Yoshino, Pres. & CEO; Koichi Amemiya, Exec. VP, Representative Director, & Pres., American Honda Motor Company

Employees: 109,400 (1998)

Principal Subsidiary Companies: Honda Motor Co. operates 89 plants in 33 countries. Overseas subsidiaries include: American Honda Motor Co.; Honda Motor Europe Co. Ltd.; Honda France S.A. B.P.; Honda Deutschland GmbH; Honda Belgium NV; AP Honda Motor Co.; Honda Canada Inc.; Honda Australia Pty. Ltd.; and Honda Motor do Brazil Ltda.

Chief Competitors: In addition to other truck, van, and car makers, Honda competes with a variety of manufacturers of other products, including motorcycles, lawn mowers, outboard motors, portable generators, and all-terrain vehicles. The company's primary competitors include: BMW; Catepillar; Daewoo; Fiat; Ford; General Motors; Harley-Davidson; Hyundai; Isuzu; Kawasaki Heavy Industries; Kia Motors; Mazda; Mercedes Benz; Mitsubishi; Out-board Marine; Nissan; Peugeot; Renault; Suzuki; Toyota; Toro; Triumph Motorcycles; Volkswagen; Volvo; and Yamaha.

BIOGRAPHY: Consumers are Fonda Honda

If Japan has its version of Henry Ford, that man would be Soichiro Honda. He worked for six years as an apprentice at an auto service station in Tokyo before opening his own branch of the repair shop in 1928. In addition to his mechanical talents, Honda was also a race car driver, and in 1931 he received a patent for his invention of metal spokes, which replaced the wood that had been previously used in wheels. From there, Honda created a company to make piston rings in 1937, and with the advent of World War II, the company found itself making propellers for Japanese bombers. Most of his factory was subsequently destroyed by Allied bombs (as well as an earthquake), and in 1945 he sold it to Toyota. Honda then entered the motorcycle engine-production business, which later expanded to include motorcycle production in its entirety. It wasn't until the 1960s that Honda began producing cars and trucks. He lived to see his corporation expand into one of the most respected companies in the world before dying in 1991.

The company also made headlines with U.S. court cases in 1997. First, 18 former Honda executives were convicted of engaging in unfair competition, following accusations that the executives took payoffs from a car dealer for more lucrative franchises. Later on, a group of emu ranchers in Texas and Arkansas sued Honda for allegedly disparaging their feathered livestock in a television commercial that mockingly called emu meat the "pork of the future," long after the market for emus had crashed.

STRATEGY

In May 1996 Honda announced its decision to accelerate its "Automobile Strategy for the Americas," originally established in July 1994. This strategy included expanding U.S. production of automobile engines and automatic transmissions, increasing R&D capabilities in the United States, and boosting local procurement in North America.

By fully utilizing existing resources, Honda was working to improve the competitiveness of its products. This was done by bolstering its R&D from the early stages of the development process and increasing the efficiency of its manufacturing system.

INFLUENCES

The main influences helping to shape Honda's strategy come in two different categories, marketing successes and the opening of overseas subsidiaries and manufacturing plants. In each instance, new technology and new subsidiary locations brought new opportunities to Honda Motor Co.

Honda began its international expansion in 1959 with its move into the United States. The rest of North America and Central and South America slowly followed. Honda then began expanding into Europe and Asia in 1961 and continued to grow around the world throughout the 1980s. According to Honda, this expansion met the goals of "taking manufacturing to our markets." By expanding local economies through R&D centers and manufacturing plants worldwide, Honda lowered costs by cutting the need to transport parts or vehicles and by taking advantage of cheaper labor and a strong yen.

Honda's marketing successes have also influenced the direction of the company. After the introduction of its first car in 1962, Honda became active in the racing arena. Racing successes combined with good sales pushed Honda onward in the automobile industry, acting as an incentive to introduce more models. As each model was well received, proceeds enabled Honda to begin development of newer technologies and models. By the mid-1980s, and again in 1994, the Honda Accord was named Japanese car of the year. By the 1990s the Honda Civic was given the same honor. As Honda's quality became well known, sales grew at an astronomical rate, allowing for more R&D and higher production.

CURRENT TRENDS

Honda's current trend is essentially a continuation of policies and programs set in motion earlier. Honda continues to create new models, open new manufacturing plants and R&D centers, and take advantage of every marketing medium available. These strategies helped to build Honda into the company it is today, and there are no signs that company executives will abandon them any time soon. Honda's reputation for quality has made it a big seller in the United States, and its continued accolades and awards help to bolster that reputation.

The company's move into automobile and motorcycle racing broadened its market to specialty racing cars as well as consumer automobiles. Since the 1960s Honda has been active in formula-1, formula-2, and motorcycle racing.

CHRONOLOGY: Key Dates for Honda Motor Co., Ltd.

1946:: Honda Technical Research Institute is founded by Soichiro Honda in Hamamatsu
1948:: The company is incorporated as Honda Motor Co.
1949:: Honda makes its first motorcycle
1959:: The company goes international with the establishment of the American Honda Motor Co.
1962:: A Honda automobile is introduced
1989:: Honda's founder, Soichiro Honda, becomes the first Asian to be inducted into the American Automotive Hall of Fame
1993:: Honda becomes the third largest seller of cars in the U.S.
1997:: Honda introduces one frame that can be adapted for numerous car models

PRODUCTS

Honda products can be found in 140 countries. Honda's most popular products include the Accord, the Civic, the Prelude, the Acura Integra, and Acura Legend, along with a wide array of motorcycles. The popularity of the Accord and Civic automobiles continues to drive sales in North America. Honda also produces several light trucks, four-wheel drive vehicles, general purpose engines, tillers, outboard motors, generators, water pumps, lawn mowers, and snow blowers. Honda's product line expands nearly every year as they introduce new models.

CORPORATE CITIZENSHIP

According to Honda Motor Co., one of its main objectives is "to conduct all our business activities with the overall objective of serving society." Honda strives to meet this objective by protecting the environment, developing technologies to create a more efficient use of the world's energy, boosting the local economy through job creation, and supporting athletics through scholarships in the United States.

Honda's record with the environment is strong and goes as far back as 1971, when its Civic CVCC was the world's first car to meet the 1970 Clean Air Act's strict emission requirements without the use of a catalytic converter. This trend continued into the 1990s and by the mid-1990s, Honda's Civic lineup used a four-cylinder gasoline engine that received the Low Emissions Vehicle certification from the California Air Resources Board. In 1991, Honda announced a new way to reuse painted car bumpers and became the first car company in Japan to recycle bumpers.

In the United States, Honda shows its corporate spirit through patronage of young people's sports. Since the mid-1990s Honda has been a sponsor for the U.S. Little League Baseball Association of America. Its patronage has helped fund the Little League system, keeping young teams playing. Honda also supports athletics through two different scholarship programs: the Honda Awards Program and the Honda Scholar Athlete Program.

Honda also shows its corporate citizenship by operating manufacturing plants and R&D centers in nearly every country where Hondas are sold, which allows them to boost local economies by offering jobs to the local population. It also allows vehicles to be sold less expensively in each area because there are no costs for importing parts or vehicles. At the same time, with motorcycle plants in China, India, Thailand, and five other Asian countries, Honda actively promotes traffic safety programs as the region becomes more motorized.

GLOBAL PRESENCE

Honda maintains a global network, with 89 plants in 33 countries, supplying Honda products to nearly every country in the world. The company has set up subsidiaries in the United States, the United Kingdom, France, Germany, Belgium, Canada, Australia, Brazil, and Thailand. The company also has manufacturing plants in Belgium, Brazil, Indonesia, Italy, Malaysia, New Zealand, Nigeria, Peru, the Philippines, Taiwan, Thailand, Vietnam, the United States, and the United Kingdom, among others.

Honda's diversified markets include automobile and motorcycle consumers as well as consumers of power products. Because of Honda's early and aggressive international expansion, Honda's markets include the Americas, Europe, Asia, and Australia.

SOURCES OF INFORMATION

Bibliography

american honda homepage, 11 may 1998. available at http://www.honda.com:80.

"american honda motor co. inc." hoover's online, 5 may 1998. available at http://www.hoovers.com.

derdak, thomas. "honda motor company limited (honda giken kogyo kabushiki kaisha)." international directory of company histories. detroit: st. james press, 1995.

"history of honda motor co., ltd." hardin honda home page, 11 may 1998. available at http://www.hardin.com/data/m-honda.html.

honda japan homepage, 11 may 1998. available at http://www.honda.co.jp/home.

"honda motor co., ltd." hoover's online, 5 may 1998. available at http://www.hoovers.com.