Honda Celebrates 25 Years Of Manufacturing Leadership in America

9/10/2004 1:28:52 PM

On September 10 - exactly 25 years after Honda began producing motorcycles here - the company and the communities that host its operations will celebrate this American experiment, which became one of the most remarkable business stories of the late 20th century.

When Honda Motor Co. announced in 1977 a plan to begin manufacturing operations in rural Ohio, experts questioned the decision. Bigger foreign vehicle makers had not taken such a step.

What made tiny Honda - then barely ranking No. 5 in Japan -- believe that it could succeed? Many observers thought American workers might damage Honda's reputation for high quality.

"While early skeptics questioned our decision to build products in America, it made perfect sense for Honda," said Koki Hirashima, president of Honda of America Mfg., Inc. "We were confident that our company culture and philosophy would work well in America. At Honda, we seek challenges.

"Honda was committed then, as now, to a global strategy of building vehicles close to its customers."

"Honda quality was preserved, and steadily improved, in the hands of its American associates," Hirashima said. "They have become a key in making Honda the industry leader in factory flexibility and manufacturing innovation."

In the United States today, Honda manufactures annually 850,000 cars and light trucks, 1.25 million vehicle engines and transmissions, 1 million general purpose engines, 375,000 power equipment products, and 350,000 motorcycles, personal watercraft and ATVs.

Honda employs more than 25,000 associates in the United States. Their workplaces include nine factories and 10 research and development centers. Honda's capital investment in the United States exceeds $7 billion, and the company purchases more than $12 billion worth of parts and materials from North American suppliers annually.

Honda's success in America was repeated around the world. "This philosophy, which we call 'glocalization,' allows us to be fast, flexible and responsive to customers in each market," Hirashima said.

Also, in maintaining its corporate philosophy of respecting each individual worker, Honda has not experienced a layoff, despite operating in a cyclical industry.

But success was not apparent in the 1970s. Some industry analysts thought that Honda's quality processes could not be transferred from Japan. Others thought that competitive pressures alone would render Honda's American dream a historic footnote.

The company's strategy, played out on a flat piece of Ohio farmland, became the catalyst for the company's worldwide growth to more than 120 factories in 29 countries. Honda's decision has been cited as the impetus for other companies to manufacturer outside their home markets, including foreign auto companies that followed Honda to the United States.

What began as a factory making a single American product - the Elsinore motorcycle - expanded to production of the first Japanese car produced on U.S.

soil, a 1983 Honda Accord produced on Nov.1, 1982. The company's U.S. product line has expanded since then to 10 models of motorcycles and all-terrain vehicles; 10 car and light-truck lines; two lines of personal watercraft, and many models of power products, including lawn mowers.

The Ohio operations began production with 64 highly motivated, highly dedicated workers. Today, of the 25,000 full-time Honda associates in the United States, 16,000 of them live in Ohio.

In the early days, just a handful of local suppliers made parts for Honda. Today, Honda supports a network of 620 North American suppliers earning more than $12 billion in income a year from Honda. In Ohio alone, Honda's 154 suppliers employ more than 40,000 state residents, half of whom are directly involved in making parts for Honda.

A cornerstone of Honda's approach is "respect for the individual," a philosophy that places responsibility and accountability with every associate. It gives each associate the freedom to challenge his or her own ideas and to accept the ideas of others.

"A workplace based on respect for the individual allows everyone to succeed and to feel pride in their contributions to the company," Hirashima said.

"From the beginning, production associates, support staff and company leaders all were empowered to - and expected to - contribute to continuing improvement and innovation. It is still that way here."

Another cornerstone was Honda's approach to manufacturing, which emphasizes continuous improvement, environmental consciousness, and cooperation with suppliers. This approach enabled Honda to institute innovations such as rolling model changes, which allow production of current and new models on the same line, without interruption.

The company's attitude toward local communities also was important. Honda approached state and local leaders and parts suppliers as equal economic partners.

Honda's approach to people, manufacturing and partners led to steady growth and success throughout the 1980s and 1990s. Less than three years after producing the first U.S. Accord, the Marysville Auto Plant added a second assembly line. The same year, 1985, the Anna (Ohio) Engine Plant opened in the western part of the state. The East Liberty (Ohio) Auto Plant opened in 1989, and flexible vehicle assembly lines were established by Honda Manufacturing of Alabama in 2001 and 2004.

While Honda's total impact on America is difficult to measure, a major new economic study in Ohio gives some clues. "Honda in Ohio: The Economic Impact of the First 25 Years" considered the economic impact of all of Honda's operations in Ohio. It also examined whether Honda is making a long-term contribution to Ohio and its economy.

One of the most important findings was the ripple effect that Honda's business activities have on the region's economy.

As Honda's output rises, it relies on increased output from suppliers, and those suppliers rely on second and third tiers of suppliers. As the number of Honda and supplier jobs increase, more income is generated, which can be spent on consumer goods.

This ripple effect explains, for example, why in 2003 seven jobs were created in Ohio for every person Honda directly employs, resulting in the creation of 128,000 jobs - and why $3.30 is generated in Ohio for every $1 dollar Honda pays in wages here for total statewide earnings generated of $4.85 billion.

"Honda may have come to Ohio as a 'foreign' car company," the study observes, "but today it is viewed as an integral part of the state and of Ohio's future as a globally competitive state."