Glenn Brooks discovers how a well-timed product launch and strong leadership helped Honda recover from the effects of the 2011 earthquake.
On April 8, 2011, Honda’s president and CEO, Takanobu Ito, addressed the company’s associates (employees), promising that the firm would restart operations at its Saitama and Suzuki plants, meaning all Honda production locations in Japan would be back online from that day.
He was personally aware of the devastation that had been wrought by the earthquake less than a month earlier. “In the Tochigi prefecture, there are many Honda facilities,” he said, “including the Automobile R&D Centre, an office for the purchasing division, a parts plant and Honda Engineering Co. Ltd, which develops production technologies. Shortly after the earthquake, I rode my motorcycle to visit each of these facilities to check the level of damage.”
The company’s purchasing division, despite its head office in Tochigi having sustained damage, nonetheless immediately began checking the situation of all of its suppliers, including second and third-tier vendors, and investigating the impact of the earthquake on the parts supply. Meanwhile, the Automobile R&D Centre immediately set up satellite offices within Honda’s plants while repairs to its base were carried out. By March 28, Honda R&D was functioning once more – an extremely impressive achievement.
“I visited affected suppliers and dealers in Tohoku and saw them working hard day and night to resume their operations under conditions beyond my imagination,” said Ito. “We will devote ourselves to support our suppliers and dealers to resume their stable parts production and services to our customers as soon as possible.”
In the months that followed the March 11 disaster, production of Honda and Acura cars in Japan fell by over 50% but with hindsight, it seems clear that things would have been a lot worse had the company not had such strong, decisive leadership. Its strategy of clear and constant communication with employees, overseas subsidiaries and suppliers worked wonders to restore operations and confidence to its overall business.
Innovations in small car manufacturing
Just six months after the March 2011 disaster, Honda revealed an innovative and highly efficient small car at the Tokyo Motor Show. This boxy rival of the Daihatsu Tanto Exe and Suzuki Palette first reached the company’s Japanese dealers in December 2011. It has since gone on to enjoy huge success in the home market.
Honda got lucky with the timing of the N Box launch, but there is no doubting that it had correctly anticipated the need for a new small car which would appeal to the country’s rapidly aging car-buying demographic. What the company hadn’t envisaged was a programme of car purchase incentives that was rolled out by the Japanese government as a way of trying to stimulate consumer spending and thus national recovery.
Designed to encourage sales of low-emission and highly economical cars, the incentives worked, giving the Honda N Box, as well as the company’s larger Fit, an enormous sales boost. Even though the scheme ended in the third quarter of 2012, by year-end, N Box sales in Japan had reached 211,162 units, while sales of the Fit totalled 209,281. Long used to battling with Nissan for the number two spot in the home market, Honda leapt ahead in 2012, thanks mostly to its small cars.
The contrast with Nissan is especially noteworthy. Having built sub-compact cars in Japan for over half a century, Nissan took the radical step of shifting production of its latest generation March (Micra in some markets) to one of its Thai plants. Thus, one of Nissan’s traditionally biggest selling home market models became an import.
Rather than join its rival in sending low-margin models offshore, Honda instead sought ways to cut the cost of manufacturing at home. It decided to task its engineers with the challenge of creating a bespoke platform for a new generation of advanced Kei-class cars. To ensure that these tiny vehicles made money, the new architecture would have to feature innovative construction methods that also had the benefit of requiring fewer parts.
Affordable and highly practical, the N Box was the first car to be launched on the so-called ‘N Concept’ mini-vehicle platform. The N Box +, launched in 2012, was the second model in the series, while the N One, a retro-styled car which harks back to the Honda N360 from the 1960s, is the most recent variant, launched in November 2012.
Honda used lessons learned from two generations of its Fit/Jazz models when designing the platform for the N Concept vehicles. Both architectures feature the same principle of minimal weight, long wheelbase and a fuel tank mounted almost in the centre of the vehicle. The appeal of a roomy car with a long, low floor are obvious, so the company knew it had a winning design. But still there was the all-important need to lower the cost of manufacturing the new model series at a time when the yen was becoming ever stronger.
Having carefully examined every step of the manufacturing process, Honda’s engineers finally found their breakthrough idea. Conventional welding methods were reviewed and an inner frame was adopted for the first time in Japan. This resulted in a reduction in the number of parts and significantly increased binding rate.
This and other advanced production technologies, such as the world's first tailored blank and hot stamping of moulded trim, help to increase the tensile strength and reduced the weight by approximately 10% as rated by Honda, using the previous Kei architecture as the bench mark.
Each vehicle in the N Concept range is powered by a naturally aspirated or turbocharged 660cc engine. So as to comply with the regulations that govern Kei-class minicars, the output of the sportiest versions is restricted to 63hp. All cars are manufactured at the Suzuka plant (pictured previous page) in Mie prefecture.
Small cars, big profits
The majority of Honda’s car sales might still be in the US but the rise of China, the return of Japan as a growth market, plus the end of financial and flooding-related production losses in Thailand mean that profits at the parent company are now stronger than ever.
Consolidated operating income for the fiscal third quarter ending December 31, 2012 amounted to ¥131.9 billion ($1.4bn), which represents a tripling of the total from the same period in 2011, and an increase of 197.8%. The total for the first nine months of the fiscal year ending March 31, 2013, amounted to ¥408.8 billion, a rise of 242.4% compared to the same period last year.
As well as reporting such strong numbers in late January, Honda has now raised its sales target for the home market in fiscal 2013-2014 to 850,000 vehicles – a 14% year-on-year rise. Sales in Japan are expected to be up 22% in the year ending March 2014, boosted by increased demand for N Concept series mini-vehicles. The company is predicted to sell 350,000 units in the first six months and 500,000 units in the second half of 2014.
