Honda myth the genius and his wake Hardback - 2006

Excerpt

FOREWORD
By Paul Ingrassia
The names of the big Japanese consumer-products companies--Sony, Toshiba, Toyota and the like--are well known to virtually all Americans. But the men who built these world-class companies, and the stories behind how they did it, remain largely obscure in the world’s largest consumer nation. Now Masaaki Sato, Japan’s foremost automotive journalist, lifts the obscurity from the men who founded Honda Motor Co. during Japan’s lean years in the wake of World War II.
There is, of course, Soichiro Honda, the engineering genius who gave the company his name. But equally as important, Mr. Sato brings to life Takeo Fujisawa, the financial and management genius without whose skills Mr. Honda would have been just another garage-shop tinkerer.
The two men were total opposites, yin and yang, and the polarity of their temperaments as well as their skills parallels those of the first Henry Ford and his top financial man, James Couzens. But there is a big difference between these two automotive odd couples. Messrs. Ford and Couzens had a falling out after Ford Motor rose to success, a phenomenon that happened more than once with those who were close to Henry Ford. In sharp contrast, when Mr. Honda was inducted into Detroit’s Automotive Hall of Fame in October 1990, he flew back to Tokyo and placed his medal on the memorial tablet that commemorated Mr. Fujisawa, who had died two years earlier. “Takeo Fujisawa was the stalk that supported the gay flower Soichiro,” Mr. Sato writes. “The stalk withered first, in the winter… The petals scattered in the summer.”
Mr. Honda was a genius engineer and a born extrovert. He loved to party and he craved the spotlight. The reserved Mr. Fujisawa was a loner who often worked at home and rarely, if ever, drove a car, preferring instead to be chauffeured around. They met each other through a Japanese bureaucrat who knew Soichiro Honda needed money and also knew that Mr. Fujisawa could figure out how to raise it.
What Honda’s co-founders had in common, as Mr. Sato tells it, were their explosive tempers--which earned Mr. Honda the nickname “Thunderer” among employees, who also labeled Mr. Fujisawa “Godzilla.” But the two men also had an uncanny ability to command loyalty and to inspire their employees.
Honda Giken Kogyo, or Honda Motor Company, officially was incorporated as a motorcycle maker on Sept. 24, 1948 in Japan’s bleak, early post-war years. It was a year later that Messrs. Honda and Fujisawa met and formed their partnership, with the former handling engineering and manufacturing, and the latter handling financial affairs. Soichiro Honda was 42 years old, and Mr. Fujisawa was 38.
Expansion was frenetic in the early years. A young recruit named Satoshi Okubo got rude treatment during his job interview, which prompted him to ask the interviewer: “When did you begin working for Honda, sir.” The reply: “Yesterday.” Mr. Okubo later became chairman of the company.
By 1954, when the company went public, Honda was the dominant motorcycle manufacturer in Japan. But the company’s sales soon plunged, partly due to quality problems. Mr. Honda responded by setting plans to enter the world’s most prestigious and demanding motorcycle race: England’s Isle of Man TT.
The goal rallied employees to improve quality, even though it took five years before Honda actually entered the race. The company’s motorcycles placed sixth, but just two years after that Honda shocked the motorcycle world by sweeping the top five positions. Thus began a pattern: racing would inspire product advancements and generate publicity, both of which propelled Honda’s increasing sales success.
All this inspired Mr. Fujisawa, despite his financial bent, to insist that the company’s engineering research operations be set up as a separate entity, albeit affiliated, from the manufacturing business. His goal was “to isolate the new section’s research budget from Honda’s sales income,” Mr. Sato writes. So Honda Research and Development Co. produced a string of engineering innovations, and also a string of Mr. Honda’s successors as CEO. The setup remains unique among automotive manufacturers.
In 1955 Honda established stock options for employees, allowing each one to buy an unlimited number of shares for about 50 cents each--one-fourth of the market price at the time. Between 1959 and 1961 the price of Honda’s shares surged 72-fold. The good times were rolling. Honda was a company of young people, many of whom met their spouses at work. If both husband and wife had purchased stock options, the couple was instantly well off. “Men who married within the company were the envy of the other staffers,” Mr. Sato writes.
Then in 1961, as in 1954, Honda hit a financial crisis, but this time the cause was different. Instead of quality and production glitches, the new crisis began when production capacity surged beyond the capability of the company’s sales and marketing network. Only emergency financing from Japan’s Mitsubishi Bank allowed Honda to escape unscathed.
Just two years later, in 1963, Honda held lavish parties in Kyoto, Japan’s cultural capital, to celebrate its fifteenth anniversary. The company booked virtually all of the nation’s top entertainers and reserved the ballrooms of every major hotel in the city.
Most of these events occurred at the young company before it made a single automobile. Honda was a maker of motorcycles and motor scooters, pure and simple. And if Japan’s strong-willed bureaucrats had had their will, Honda would have stayed that way.
Messrs. Honda and Fujisawa dreamed of going “big time” and entering the car business. But Japan’s trade ministry planned laws that would “rationalize” the country’s then-fledgling auto industry by limiting new entrants. Honda defied the bureaucrats and moved ahead anyway.
The Honda Sports 500 automobile, or “S500” for short, finally went on sale in October 1963. The car was derided as “just a four-wheeled motorcycle,” and it never made money for Honda. But Honda was on its way to becoming the premier automobile manufacturer that it is today.
Mr. Sato introduces and portrays other key Honda personalities besides the two co-founders. One of the most vivid is Shoichiro Irimajiri, a talented engineer who oversaw Honda’s first U.S. car-manufacturing factory in Ohio. Until Mr. Irimajiri and Honda came along, no foreign auto maker ever had succeeded in making cars in America. Honda’s brazen success seemed to give Mr. Irimajiri, known as “The Prince of Honda” for his outgoing personality and love of racing, the inside track to becoming CEO.
But it didn’t turn out that way. While Mr. Irimajiri was overseeing Honda’s American adventure, the more reserved Nobuhiko Kawamoto was closer to home and to headquarters--running Honda R&D, the company’s engineering lab. Both men had joined Honda in 1963, had served on the company’s Formula 1 engine-development team together and had been close colleagues and friendly rivals over the years. The winner, in the spring of 1990, was Mr. Kawamoto, who became Honda’s fourth CEO thanks partly to Honda’s “tradition of being led by those who do not seek to lead.”
Mr. Kawamoto led Honda through another difficult period in the mid-1990s, when the Japanese yen rose in value and American consumers flocked to SUVs and minivans, catching Honda flat-footed. Ironically, part of his solution was pulling Honda out of Formula 1 racing competition, where both he and Mr. Irimajiri had cut their teeth.
Mr. Irimajiri, meanwhile, left Honda, and later was heavily recruited for a senior job at General Motors. But the man who had made automotive history at Honda declined the chance to do it again at GM.
The personalities, issues, crises and key decisions at Honda are portrayed in detail in The Honda Myth: The Genius and His Wake. The engineering innovations that spurred Honda’s growth in its first quarter-century have given way to more conventional forms of success. No one can understand Honda, or the current state of the global automotive industry, without reading Mr. Sato’s book.

Media reviews

"The engineering innovations that spurred Honda's growth in its first quarter-century have given way to more convention forms of success. No one can understand Honda, or the current state of the global auto industry without reading Mr. Sato's book."
-Pulitzer Prize-winner Paul Ingrassia

"Masaaki Sato's career as a business journalist enabled him to see firsthand much of the evolution, struggles and fascinating men who built Honda, the youngest of Japan's automotive giants. Sato does a masterful job of weaving together the ambitions and conflicts between the strong personalities of the Honda Founders with the economic, industrial and political upheavals that tipped global automotive power in Japan's favor and vaulted Honda into Japan's Big Three despite the obstacles thrown in its way."
-Maryann Keller, leading auto industry analyst