Mises Daily Articles
Hubba Hubba Honda Honda
That title is from a Car and Driver article of the mid-1980s, about the results of the editors' putting two engines into a little Honda CRX. The Hubbas are even more fitting today, as Honda keeps building the best cars in the world, forcing other automakers to work hard to keep up. Some are having more success than others. How does Honda do it?
In Honda's case, as with any corporation, much of what the consumer sees comes from the top. Soichiro Honda, the founder, was a daring, hard-headed, friendly entrepreneur and engineer. He thwarted the good-ol'-boy Japanese business environment of the mid-20th century by working around government discouragement and restrictions, ignoring social and business pressure, and making his little machines. He began by manufacturing piston rings, moved to motorcycle engines, then motorcycles, and then he took on the auto industry.
Since he wasn't one of the good ol' boy corporations, he had to accept less promising college and trade school graduates as employees. Soichiro attended engineering school, but didn't bother taking tests or attending classes he didn't want; he was already too busy attending to his new business. He told his new employees he had faith in them, and if they didn't like the way he did business, they could leave. This was exceptional—traditionally, Japanese employers viewed new hires as lifetime vassals.
Soichiro put customers first, and he adapted quickly to customer input. He introduced his motorcycles to the American market in 1959. The bikes quickly developed a reputation for unreliability—they couldn't handle the hard paces through which Americans put them. So Mr. Honda immediately improved his engines, and by 1963 Honda was the best-selling motorcycle in the US. In 1960 he decided to build cars, and within 5 years of that decision a Honda won the Mexican Grand Prix.
The company continues to damn the torpedoes. When the American government went (more) protectionist against Japanese imports in the 1980s, Honda, along with other foreign manufacturers, built plants in the US. Today, a Honda Accord's "domestic content" for us is 97%, which makes the Accord less of an import than the Ford F-150.
The Marysville, Ohio plant that builds Accords is worth mentioning. Considered the most efficient auto plant in the world, it is where the Honda people bring young Japanese managers to show them how a plant should work. (Note that the Marysville workers decided to go nonunion when the plant opened.) Today, the Japanese continue to outstrip American automakers in auto quality, performance, and manufacturing efficiency.
The big three American automakers habitually beg the government for protection, and the Japanese just put on softer gloves and keep beating us up. Are Japanese government subsidies a competitive advantage? The Americans get subsidies, too. As to whether the Japanese restrict American cars entering Japan: Heck, suppose the Japanese allowed no American cars at all on their shores. Should that make us build inferior vehicles?
Here's part of the answer: An American, Edwards Deming, developed approaches to measuring and improving quality and efficiency in manufacturing in the 1950s. Deming was ignored by American manufacturers at the time, but the Japanese embraced him and his ideas, and later named their national manufacturing prize for him. From following Deming's advice, Japanese cars are the best in the world for the money (my high-strung S2000, street legal but built to be raced in amateur meets, needs its first full tune-up at 105,000 miles).
Many Japanese cars are now better than even German cars. Just as one example, the rear-drive Infiniti G35 is a four-door sedan that competes directly with the BMW 5 series in interior space, amenities, and performance. The G35 can be had fully equipped for about $33,000, the engine is good for 260 hp and 260 lb-ft of torque, and the interior is the same size as the BMW's. The BMW 530i develops 225 hp and 214 lb-ft while it weighs 100 pounds more than the Infiniti, and the BMW starts at $8,000 more.
I would assume everything Honda manufactures (ATVs, engines for riding lawn mowers, generators, motorcycles, outboard motors, personal watercraft, pumps, scooters, and snow blowers) lives up to the same quality, reliability, affordability, and style standards as their cars. Honda continues its record of successful adaptation to external constraints and demands by leading the industry in developing government-mandated alternative fuel vehicles. Their Insight hatchback is the only consumer gas/electric hybrid vehicle you've probably already seen on the street (the one with the rear-wheel skirts).
Americans invented many of the biggest ideas—Henry Ford made automobiles affordable; Deming showed the way to continuing quality and efficiency improvements; our marketers probably did much more than the Japanese to develop the customer responsiveness the Japanese have mastered; and we invented SUVs, pickups, and minivans. Engineering isn't the only issue, either: Style matters to car buyers, so some of the more expensive Japanese brands have hired American designers in California to make their cars look so good inside and out.
We invent great ideas, and the Japanese—Honda in particular—adopt them and put them to work. We should have the advantage in the auto industry, but our automakers want profits without sweat. Hey, it's easier to get the government to hurt the competition. One example: In the 1980s, we passed a $2000 tariff on Japanese minivans. Our automakers immediately raised our prices by $2000. It's too bad for us that our corporations would rather stiff us than learn from their own great ideas. Until they change their habits, get yourself a Honda.