Recognizing the Ongoing Changes in the World: Takeo Fukui
Assumes the Role as the Sixth President of Honda

As Honda continued to advance, world affairs and the global economy were undergoing drastic changes.
On September 11, 2001, the coordinated terrorist attacks that occurred in the U.S. shook the world. In particular, the widespread destruction wrought upon the World Trade Center and its surrounding area had a tremendous impact on world markets, not to mention the economy of the City of New York. The terrorist attacks triggered the U.S. invasion of Afghanistan the following month, and in March 2003, the U.S.-led coalition of the willing intervened militarily in Iraq to overthrow the Hussein regime, which started the protracted Iraq War.
In Europe, physical coins and banknotes of the euro, the single currency of the European Union (EU), entered into circulation in January 2002.
Furthermore, the rise of emerging countries around the world, represented by the BRICs nations (Brazil, Russia, India and China), especially the remarkable growth of China, had become one of the factors Honda couldn’t overlook when considering its global strategy for the future.
The global networking system established based on the concept of “Made by Global Honda,” which Yoshino pushed through, proved that Honda had great foresight in responding to an increasingly uncertain situation of the global economy.
Although the Japanese economy remained stagnant, and automobile sales in Japan continued to suffer, Honda set an all-time fiscal record at the time for consolidated operating profit for the FY2003 (fiscal year ended March 31, 2003) due primarily to the solid performance of its North American business and the strong recovery of European business.
On April 22, 2003, three days before the announcement of this fiscal year financial results, Honda announced that Senior Managing Director Takeo Fukui would become the sixth president of Honda.
At the press conference, Yoshino explained the reason for stepping down: “The establishment of the Global Honda structure is now on track. As I have reached the five-year milestone as president, I decided to hand over the presidency at this time.”
Fukui expressed his aspirations as the new president: “My intention is to focus on the utilization of the global network of Honda operations including the ones in North America, China and Asia; commit to commit to the content and quality of our operations as a company; further advance our technologies in various areas; and increase the product quality and motivation of all associates.” Then, he concluded his remarks by saying, “Of course, we will strive to perform well in racing activities.”
In June 2003, Fukui was officially appointed as the new president of Honda.

Takeo Fukui, the sixth president of Honda, at the 2005 Frankfurt Motor Show

Going Back to Basics of Manufacturing:
Thoroughly Strengthen the Core Elements that Make Honda
Unique and Accelerating the Initiatives to Achieve
a New Level of Outstanding Quality

Immediately after assuming the role of president, Fukui set his sights on “strengthening the core elements that make Honda unique” with a focus on further strengthening technology, quality and motivation.
His focus on technology was not merely on engineering capability, but also skills in all areas, including development, production and sales. The quality was also not merely about product quality, but the overall quality of all works and operations of Honda. As for motivation, Fukui defined it as the passion of all Honda associates to pursue their respective assignments with a sense of pride. By further strengthening these three key elements of its business, Honda would offer excitement and joy beyond customer expectations. This was the essence of what Fukui expressed in his inaugural press conference.
At every opportunity, Fukui conveyed his message to associates:
“We must go back to basics of manufacturing and thoroughly implement our initiatives to strengthen the core elements that make Honda unique as a manufacturer”
“Ever since I became president, I have repeatedly emphasized the importance of strengthening the core elements that make Honda unique. However, that and the creation of advanced technologies and products are something Honda has been doing since its founding period.”
Additionally, Fukui clearly stated that “quality is the lifeblood of Honda,” and as a part of an effort to strengthen quality, he further accelerated the ongoing initiative to achieve “a new level of outstanding quality,” that Yoshino had laid out in the 8th Mid-Term Plan.
By the time Fukui became the president of Honda in 2003, a major labor shortage that would occur in a few years in Japan was already an issue of concern. It was called “the year 2007 problem,” referring to the labor shortage which would start in 2007 when the large number of baby boomers would begin to retire. In Japan, the first baby boom occurred between 1947 and 1949. The year 2007 was when those who were born in 1947, the year Japan marked the highest post-war birth rate, would reach age 60 and retire.
For manufacturing companies including Honda, the most pressing challenge was how to pass on the advanced technological skills and know-how of experienced workers who had been supporting production operations, which were the core element that make each company unique. In order to address “the year 2007 problem,” it was essential for Honda to systematize the operations to achieve “a new level of outstanding quality,” which encompassed the know-how of experienced associates. It was time for the baby boomers who supported Japan’s high economic growth after the war to hand over the leading role to the next generation. In the face of major changes in Japan’s overall labor environment, Fukui believed that it was the perfect time for Honda to achieve a new level of outstanding quality, which included the quality of products as well as the quality of Honda as a whole company. More than anything, the ultimate goal of the Honda initiative to achieve a new level of outstanding quality was to pursue the joys of its customers. Fukui saw this time of change as an excellent opportunity for Honda to truly embody the original desire that became the starting point of the company.
In this initiative, Honda aimed to assure the quality of automobile products by utilizing the database of design and production know-how Honda had amassed over many years and by creating drawings that take into account possible human errors and the ease of manufacturing. Then, production control items and standards to be followed for each of the parts, processes and tasks would be set to carry out initial and mass production while minimizing any variation in quality. After sales, Honda dealers would handle the defects or quality issues involving the vehicles in the market, then, the quality assurance division of Honda would collect and analyze quality-related information obtained from customers to further improve and enhance the quality of current and future Honda products. Honda strived to install such a quality assurance flow, called Honda Quality Cycle, that would encompass the know-how and skills of experienced associate.
In 2009, before he stepped down as president, Fukui looked back and said, “We may not be able to say that we’ve completed everything to achieve a new level of outstanding quality just yet. However, the completion is well within reach. The customer complaint rate for 2008 and newer models has noticeably improved, which has been contributing significantly to our earnings for this fiscal year.”

Honda Quality Cycle

Advancing the Global Operations to the Six-region Structure
in Anticipation of Changes in Global Economic Trends

It was in 1994 when the fourth president of Honda, Nobuhiko Kawamoto, announced the establishment of a four-region global operation structure consisting of Japan, the Americas, Europe, and Asia/Oceania regions. In the years since then, the global dynamics had changed at a tremendous pace. The rise of the BRICs countries, especially China, had been exceptional. Against such a backdrop, in 2005, Honda transitioned from the four-region structure to a six-region structure, consisting of Japan, North America, South America, Europe, Asia/Oceania, and China.
Furthermore, in April 2005, the company established the Global Honda Quality Standard (G-HQS) in order to pursue the initiative to achieve “a new level of outstanding quality on a global basis and to continue to ensure “120% product quality” at each Honda operation around the world.
The G-HQS was set based on the ISO 9001 (international standards for Quality Management System, QMS) and the ISO/TS 16949 (currently, IATF 16949:2016, international standards for QMS technical specification for automotive industry) while also incorporating the original know-how Honda had amassed at each of its operations for producing excellent products and building a system to prevent reoccurrence of defects.
To ensure the joy of the customer, Honda is constantly pursuing the advancement of quality, which had been and will be the lifeblood of Honda.

When a difficult case involving a market quality defect occurs, the Quality Innovation Center Tochigi (for automobiles) investigates and analyzes the case upon the request of respective regional operations.

Strengthening Automobile Sales in Japan by
Consolidating Sales Channels into one “Honda Cars”

For a long time, Honda had the three-channel sales network for automobile sales in Japan, consisting of Verno, Clio and Primo dealership channels. First, the Verno channel was established in 1978 to sell the Prelude and other sporty models. The Clio channel was launched in 1984 to focus on the sales of luxury models such as Accord. Finally, the Primo channel was launched in 1985 to sell popular models such as Civic. Honda differentiated its diverse products in the lineup through these three channels with distinctly different characteristics tailored to the different needs of customers, and emphasized its ability to offer sales and service while being more attentive to each customer segment.
However, as automobile sales in Japan continued to struggle, Honda undertook the transformation of its sales network. In March 2006, Honda consolidated the three channels and launched “Honda Cars,” which would sell and service all Honda brand models.
The three-channel system was originally designed to improve sales efficiency, especially from the perspective of customers. However, by this time, some models were being sold concurrently through all three channels, and it was getting difficult for customers to clearly differentiate between the three channels. Moreover, from the perspective of “strengthening the core elements that make Honda unique,” which Fukui had called for, Honda decided to consolidate the three channels into one Honda Cars network throughout Japan. The purpose of this consolidation was to fully utilize existing dealership locations and human resources to offer value beyond the expectation of customers and establish an advanced and trusted dealership network that customers can relate to. Prior to this sales channel consolidation, as a part of its branding initiatives, Honda modified the design of Honda logo, which represents the entire company, as well as product marks such as the Wing mark for motorcycles and the H mark for automobiles and established new Visual Identity (VI) guidelines.
At the same time, based on the observation that demand for luxury brands was increasing in the Japanese automobile market, Honda made plans to introduce Acura, the luxury and performance automobile brand it offers exclusively for the North American market, in Japan. Since the introduction in the U.S. and Canada in 1986, the Acura brand had been well received and well established in those local markets; therefore, Honda expected that the addition of the Acura brand luxury models combined with the launch of the Honda Cars network would further increase the overall appeal of the Honda brand.

Making Painful yet Bold Decisions to Survive a Major Blow to
the Global Financial Economy Trigged by the Lehman Shock

Going back a little in history, near the end of the 20th century, Honda faced the worst crisis the company had ever faced since its founding, which coincided with the turmoil caused by the bursting of the economic bubble in Japan. Then President Kawamoto took on the challenge with a “life-saving” major reform, and set a foothold for Honda to leap forward to a new stage. As the 21st century dawned, Honda was put into the midst of turbulent waves of the global restructuring of the automobile industry through strategic alliances and consolidations. Then President Yoshino led the company in the right direction with the policy to maintain “Spirited Independence.”
Fukui took over the management of the company at a time when the business environment and practice were drastically changing with the times. Fukui led the company with a goal to achieve a further leap forward by returning to the basics of manufacturing, which Honda had always valued since its founding, and strengthening the core elements that make Honda unique as a manufacturer. At the time, the North American economy was going strong and the Asian market was also expanding, and Honda was conducting motorcycle, automobile and power products business globally.
However, in September 2008, Lehman Brothers, the fourth largest investment bank in the U.S. at the time, declared bankruptcy and triggered a global financial crisis. (It was often referred as the “Lehman Shock” in Japan.) An unprecedented global economic and financial crisis had suddenly arrived. Lehman Brothers had been securitizing and selling subprime loans, or mortgage loans for borrowers with low credit ratings. When the housing bubble burst in the U.S., Lehman Brothers became saddled with debt of approximately $613 billion (64 trillion yen), resulting in the largest corporate bankruptcy filing in U.S. history.
Looking back at the time, Fukui analyzed the situation and said, “We had faced tough times before, such as the decline in business performance in the 1990s and the vehicle quality issues around the time I joined Honda. However, this crisis [the global financial crisis] had affected the entire industry, and the world economy has fallen into an unprecedentedly difficult situation. That was the big difference.”
Faced with this critical situation, Fukui worked together with Takanobu Ito, who Fukui had unofficially named as the next president, to speedily embark on a series of painful reforms.
First, Fukui made the difficult decision to again withdraw from F1 racing; something that he deeply loved. In fact, Fukui was famous for his love of F1 as he often told the people around him that the reason he joined Honda was because of Soichiro Honda and that Honda was competing in F1.

Takeo Fukui driving B・A・R Honda 005 at the 2004 Honda Meeting

However, when faced with such a time-sensitive crisis situation that could shake the foundations of the company, Fukui prioritized sound business operations above all else. He explained, “I decided to withdraw from F1, which had been a part of Honda corporate culture, because I thought I had to take on the pain of reform myself.”
Fukui also reassessed the company’s investment plans, which delayed the start of operations of the Yorii Plant and the R&D Center in Sakura, and made a decision to cancel the development of the successor model to the NSX supercar which had been proposed by Ito and the introduction of the Acura brand in Japan. In addition, Fukui implemented a series of measures in a short period of time, which included reduction of executive compensation and annual salaries.
Fukui made a number of bold decisions which were necessary to maintain the “Spirited Independence” and healthy corporate structure of Honda to ensure the joys for the next generation.
As Mr. Takeo Fujisawa, cofounder of Honda, was concerned about the “law of perpetual change” even from the founding period of Honda, the stormy waves of the times continually battered Honda, and successive generations of Honda leaders repeatedly transformed the company to resist and enable Honda to rise above such perpetual changes. As Fukui was preparing to hand over the role of president to Ito, Honda was about to begin structural reforms on a scale the company had never experienced before.