If You’re Not the No.1 in the World,
You Can’t Be No.1 in Japan / 1952
"Rather than use money, use your wisdom."
This was a favorite saying of Mr. Honda to his engineers, but there was one big problem he couldn’t solve no matter how hard he thought about it–machine tools. To improve the specification of components, you need high-precision machine tools. Even though the company was performing marvelously, the Dream E-Type was a big hit and sales of the Cub F-Type were positively explosive, Mr. Honda was still totally dissatisfied with the level of precision of his components. Although he wanted to be number one in the world, he realized more than anyone else that he would never be able to make a breakthrough using his existing machine tools. In June 1952, Honda carried out its second capital increase bringing the company’s capitalization to 6 million yen and Fujisawa became senior managing director. In October of the same year, the company decided on a program to invest as much as 450 million yen in the latest imported machine tools.
Having decided to import 450 million yen worth of machine tools, Honda left for America in November 1952 from Haneda Airport.
The October 1952 issue of Honda Monthly carried an article by Mr. Honda entitled "Taking a global perspective." The article gave more passionate expression than usual to the main tenets of his long-held beliefs.
"I have always said that all my efforts are devoted to my wish to satisfy my customers by manufacturing good-quality products at low prices. However, I do not think we have yet completely succeeded in achieving this aim in terms of capacity, design, or price. In September we produced more than 1,000 ‘Dreams’ and production of the ‘Cub’ broke through the 5,000 barrier, but although we are now the top makers in Japan, I feel an unbearable sense of shame when I look at our present level of performance from a global perspective. As I remarked in my New Year greeting, my goal is to manufacture products which exceed international standards. I am well aware that there is still a huge gap between our products and those of advanced countries like Britain and the U.S.A. In order to realize our creativity and inventiveness, we need the very best machinery. There is an old saying that ‘A bad workman blames his tools’. I have taken a major decision to purchase the world’s best machine tools. The order has already been placed and we are now dealing with the import license formalities. The investment will come to 300 million yen. I simply cannot go along with the idea that in order to protect our jobs we should set limits on the import of foreign cars. Technological competition should be conducted by technological means. No matter what barriers we put in their way, quality products will always find a way in. Good products know no national boundaries. ‘The best in Japan’ means nothing when you are only comparing yourself with the rest of Japan. The moment a better foreign product is imported, that kind of ‘Number One in Japan’ is toppled. Being ‘Number One in Japan’ is but a stage on the way to being ‘Number One in the world.’"
Looking at these words half a century later with the benefit of hindsight, it is surprising and yet understandable that a corporation with a capitalization of only 6 million yen should have wanted to import machine tools on such a massive scale. But seen from a contemporary perspective it must have looked like an overreaching, reckless adventure. Nevertheless, although we can still sense the passion of Honda’s words, they really reflect a technician’s cool, logical mind. They are an expression of freedom, autonomy and independence of thought. Although Honda belonged to what was called "the war generation," he was an example of a hitherto unknown, new kind of Japanese who looked at things from a global perspective.
"I heard the word ‘world’ from Mr. Honda very early on," says Shirai. "Soon after I joined the company in summer 1950, he was talking about die-casting. ‘The Ministry of International Trade and Industry is talking about giving us a grant of 400,000 yen if we can demonstrate the advantages of die-casting aluminum components instead of casting them in sand molds. Hurry up and write a report!’ I was suddenly told. I immediately made a comparison of difference in cost and quality between the two methods and demonstrated that die-casting was the superior technique for mass-production, but Honda’s level of output was not enough to benefit from it. We were making 100 units a month, or at most 200. Die-casting offered no cost advantages unless you were making at least 1,000 units and preferably 10,000. I was in a real fix, but I had to report to Mr. Honda ‘No matter how you work the figures, sand-casting is better for us than die-casting. I can’t write that die-casting is better.’
"Maybe it was because Shirai had worked out his figures in such detail, but Mr. Honda did not show any signs of anger when he saw Shirai’s reply. Instead he explained very patiently: ‘What you say is true under the present circumstances. It is quicker and cheaper for the workers to sand-cast the components. But Japan’s future depends on industrialization. If we have to trade with the rest of the world, the most important things will be mass-production and consistency of quality. That’s why we have always used die-casting even though we know it is inconvenient. Make sure that your report emphasizes this point.’ To be quite frank, I was flabbergasted to hear this from the boss of a small factory. He really meant it when he talked about ‘trading with the rest of the world,’ something even presidents of big corporations did not mention. Although I was amazed, I realized that he was no mere workman turned engineer. The scale of his thinking was quite different. So I wrote the report the way he wanted it."
The grant was approved without any difficulty.
"‘If you’re not Number One in the world you can’t be the Number One in Japan!’ It was March 1952 when Honda left us speechless with this topsy-turvy piece of logic," said Shiozaki. "It was in that month that he purchased an old plant in Shirako and brought me over from Hamamatsu to help with the construction work needed to complete a major renovation of the facility. During the war it had manufactured aircraft parts and there were still hundreds of old machines left there. When I asked if we were going to use them, he replied ‘If we use that kind of stuff, we can’t make anything decent. Sell it all off!’ I heard him say that in one of the speeches he made in those days, when he would gather us employees together and address us standing on an old apple – or orange - box."
"The Old Man was great at talking to people. When he got older, he was very good at making formal speeches as well, but in those days his thoughts would run ahead of his words and he would jump from one point to another. Sometime we couldn’t understand what he was talking about," Shiozaki said, laughing. "His face would go completely red, his eyes would sparkle and the spit would fly but he made a great impression. Maybe it was because he thought that he wasn’t getting his message across this way, but about this time the Old Man started recording his pep-talks at home on one of the tape recorders that were coming out for the first time. At morning assemblies, he presented an extraordinary sight as he set the tape machine going and stood next to it saying nothing. Around that time some experienced engineers from the same generation as the Old Man had joined the company and although they were serious guys they were completely bewildered. From a common sense point of view it sounded a bit strange to say that in order to be the Number One in Japan you had to be the Number One in the world. And as for us younger men, we were all the more confused because the Old Man would never explain things as he went along. (Laughs) But when I saw the Honda Monthly I thought ‘Ah! That’s what he meant.’ I’m not sure who’d written the piece (it wasn’t the Old Man) but it struck me that he had listened very carefully. Mr. Honda’s Hamamatsu dialect was carefully translated into standard Japanese so that the points he was making came through very clearly," laughs Sadao Shiozaki.
Later on Shiozaki was one of the first people involved in another project which was carried out in defiance of conventional Japanese thinking – the construction, along with the Suzuka Factory, of the Suzuka Circuit, Japan’s first international racetrack. "Because I’d become completely absorbed in Honda’s ‘global’ way thinking, I wasn’t surprised at all," he laughs.
The Dream E-Type became the top-selling Japanese motorcycle but no matter how you looked at it, it didn’t come up to international standards. Just as Honda had said, its performance was "truly shameful" by comparison with overseas brands.
Around this time the import of European and American motorcycles was resumed on a small scale and the difference between their bikes and Honda’s could be clearly seen on Japan’s roads. When people riding Japanese bikes – including Hondas – were pitted against foreign bikes, they always came off second best. It had seemed such a big deal when the Dream E-Type had made it over the Hakone Pass but that wasn’t even a challenge for British and German bikes.
Kiyoshi Kawashima, who was in charge of the Engineering Design Section at that time, describes the decision to import machine tools:
"The Korean War had started two years earlier. Japan, which still hadn’t recovered from the Second World War, suddenly experienced a demand-led recovery. The American army started placing big orders for all sorts of things, from trucks to wire netting and oil drums, and of course automobile parts as well. There was a rapid turn-around in the performance of companies making that kind of thing. But Honda took no part in fulfilling those orders. It was just when we had brought out the A-Type engine and we had no machines for making parts or anything else.
"To put it bluntly, the Honda plant was not a production facility but an assembly facility. Nearly all our parts were purchased from component manufacturers and we just put them together to make motorcycles. The company itself couldn’t even fabricate a single cogwheel. All we had was an assembly line and a paint shop. Even welding was brought in from outside.
"The only things that could be made in-house, with a lot of difficulty, were engine parts like camshafts, crankshafts and cylinders, but they made up less than 20% of the components.
"It was at this point that Mr. Honda and Mr. Fujisawa made a decision that demonstrated their great managerial foresight," continued Kawashima. "The period of deflationary recession was over. The E-Type was selling and the company had gotten over a temporary crisis but there was no prospect of significant growth if things went on as they were. And if it went on buying components manufactured using old, pre-war machinery, Honda would never become a world-class company. So the two of them decided to purchase the most advanced machine tools that money could buy and turn Honda into a company with its own manufacturing facility. They put in an application for 450 million yen worth of foreign currency."
It was just then that Korean War-related demand had created booms in the textile and metallurgical industries and the country’s foreign currency reserves had risen sharply. So it was the perfect moment to ask for permission and as it turned out it was quite easy to get authorization from the Ministry of International Trade and Industry and the Ministry of Finance. If they had made their decision a year later, this project would probably never have gotten off the ground.
In November, Honda went to the United States for the first time to see American industry first hand and buy machine tools. He also went on site visits to view American automobile mass-production facilities which he had previously only heard about. He studied every aspect carefully, from the assembly line system to the general working environment. Speaking through an interpreter, he enthusiastically quizzed the machine-tool makers. There still remain a lot of the machine-tool catalogues he collected at that time.
The story goes that whenever Honda said he would buy someone’s machine tools they were very happy and kept saying, "Sekihan, sekihan." He thought that they were referring to sekihan, the mixture of red beans and rice that is eaten on festive occasions, but actually they meant "shake hands."
When Honda returned to Japan the company carried out a third capital increase, increasing its capitalization to 15 million yen.
At the same time, Kiyoshi Kawashima went to Europe. His mission was to purchase machine tools and get advice on what to use with them and how to make it. He spent two months going round Germany and Switzerland.
"I was told to go and take a look at things in Europe, but whenever I went to see a manufacturer they would look at me in amazement," he said. "Because this was such a big potential purchase, they assumed that someone much older than me would come, but all they got was one young man in his twenties. And I could hardly speak any German, and no English at all. They had no idea what Honda was – the name meant nothing to them. Even though we were going to do business through a trading company, so that there would be no risk of their losing money, they were probably wondering how they could entrust everything to this youngster from a company they knew nothing about."
Eventually Kawashima successfully accomplished this important mission and returned exhausted from the rigors of living in unfamiliar foreign countries.
"We designers always like to see good machine tools – they encourage us in our design work. The Old Man must have gotten excited about them as well. He was just like a boy being taken to a toyshop and told he could buy what he liked. And he would buy whatever he could get his hands on," said Kawashima, laughing. "He just loved the idea of a little Japanese bike manufacturer like Honda having a chance to get its hands on gear-cutters made by the Swiss company Maag or the American Lees-Bradner to make the big companies really jealous and use them to produce little motorcycles. But thanks to his bold decision to make what seemed at the time like a totally disproportionate investment, we managed to make better products and in the end we were able to switch to manufacturing automobiles."
The original plan was to invest about 300 million yen in imported machine tools, but this rose to 450 million yen.
The production department, too, had already made the bold decision to construct a manufacturing facility with the capacity for mass-production. In March they bought an old factory in Shirako, Yamato-machi, Saitama Prefecture, and while it was still being renovated they carried out the move of machine tools from the Yamashita Plant in Hamamatsu, so that the new plant started production only two months later, in May. The imported machine tools had still not arrived but they sought and installed the best second-hand machines they could find. Immediately, their production capacity rose.
The number of employees also started to increase rapidly. When the company was founded, the employees numbered only 34, and in February 1952 the total was still only 214. But the following February, it had grown to 1,337. Honda’s production and sales grew so fast that it was soon the largest manufacturer of two-wheeled vehicles in Japan.
In response to the wishes of the labor union which was formed in that year, white work overalls were adopted in May 1952, just after the Shirako Plant started production.
"White overalls were the president’s idea. ‘If you haven’t got a good environment, you don’t have an appetite for work. Good products can’t be made in a dirty plant. That’s why I think it would be good to have white overalls. Dirt shows on white, so we have to make our plant as clean as possible so that the white overalls won’t get dirty,’ he said. He also had both the interior of the plant and the machines painted in two tones of green and installed flush toilets with white tiles. As the atmosphere in the plant changed, so did our mood, and as a matter of course we started to take more trouble about looking after the machines and noticing things like oil stains. At that time workers in other factories always used to wear their own overalls, but our overalls were loaned by the company and everyone, both president and employees, wore the same uniform. All these details concerning the working environment and the overalls were thought up by Mr. Honda out of consideration for the feelings of the people who were working there. There were still many sections which had to do very heavy work. But it is always a great help to know that the man at the top understands how demanding the work is," says Isobe.
The design and development department set to work on plans for new products and starting from about spring 1952 the company embarked on the development of two new models. One was the H-Type, a general purpose engine based on the Cub F-Type engine and developed at the request of an agricultural equipment manufacturer, Kyoritsu Noki Co. The production of this started in September as an OEM product, used to provide the power for back-mounted agricultural chemical sprayers. It provided Honda with a chance to enter the power product market. The product’s design took rapid account of the need for it to be easily used by people with no experience of operating machinery. However, this joint venture soon came to an end and production of the H-Type ceased. This was Fujisawa’s decision.
"The customers were top-flight companies. The profit margin was high and this was good business for Honda. But one day Mr. Fujisawa suddenly said ‘I think we should get out of this contract.’ His reasoning was the same as the time before when he had created a new sales network. ‘Honda’s policy is to work in direct partnership with customers, making and selling complete stand-alone products. We shouldn’t get into businesses where the rate of production depends on someone else,’ said Fujisawa. That decision showed the difference between short-term expediency and long-term planning with unswerving commitment to a basic concept. It was a valuable lesson," explains Kihachiro Kawashima.
The development of general purpose engines was immediately abandoned but two years later they were revived, this time under the Honda brand name.
The second new product was a scooter. Development on this also started in spring 1952, just when there was a boom in the popularity of scooters as a form of two-wheeled transport that anybody could use even when wearing a suit and tie. To make it more salable than previous bikes, the company thought up all sorts of ideas of the kind that could only come from Honda.
In autumn, Honda also started development of a new type of motorized bicycle. In those days licenses were only granted to motorized bicycles with engines up to 60 cc in the case of 2-stroke machines or 90 cc in the case of 4-stroke machines. The company used its experience with the Dream to develop a 4-stroke bike. This time, of course, it did not use an auxiliary engine made for use with a bicycle but decided instead to launch a model in which frame and engine were conceived as an integrated whole.
After that, it was just a matter of waiting for the long-expected machine tools to arrive.