HONDA The Power of Dreams

Immediately after issuing that declaration, however, the circumstances surrounding Honda suddenly changed for the worse. The company was faced by an unparalleled management crisis.

Kihachiro Kawashima recollects the hardships of this period:

"I think Mr. Fujisawa was really in love with the Juno, saying 'This is a revolutionary scooter. It's bound to have huge sales. Let's line up the dealers and have them send us guaranty money.' He was very upbeat. The guaranty money was three million yen, I think. Some dealers said it was too much, and asked us to reduce it to half. Then, though, we found out that the Juno was a splendid failure. The advance publicity had been pretty flamboyant, so we had a terrible time making a recovery.

"Then, on top of that, sales of the Cub F-Type screeched to a halt. For one thing, the customers' interest was shifting to products from other companies that were catching up to us, and for another, auxiliary engines for bicycles were starting to seem out-of-date. Bad things come together, so the Dream, which had been selling so well, started having problems. In December of the year before, we had increased the displacement of the Dream 4E-Type to 220 cc. We put it on the market, and started getting one complaint after another about engine problems of unknown origins. On top of that again, the Benly also got a bad reputation for noisy gears and tappets. The sales office fell into an awful state with disaster in every direction."

Each of the company's four mainstay products developed problems during the very same period of time.

The unexplained problem with the Juno K-Type turned out to have several causes. Its engine was completely enclosed by FRP, which is not good at dissipating heat, so the poor cooling caused it to overheat frequently. The FRP body had been intended to reduce weight, but it turned out to be heavier than expected. That and the deluxe features brought the machine's weight to 170 kg, making handling difficult. Moreover, it was underpowered at that weight, so it didn't provide a good ride. The cantilevered suspension that was intended to make changing tires easier also had problems. The clutch operated in the same way as on a motorcycle, and scooter users who were accustomed to the easier operation of the centrifugal clutch and the V belt did not like it.

Honda's scheduled trip to Europe in April was canceled. He had to devote himself immediately to finding solutions to the engineering problems.

Fujisawa, for his part, worked out measures to redress the sales problem. In August of the previous year, the regulations governing the 4-stroke engine displacement of light motorcycles had been extended from 150 cc to 250 cc. Therefore, the main thrust of production was directed to the 220 cc Dream 4E-Type. For the time being, the only product that seemed likely to help Honda through this crisis was the 189 cc Dream 6E-Type, which had been developed as the successor to the 146 cc Dream 3E.

Mr. Honda and the engineers were having difficulty tracking down the cause of the troubles with the 4E. When the machine slowed down, the idle grew rough and caused the engine to stall. Sleepless days and nights continued until they identified the source of the problem.

On April 20, Fujisawa went to the Saitama Factory, where he gathered all the employees together and explained the company crisis to them frankly. He asked their cooperation in taking emergency measures. Until the problem was resolved, 4E sales would cease, he told them, and they would have to try to make that up through increased production of the 6E. The workers' union accepted this. Giving up their long May holidays, labor and management would unite in the tough struggle that lay ahead.

Noboru Horikoshi had just joined the Saitama Factory as a body assembly worker. He recalls this period as follows:

"Around that time, the shipping area at the factory had rows after rows of Dream 4Es lined up. They were on our inventory both because of the halted shipping and the machines sent back from all over Japan. One day, somebody told us all to gather together. I went, and there were Mr. Honda and Mr. Fujisawa standing side by side. The Old Man's white uniform was dirty and very wrinkled. His eyes were all bloodshot. Then, after Mr. Fujisawa explained the emergency situation, the Old Man talked to us. He didn't tell any jokes, as he usually did, and he didn't say anything about aiming for the world, either. He explained just what had gone wrong with the 4E. It seemed that the problem was in the carburetor. There was something wrong with the design of the carburetor and how it was installed, so the fuel flow was cut off and the engine would stall. But he said they finally saw a way they might fix it. The Old Man apologized to us. He said, 'I'm really sorry about this. I've really caused you trouble.' At that point, it really got to me."

The emergency increase in production of 6Es that began on April 20 was halted less than a month later, on May 8. The engineers headed out to all parts of the country to change the carburetor settings on every Dream 4E in Japan.

This did not, however, mean that the crisis was over.

Honda was gradually receiving shipments on 450 million yen worth of imported machine tools, but the products that would make full use of this new capability had yet to be created. However, payments could not wait. Furthermore, the first step would be to sell the huge inventory of 4Es, now that their problem had been solved. In a move to totally reverse the previous measure, Honda now had to cut production.

Fujisawa approached manufacturers who contracted Honda parts and requested their cooperation. He did not try to conceal the trouble that Honda was in as he explained the position to them. Fujisawa's book, Light the Torch with Your Own Hand, contains a passage that describes these events:

"On May 26, I called all of our outside contractors to gather at the Shirako Plant and asked them to accept postponement of part of our payments. 'We can't manage our payments as we have been doing until now. Therefore, we want to add upcoming purchases to our current balance and pay you 30% of that. We will not write any promissory notes, so what this means is that we're asking you please to bite the bullet for a while.' To write promissory notes on top of everything else would be very dangerous. Therefore, if we couldn't get them to agree, we wouldn't receive any more parts. Production would stop. I must say, I did some stuttering as I talked to them. When I managed to obtain their agreement, I was so relieved that I almost felt drained. Two or three of the firms went their own way, but most of them put themselves on the line and bet on the future of Honda Motor Co."

Sluggish sales and continuing customer complaints were also making for a tough battleground for the sales staff.

Nakano recalls:

"From morning till night, I was out running all over the place trying to collect some payments, to the point that at night I dreamed about printing money with a rotary press."

Nakano had joined the company wanting to be an engineer. However, Fujisawa said he wanted people who knew machines to be in sales, so Nakano was transferred over to the Sales Division when the Cub F-Type went on sale. At this time, he was assistant manager of the Kyushu branch office:

"One dealer said to me, 'I'm really sorry not to be paying you after I sold some of your products, but I still have all this inventory. If you really need money that badly, Mr. Nakano, why don't you take all these to a pawnshop? ' I didn't think I could stand it. I experienced insults like that, and I also drove through the rain on a heavy motorcycle at night, freezing, going around collecting on bills. It wasn't only the engineers who worked till dawn to solve problems. The sales side was doing something like that, too," he said, laughing.

Fujisawa went to Mitsubishi Bank, Honda's main bankers, to request assistance for the first time. His book, Light the Torch with Your Own Hand, again describes what happened:

"I told the bank everything. I didn't hide a single thing from them, but laid out all of our worst problems. If they have all the information, then banks can make the proper judgement."

At this time, the manager of Mitsubishi Bank's Kyobashi branch was Tokita Suzuki and the managing director was Fukuzo Kawahara. Their wide judgment resulted in the bank providing Honda with full support.

"The Mitsubishi Bank provided us the definitive assistance in carrying out this surgery, and Honda Motor Co. must never forget this as long as it continues to exist. I particularly want you to remember the name of Branch Manager Tokita Suzuki, who cast himself wholly into convincing the directors to share his belief in Honda. He never wavered in this effort, despite the difficulties that enveloped his task, and devoted himself entirely to communicating his faith in us," wrote Fujisawa in the Honda Company News (No. 12), as published in January of the following year, 1955.

In December 1954, the workers' union had entered collective bargaining over their demand for a year-end bonuses. Kazugo Morii, then secretary-general of the Saitama workers' union, related his memory of that time:

"People say that we had made demands that were unrealistic in terms of the company's position, but that wasn't the case. We weren't hoping to get huge sums of money. At that time, we were all poor. It was the difference between eating and not eating, and there were some people who had to come to work without bringing any lunch. But that's probably hard to imagine, today. It's wonderful to be number one in the world, but we couldn't live only on a dream of the future. Our union hardly had any members who wanted to fight just for the sake of fighting. We were all na?ve young people and ordinary family men and women. That's why, when the union held a general meeting, we quickly agreed to go without the May vacation. When it came to the year-end bonuses, though, the company may not have had much cash in reserve, but they didn't give us any explanation. They simply came back with a very low offer.

"We thought that the top management should give us an explanation, and asked to negotiate directly with Mr. Fujisawa. Mr. Honda's attitude was a combination of amazingly fresh thinking, for instance calling the plants and the R&D center 'my place,' together with a traditional boss-man mentality all mixed up together. We understood that, so we didn't ask for Mr. Honda to come to the meetings. We all felt that we didn't want to hurt the feelings of the Old Man, who was such a childlike, innocent person without any selfishness in him. That's how considerate the employees were in dealing with the president. I guess that could only happen with someone of the Old Man's natural virtue."

The year-end bonuses amount that Fujisawa proposed to the union was a uniform 5,000 yen for everybody. The union was asking for 25,000 yen. That was the average level at the time.

In the book titled "Management has no Ending," Fujisawa wrote:

"I went by myself to appear before 1,800 [union members]. The chairman of the executive committee asked me, 'What do you think of this 5,000 yen figure?' I replied, 'There's no question, it's a low figure. However, what if we were able to pay a little more, and then the company later went bankrupt. When people asked why we hadn't held out a little longer at this point, as a manager, I wouldn't have any excuse to offer them at all. Rather than that, I'd like to hold off until next year. Our products should start selling again by March, and we could negotiate collectively again at that time.' I guess everyone understood what I meant, because the applause sounded like thunder. It didn't stop. The chairman declared, 'The collective bargaining is now over,' and still more applause filled the hall. As I walked out through their midst, I heard people calling out from both sides of me, 'We're counting on you! We're counting on you!" and I couldn't hold back my tears. Really, I wept as I promised in my heart that I would do it no matter what."

Remembering those days, Morii spoke with great emphasis:

"Honda was blessed with wonderful employees. I want that to be remembered. The pure-hearted people who responded in this way to Mr. Fujisawa's persuasion were giving support from below to Honda in its crisis."

"April of that year, 1954, when the crisis started to hit Honda, was when I joined the company," says Fumio Mukoyama, a former managing director.

"Among those who joined the company with me were Mr. Kume, who became the third president, and Mr. Yoshizawa, former chairman of the board. As soon as I arrived at my assignment in the Saitama Factory, the place turned into a bloody battlefield. For about two months in a row, there wasn't a single day when I got home before midnight. For some reason, though, everyone was cheerful and full of energy. They didn't act as though they were suffering. Right around that time, the Isle of Man TT Race declaration came out, and I felt as though a load had been lifted from me. It brought such a sense of hope for what lay ahead. With that to stimulate me, we started talking with each other as though we were going to take over the world ourselves. I was a bachelor, at the peak of youth, and I didn't have any idea what people like Mr. Morii were going through. So there were some of us living on our dreams," he said, laughing.

Mukoyama, who later went on to become a full-time union official, further recalled:

"This was after I had become the union secretary, so it's something from a slightly later time that I'm going to tell you about. The labor-management relationship had grown rather strained, and there was an incident when the company had decided to punitively dismiss the committee chairman and two other workers, while I was punished by freezing the pay-increase for a half-year. At the same time this was going on, a member of the executive committee did something bad, so the union was expelling him. Difficulties were coming up all at once. It ended up going to court, where the union won in the first trial, and we immediately reached an out-of-court settlement. During this, we talked directly with Mr. Honda. The Old Man said to us, 'You know, let's stop this family quarreling.' This one statement by the Old Man moved us all to complete agreement with him. Things like this made a foundation on which labor and management together forged a healthy cooperation."

One other point has to be added here in order to give credit to the Dream 4E and the Benly J. Once its carburetor problem had been fixed, the 4E regained its full performance and went on to reach the largest production figure of the entire Dream E series. The Benly J series grew more popular with every year that passed. It became one of Honda's mainstay products, with a production run that lasted five years.

The company decided to halt production of the Cub F-Type. Too many problems arose from its being installed on bicycles that varied so widely in quality. Honda could not resolve problems of that kind, and this was one reason that the company gave this model up so easily.

The first-generation Juno K-Type went out of production after just about a year and a half. Total production only amounted to 5,980 units. However, the plastics technology that Tsuchida and his colleagues labored so hard over did not fade away. It would reappear five years later in an epoch-making form.