Honda Reaches For US Identity
Recession puts expansion plans in doubt
LIKE an octopus reaching out for its prey, the massive welding fixture envelops the fenders, roof, and quarter panels rolling down the assembly line. In the blink of an eye and a shower of sparks, 100 welds are completed, transforming loose sheet metal into the outer shell of a new Honda Accord station wagon. The wagon itself symbolizes Honda's transition from a Japanese importer into a "self-reliant" American motor company.
Honda's plants in the United States and Canada use more than 70 percent North American-made components. The figure will soon top 75 percent, the point at which the cars would be considered "domestic" under US law. "To do everything they do in Japan here might take [another] 10 years, but we're on our way," says Tom Elliott, American Honda's executive vice president.
In 1984, Honda became the first Japanese automaker to assemble passenger cars in the United States at this plant in the middle of Ohio farm country.
The project proved that American workers could build cars of the same quality - and for roughly the same cost - as their counterparts in Japan. And in the process, that set the stage for the Americanization of Honda.
In 1987, Honda announced the second step, outlining a five-part plan that will eventually allow its American subsidiary to design, engineer, produce, and market cars independently of its Japanese parent.
"As much as possible, we want the products produced for North America to be developed and designed here," says Ben Knight, assistant project leader on the Accord wagon project. Designed at Knight's Torrance, Calif., styling studios, the wagon went into production at Marysville on Nov. 20.
Several other all-American Hondas are either under study or are already committed to production later in the decade.
The wagon was a logical first step, Mr. Elliott says, because it was "a very cost efficient way of adding another model" in a facility already tooled up for the Accord. The Marysville plant now produces the Accord wagon, sedan, and coupe on the same line.
Station wagons appear to be in for something of a comeback. J. D. Power and Associates, a market research firm, predicts station wagon sales could jump from 450,000 this year to 765,000 by 1995. Current plans call for Honda to produce 40,000 to 45,000 Accord wagons a year.
The Accord - currently available in two- and four-door versions - has been the best-selling American car for two years in a row. The addition of the wagon could help the Accord hold the top spot for another year or two.
Exporting from the US
As part of its global strategy, Honda is trying not only to make the US a self-reliant market, but also one that could serve as a product source for other markets.
A critical element in the 1987, five-part plan calls for Honda to eventually export 70,000 vehicles a year to markets in Asia, Europe, and the Middle East.
The Accord coupe - which is produced only in the US - recently became the first passenger car exported from Marysville, going on sale in six countries, including Japan. Honda also expects to export as many as 11,000 Accord wagons overseas each year, split about evenly between Japan and Europe. Honda also exports Gold Wing motorcycles, and automotive components.
As much as Honda has already invested in its US operations, the process will take still more money and manpower. "We need to add more engineers and designers, the human resource," Knight says, "and then match it with facilities, expanded relationships with local suppliers," and similar growth in manufacturing.
In the last year alone, Honda's American work force has grown from 8,800 to 10,000. The plan was to add even more this year.
However, that may not happen because of the current US recession.
In previous downturns, Honda continued posting sales gains even as its US rivals found their sales plunging. Now, however, Honda is facing the same problems as its American competitors, offering rebates of nearly $1,000 a car and having to worry about rising inventories.
Rather than cut back on US production, Honda has further trimmed imports and it is taking the preemptive step of putting more than 2,000 of its American-made Accords in temporary storage until demand improves. Analysts wonder if that will be enough to prevent long-term cutbacks.