TACH - AUTOMOTIVE STOCK INDEX
January 03, 1997
By Gerald Levinson CMA
Honda Motor Co., Ltd.
Maverick, mechanical genius, and Honda Motor Co. founder Soichiro Honda was the Japanese counterpart to Henry Ford. Honda created a company that became a world leader in automobiles as well as the world's top maker of motorcycles. The Honda Accord was the #1 selling US car model from 1989 to 1991. By 1993 Honda Motor Co. was the 3rd largest seller of cars in the US (after General Motors and Ford), selling 2 cars in the US for each one sold in Japan.
But since then Honda Motor has skidded, hurt by falling sales, stiff competition from both US and other Japanese car makers, and a strong yen, which erodes profits. To recoup, CEO Nobuhiko Kawamoto reorganized the company, slashed costs, and shifted much of its manufacturing operations to North America. Honda is boosting production, reducing the number of parts in its cars, building a new plant in Mexico, and using more American-made parts. The company also is pursuing new markets, with a sport utility vehicle (Passport, made by Isuzu), minivan (Odyssey), and V-6 engine for its Accord.
To strengthen its American credentials and boost advertising, Honda announced in early 1994 that it would build engines for the Indianapolis 500. Booming sales of Honda's motorcycles, especially in China, have bolstered the company's profits, accounting for 63% of operating income in 1994.
HISTORY
After 6 years as an apprentice at Art Shokai, a Tokyo auto service station, Soichiro Honda opened his own branch of the repair shop in Hamamatsu (1928). In addition to repairing autos, he raced cars and received a patent for metal spokes that replaced wood in wheels (1931). In a race in 1936 Honda set a long-standing Japanese speed record, then crashed at the finish line but escaped critical injury.
In 1937 Honda started a company to make piston rings. The Sino-Japanese War and WWII increased demand for piston rings, and the company mass-produced metal propellers for Japanese bombers, replacing handmade wooden ones. When bombs and an earthquake destroyed most of his factory, Honda sold it to Toyota (1945) for nearly $800,000. He then installed a large drum of alcohol in his home, drank, and entertained friends.
In 1946 Honda established the Honda Technical Research Institute to motorize bicycles with small, war-surplus engines. This inexpensive form of transportation proved popular amid the scarcity of postwar Japan, and Honda soon began making engines.
The company was renamed Honda Motor in 1948 and began producing motorcycles. To allow himself to focus on engineering, Honda hired Takeo Fujisawa (1949) to take on management tasks. Honda's innovative overhead valve design made the Dream Type E (1951) motorcycle an immediate runaway success. Fujisawa enlisted 13,000 bicycle dealers to launch Honda's smaller F-type Cub (1952), which accounted for 70% of Japan's motorcycle production by the end of the year.
Funded by a public offering (1954) and heavy support from Mitsubishi Bank, Honda expanded capacity and began exporting in the 1950s. The versatile C100 Super Cub, released in 1958, became an international best-seller. American Honda Motor was formed in Los Angeles (1959), accompanied by the slogan "You meet the nicest people on a Honda," created to counter the stereotypical "biker" image. In the 1960s the company added overseas factories and began producing lightweight trucks, sports cars, and minicars.
In 1972, on the eve of the oil crisis, Honda introduced the economical Civic, emphasizing the US market and targeting Volkswagen buyers. Honda released the higher-priced Accord in 1976, as cumulative Civic sales passed one million. In 1982 Accord production started at Honda's Marysville, Ohio, plant, now a source of exports to Japan. Honda successfully launched a more upscale Acura line in the US in 1986 and bought 20% of the Rover Group in 1990.
Soichiro Honda died in 1991. Also that year Honda started selling Chrysler Corp.'s Jeeps in Japan. In 1992 Honda established the first joint venture to manufacture motorcycles in China and agreed to license Daewoo Motor to produce the Legend in South Korea. Later that year the Big Three US auto makers, who wanted trade sanctions against Japanese car makers, threw Honda out of the US car makers trade association. After BMW bought an 80% share of Rover from British Aerospace in 1994, Honda sold its 20% stake in the company for a $130 million profit.