Honda: From a Small Japanese Motorcycle Manufacturer to a Top American Carmaker

Joshu Shih
Japanese Civilization
December 6, 2001

Honda. This is a name that, in America, conjures images of high quality.
The benchmark. The best-selling car in America. The highest resale value in its class. These are all statements that have been made with regularity concerning the Honda Accord, a vehicle that is always on the short list of the most popular cars in this country. (“2001 Honda Accord Review”)

    Even as early as 1985, according to J.D. Power & Associates, “Honda owners enjoyed the country’s highest customer-satisfaction rating, edging out even luxurious Mercedes-Benz” (Koepp, 48). Honda, while now sitting comfortably at the top of the U.S. passenger car market, was not always in this successful position. Less than four decades ago, Honda was a small Japanese motorcycle maker seeking to break into the U.S. auto market. The Big Three—General Motors, Ford and Chrysler—dominated U.S. automobile sales. Now, Honda is a model that the Big Three try to emulate in order to increase their own sales. Honda has made great strides in its U.S. passenger car sales, from 274,876 units in 1978 to 882,055 units in 2000 (“American Honda Motor” 29; “United States” 198). This increase translates into a jump in market share from approximately three to ten percent of U.S. passenger car sales in that time period. This discussion will trace the marketing, manufacturing and managerial strategies that Honda Motor Company has used to climb to its position as a leading carmaker in the United States. Two themes have contributed to Honda’s success in the United States: the company has seized on opportunities in the U.S. market and it has also tailored its practices to fit American culture. In another example of the Japanese borrowing a foreign idea and improving upon it, Honda is a benchmark by which other automakers—Japanese and otherwise—are now measured.

    Upon entering the United States, Honda formed the American Honda Motor Company in June 1959 to run its American operations (Shook, 30). After a slow start in the United States market, “Honda built a reputation as a premier maker of small motorcycles” (Ingrassia and White, 326). The company’s U.S. sales did not see a sharp increase, though, until 1963, when Grey Advertising, a large national advertising agency, launched an ad campaign with the following theme: “You Meet the Nicest People on a Honda” (Ingrassia and White, 326; Shook, 34). Until Honda’s ad campaign, motorcycles were synonymous with Hell’s Angels and catered to “black leather jacket” customers (Ingrassia and White, 326; Shook, 34). The result: Honda motorcycle sales topped 100,000 units in 1963, “outselling all domestic and foreign manufacturers combined. By 1964, Honda had captured nearly 50 percent of the entire American motorcycle market” (Shook, 35).

     Honda’s activities at this time were not limited to its advances in the motorcycle market. Honda built its first two automobiles in 1963 and looked to enter the U.S. automobile market. However, Honda faced several obstacles to its entrance: a strong reputation as a motorcycle manufacturer would not help Honda’s venture. While Honda motorcycles were fun products, they were “not a serious purchase as was an automobile” (Shook, 35). Also, unlike having previous motorcycle experience to help guide its expansion in the U.S. motorcycle market, Honda would not be able to apply previous automobile marketing knowledge from Japan. Honda was a relative newcomer to the Japanese auto market, with Toyota and Nissan having taken the optimal retail locations in Japan (Shook, 36). Instead, the company essentially had to start its U.S. auto marketing strategy from scratch.
 Aware of the fact that it would not be able to rely on its motorcycle reputation to sell its cars in the U.S., Honda required that its cars and motorcycles be sold separately (i.e. cars and motorcycles could not be sold at the same dealership). Initially, Honda cars were usually featured in a foreign car department in a Big Three dealership; only in the mid-1970s did Honda carry enough weight as a legitimate carmaker to insist that dealers carry its cars exclusively (Shook, 37).

     After a slow start in the U.S. market, Honda introduced an innovation in its automobiles that established its reputation as a high-quality carmaker in the U.S. In response to strict new U.S. tailpipe emissions standards, Honda developed the Compound Vortex Controlled Combustion (CVCC) engine (Ingrassia and White 327; Shook, 37). This engine—featured in the Civic model—was powerful for its size, fuel efficient, and able to meet the stricter emissions standards without needing a catalytic converter, thus keeping the car’s price low (Shook, 37). Honda Civic sales soared to 10,000 units a month by 1975 (Shook, 38). In 1976, Honda introduced the larger Accord—which Motor Trend magazine awarded its “Import Car of the Year” honor—and the car was so popular that Accords were back-ordered at Honda dealers across the U.S. (Shook 38). Honda had finally established itself as a serious player in the U.S. car market.

     Looking to build on its success with the Accord and Civic in America, Honda embarked on a bold and unprecedented plan to build cars in the United States. No other Japanese automaker had ever done so (Ingrassia and White, 327), and a small company like Honda seemed ill-equipped to battle the Big Three giants in their home territory (Shook, 39). The motivation behind this decision was Honda’s desire to expand, compounded with Toyota’s and Nissan’s dominance of the Japanese market. These two companies comprised nearly half of Japanese car sales, with Honda battling eight other manufacturers for the rest of the market. The United States had only four other automakers, the Big Three and American Motors (Ingrassia and White, 327). All of the American automakers were plagued with efficiency and quality-control problems, and Honda saw with the success of its Civic and Accord that Americans consumers were willing to consider Honda products over American alternatives. Here, Honda saw an opportunity.

     The key questioned that remained was whether American workers—“who were widely portrayed as lazy, oafish, and spoiled”—would be able to produce products of quality equal to Honda’s Japanese workers (Ingrassia and White, 328). For a tentative answer to this question, Honda began by starting motorcycle production in Marysville, Ohio in 1979. Honda chose this location because Marysville was south of the United Auto Workers’ territory but still close to parts suppliers (Ingrassia and White, 328). The motorcycle plant was so successful that within a year, Honda decided to begin automobile assembly in Marysville as well. The auto factory opened in 1982, producing the popular Accord model and making Honda the first Japanese automaker to assemble cars in the United States.

     Honda of America Manufacturing (HAM), led by president Shoichiro Irimajiri, pursued a company philosophy different from that of Honda back in the homeland. Seeking to pattern itself after neither management in the Japanese Honda plants nor that of other American carmakers, HAM implemented a unique set of policies and procedures (Shook, 45). For example, HAM called its first-line managers “production coordinators” and its workers “associates.” The latter term “described how each person would relate to the other members of the organization. It also reflected a feeling of respect for the individual, compared to a title that implied a subordinate role” (Shook, 46).

     An example of differences between American and Japanese production was demonstrated when Marysville quality auditors repeatedly found squeaks and rattles in Accord dashboards. Per Honda policy in Japan, Irimajiri directed that quality data be fed back to the assembly workers, with the assumption that the workers would trace the source of the problems on their own. This strategy failed, however, since the squeaks and rattles continued. After consulting with HAM’s American managers, Irimajiri learned that American workers collaborated by each individual focusing on his or her dedicated task. Keeping this observation in mind, Irimajiri asked HAM associates to place their employee ID number on each dashboard that they installed. The rattles and squeaks ceased shortly thereafter (Shook, 329). Honda was thus able to produce high-quality automobiles successfully by adapting to the needs of its workers and not by forcing Japanese managerial policies to be practiced.

     Other strategies that Honda implemented—mainly in the person of Irimajiri—were discussion groups in which associates would give input for improving various aspects of production (e.g. quality, safety), awards ceremonies for employees who gave successful suggestions, and an employee fitness center adjacent to the factory (Ingrassia and White, 330). Detroit took notice; by late 1985, Big Three executives—as well as those from outside the auto industry—came to Marysville to observe Honda’s operations. HAM achieved another manufacturing marvel when it converted its production line from the 1985 to 1986 model in less than a day, a process that took most Big Three factories two to three months to complete (Ingrassia and White, 330).

     As mentioned before, Honda’s success in manufacturing in the United States can be attributed to its management philosophy, unique to both the Japanese and American auto industries. HAM corporate culture “fosters flexibility and innovation” (Koepp, 49).

    The company operates with an openness that is rare in the world of Japanese business, where consensus and conformity are the rule. To boost communication, Honda has done away with executive lunch rooms and private offices. At Marysville, for example, egalitarianism prevails: all Honda employees, right up to [president Irimajriri] wear white coveralls with their names stitched in red lettering above the right breast pocket. (Koepp, 49)

    In making its associates true team members, Honda increases productivity by seeking input from all levels of the company and not just management. Also, in feeling that their contributions are important, Honda associates feel important and thus have less incentive to be unproductive on the job. Honda adapted to the business environment in which it operated, allowing it to be successful.

     Honda’s position today as a top American carmaker came as the result of three key plans of action. First, Honda exploited a market opportunity. Instead of trying to battle Toyota and Nissan in a saturated Japanese auto market, Honda started production in the United States, knowing that it could produce higher-quality products than its Big Three counterparts. Second, Honda used unique marketing strategies to position itself as a motorcycle manufacturer—and later a car company—that would be appealing to a wide variety of Americans. With its advertising campaign in the 1960s, Honda repositioned motorcycles from the leather-jacket riders to pedestrian consumers. Later, with its automobiles, Honda sold an affordable, environmentally clean and higher-quality alternative to Detroit’s offerings. Finally, Honda introduced a managerial strategy for its United States production facilities that was unique not only to Honda’s Japanese plants but also to American auto plants in general. Honda established an egalitarian corporate culture in which Honda associates were free to contribute input directly to management and shift their responsibilities readily to adapt to the plant’s needs on the fly. After starting as a small Japanese motorcycle manufacturer, Honda is now the envy of carmakers large and small the world over.

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“American Honda Motor Company Incorporated.” Ward’s Automotive Yearbook 1980. Detroit, MI: Ward’s Communications, 1980: 29.

Koepp, Stephen. “Honda in a Hurry.” Time 8 September 1996: 48–49.

Ingrassia, Paul, and Joseph B. White. Comeback. New York: Simon and Schuster, 1994.

Shook, Robert L. Honda: An American Success Story. New York: Prentice Hall Press, 1988.

“United States: Sales by Manufacturer, 1999–2000.” Ward’s World Motor Vehicle Data. Southfield, MI: Ward’s Communications, 2001: 198.