What is in this article?:
- How Honda Thrives
- Honda is an American Company
Honda Motor Co. is thriving amidst a struggling Japanese economy, and here's why.
Japan's official unemployment level is now 4.3%, the highest on record. Keizo Obuchi just became Japan's eighth prime minister in nearly as many years. Confidence that his administration can turn Japan's economy around is low. And the final bill for fixing the sour loans held at Japan's financial institutions could top 1 trillion (more than US$7 billion).
Yet, there are some big-name Japanese companies that are doing well despite the gloom-and-doom forecasts for the world's second-largest economy. One is Honda Motor Co. Ltd.
There is no one reason why such companies thrive. In the case of Honda, though, it has much to do with the company's leadership, specifically Nobuhiko Kawamoto. Although he stepped down from the presidency in June, Kawamoto will continue as an adviser.
Yet few observers believe the transition threatens the company's success. The new president and CEO, Hiroyuki Yoshino, an engineer by training, joined Honda about the same time as Kawamoto and pursued much the same career track. Yoshino seems intent on pursuing the same level of flexibility that turned the company's fortunes around, even as Japan's economic miracle slid further into chaos during the last seven years. Kawamoto signed on with Honda in the 1960s for one reason only -- to drive Formula One race cars. Instead, he devoted his career to inventing better machines and climbing to the top of Honda's management ladder. After 30 years, he reached the presidency.
But that was the early 1990s, and Honda was in trouble. Japan's booming economy had collapsed. The era of easy money was over for Japan and Honda. Engineers ruled the company, and their increasingly far-out designs were turning off consumers. To shake up the company, Kawamoto pulled the plug on his own dream -- Honda's involvement in the Grand Prix.
Following Kawamoto's lead, the company did an about-face on everything from decision-making to design. Bureaucracy was out, marketing took the wheel, and the engineers soon started turning out consumer-friendly designs. By 1996 the company had reduced the number of platforms and introduced flexibility in production.
Today Honda is one of only two Japanese auto companies showing a profit (the other is Toyota Motor Corp.). The last fiscal year was Honda's best ever, the second consecutive "best" year. On a consolidated basis, sales were up 13.3% to 6 trillion (more than US$43.4 billion). Operating profits were up 15.2%, at 462 billion (nearly US$3.4 billion). Ordinary profits rose 13.5%, and aftertax profits of 261 billion (about US$1.9 billion) were up 17.8%.