Honda chief Takeo Fukui spoke to John Reed and Bernard Simon about the firm's future - and its philosophy
At first glance Takeo Fukui cuts the kind of reassuringly grey figure one would expect of the head of a world-beating Japanese carmaker. In a small meeting room away from the shiny tumult of the Detroit auto show, Honda's president and chief executive stays on-message about his company's conscientious focus on customers and commitment to innovation in engineering.
But when the talk turns to motor sports, his face lights up with visible passion. "Racing is something you cannot win unless you go through a period of sleeplessness and desperation and develop new technology in a very short period of time," he says via an interpreter.
When seeking to build a winning car, even the experience of failure, he says, is "critical". A former head of Honda's racing division who was seen behind the wheel of a Formula One car as recently as 2005, Mr Fukui is what American industry executives call a "car guy".
In the 1970s he was a member of the team that developed Honda's groundbreaking compound vortex-controlled combustion (CVCC) car engine, the first to comply with the US's Clean Air Act. As head of research and development in the 1990s, he helped shepherd Honda's soon-to-be-launched small jet into development.
The 62-year-old boss also sits, literally, at the centre of Honda's Tokyo headquarters. His office is on the 10th of its 16 floors, to which he usually climbs without using the lift. The senior executives who report directly to him are arrayed at eight desks around his, facing outwards but able to swivel inwards if they need to discuss something.
The seating arrangements suit the motorcycle manufacturer-turned-global carmaker, second in Japan only to Toyota, as it seeks to grow without succumbing to "big-company disease", as one Honda employee puts it. Honda also takes pride in the speed of its decision-making. Engineers are assigned to its Formula One racing division to encourage them to think on their feet. That carries down to the manufacturing floor, where Honda's corporate philosophy urges managers "to go to the spot". This, says Honda's boss, means in spite of "having become such a big company, to listen and accept what the floor guys say".
As a company grows, he says, the tendency is to summon managers to the executive suite, which can slow things down. "Instead, we who make the decisions go directly to their spot on the floor and listen to them."
The point is critical for Honda. With a market capitalisation of some $69bn (€53.3bn), it needs to avoid the pitfalls of success. Last year, for example, Honda struggled to ship enough vehicles to dealers in the US when rising fuel prices drove a surge in demand for fuel-efficient cars.
Toyota, Honda's bigger rival, has struggled with record recall rates in its rush to roll out new models to meet demand. Honda's boss does not speak directly about his competitors, but when asked how he feels about being Japan's second-biggest carmaker, he says: "We want to be number one, but not in terms of value - we want to be number one from the customer standpoint."
That means keeping an eye on Honda's far-flung operations, which include manufacturing facilities in the US, Japan, China, Europe and Brazil, where Mr Fukui regularly makes the rounds. He has also been known to answer e-mails from middle managers himself. "We have that kind of culture at Honda," he says. "It's not a given in Japan."
One thing that does put Mr Fukui more in the typical Japanese corporate mould is his long tenure at Honda, where he served time in most of the main functions.
When he became president and chief executive in July 2003, he was already a 34-year Honda veteran. His first managerial job was at Honda Racing Corporation, where he brought the company back to motorcycle racing after a long hiatus. As well as helping to develop the CVCC engine in the 1970s - key to launching the then-fledgling Honda to success - over the years he has worked in development and manufacturing of motorcycles, still a core Honda product.
He served a four-year stint in the US, where he helped trim costs at the Marysville, Ohio, operation in the wake of the Asian financial crisis. His claim to partial parentage of the HondaJet comes from a stint as head of R&D, where he played a key role in pushing the jet into development.
Since the jets went on sale in October, Honda says it has already sold more than 100 at a price of $3.7million (€2.86 million) apiece, mostly to individual customers in the US, where it will begin flying in 2010.
Like Toyota, Honda claims hybrid and other fuel-efficient technologies as a core competency.
Even as Toyota steps up marketing for its Prius hybrid in North America, Honda is promoting its Civic hybrid as "a great opportunity for growth", says Mr Fukui.
The hybrid accounted for about 10 per cent of Honda's 300,000-plus Civic sales in the US last year, and the company plans to launch a smaller hybrid in 2009. In two to three years, it also aims to launch diesel engines in the US, where, it hopes, tightening emissions rules will lure more drivers. "If we can get American customers to test-drive, I am sure it will go down well."
On the other hand, Honda's luxury Acura brand in Detroit unveiled a low-slung 10-cylinder concept sportscar, hardly the greenest of vehicles. Furthermore, the HondaJet, which carries only four to five passengers, arguably contributes to the environmental pollution the company publicly deplores.
When pressed on this point, Honda's chief looks momentarily uncomfortable. "Personal mobility will grow globally as human beings develop," he says, so "personal jets are destined to grow too." If somebody is to build them, he implies, it should be Honda, which introduced Americans to clean cars. "We have to do something about it - that is what Honda desires."
Amid intensifying competition, Honda has faced pressure to pump up incentives, which increase sales but erode profits and hurt models' resale values. Honda has had to offer some incentives but, claims Mr Fukui, they are "the least" in the industry.
"We're not really envisioning increasing the volume of sales in a short-circuited way," he says. "Mid-range, steady growth is preferable to a short-term surge in sales."
Financial Times Service