HONDA The Power of Dreams

Fujisawa began with the following statement:

"There are two objectives in the establishment of this new foundation. The first is to contribute to cultural development through research and associated projects in natural science, cultural, and social science, and in particular, technical promotion. The second is to provide half of the shares in the Honda R&D as a basic asset for the establishment of an incorporated foundation, thereby completing the original mission of an R&D Center that can in turn contribute to society."

The Honda R&D Center was separated from Honda Motor in July 1960 to be a fully independent entity. Fifty percent of its shares belonged to Honda Motor, and the balance was split evenly between Soichiro Honda and Takeo Fujisawa. The plan was to establish Soseikai, based on the latter shares held by Honda and Fujisawa.

Fujisawa spent a great deal of time explaining the second Soseikai objective. He stressed that unless the R&D Center’s independence was secured and the dignity of research maintained, they would be hard pressed to expect significant results. This meant that the Research Division was to remain independent from the structure shared with other divisions handling various tasks such as manufacturing, sales, and accounting. Fujisawa argued that by using 50 percent of the shares held by Messrs. Honda and Fujisawa as a basic asset for the incorporation of a foundation that could be permanently maintained, a force would be created to counterbalance the gigantic influence of major shareholder Honda Motor. Research centers could therefore expand significantly, Fujisawa said, if such equally strong forces were allowed to bring their independence into full play without interfering with or pressuring one another.

Fujisawa added that such R&D’s independence is ideal for manufacturing companies. He said that in time the public would come to appreciate their worth, and that similar R&D centers would spring up everywhere.

Kawahara, upon listening to Fujisawa’s explanation, voiced his respect for Fujisawa’s passion and vision for the establishment of Soseikai. However, he expressed a certain concern regarding the fact that Fujisawa placed such an emphasis on his second goal. He feared that it might invite inaccurate speculation that the aim of establishing the new foundation would really be to enhance the mutual prosperity of Honda Motor and Honda R&D, and that the first goal would be of secondary importance.

After the debate, the prospectus for the establishment of Soseikai and the candidacies for director and trustees of the foundation were deliberated. With Kawahara representing the establishment of Soseikai, an application was to be filed with the Ministry of Education for permission to establish a foundation.

Tasku Date, then the director of Honda R&D and a nominee for the Soseikai directorship, looks back on that time:

"That was when I first was able to understand the full picture of Mr. Fujisawa’s highly respectable idea regarding research centers," he recalled. "Since about the beginning of 1955, Mr. Fujisawa had given a great deal of thought to the way an R&D center should be organized. In July 1960, he made the R&D Center an independent corporation, and Soseikai was to be the finishing touch to his concept of a research center. He was willing to give Soseikai 50 percent of the center’s shares. He had tried to create a unique, powerful R&D center - one unlike anything found in other companies - by putting the directors and employee representatives in charge of Sosekai’s management.

"It was not to be, however. Soseikai simply failed to materialize."

With the establishment of American Honda and a string of decisive wins in the Tourist Trophy (TT) races, 1962 opened with Honda ranked as the world’s top motorcycle maker both in name and reality. Moreover, the company was gaining a foothold in the automotive industry. At about that time, the company was preparing to issue ADRs (American Depository Receipts) in New York to procure funding on a worldwide basis. It was the underwriter Goldman Sachs that warned Honda that a plan to convert Honda R&D’s share percentages to 50 percent ownership by Honda Motor and 50 percent by Soseikai might invite suspicion in the minds of ADR investors, and thus precipitate difficulties.

"A R&D center should rightfully be a subsidiary of Honda Motor," Date remembered. "It was simply unfathomable, and inexcusable, that the research center could exist outside the control of the parent company. As a condition for issuing ADRs, the plan for Soseikai was completely denied."

"Around that time," said Date, "Saitama performed the basic design of the Benly and general-purpose engines. Hamamatsu was responsible for drawing up design changes to support the mass-production of these products."

Saitama Factory’s director at that time was Benjiro Honda, the younger brother of Soichiro Honda. The two alternately visited the factory site as often as every half an hour. Soichiro particularly enjoyed his visits to the engineering drawing room and design studio.

"A claim had been made against the Dream Type 4E," Date remembered. "Therefore, in order to deal with it I performed resetting tests on a carburetor. However, President [Soichiro] Honda and the factory director (Benjiro) kept coming to me with instructions. Their ideas came from totally different angles, and I had a tough time facing the pressure I felt from both sides. At one time I even felt compelled to take refuge at the testing center of MITI [Ministry of International Trade and Industry], in Murayama, so that I could concentrate on my ideas."

MITI held performance comparison tests on motorcycles through 1953–54. The proving ground was the Murayama Test Course at MITI’s Machinery Testing Center. Gas-mileage tests, however, were held on an ordinary public street. At Murayama, there were five test categories: acceleration, maximum speed, gas mileage, coasting, and control. Because it was an official test conducted in the presence of ministry officials, the competing companies went to great lengths to obtain good test results.

"The guys who went for testing became frantic," Date said. "President Honda was the kind of man who just would not accept second best. The moment they’d return from the test course, he would always be there, asking, ‘How did it go today?"’

The company also held an in-house endurance test, called the Special Drive Endurance Test, or simply the Special Drive. It consisted of a circular course over public roads through Kawagoe, Kumagaya, Maebashi, and Takasaki. Back then, all those roads were gravel, which caused tires to be buried a number of times. The old Hakone road and Usuitoge peak were used for uphill testing, while Shirako-zaka was chosen as a more conveniently located test road.

Honda’s April 1956 company newsletter featured an article by then-General Manager Kenji Yatomi, who wrote about unifying the Engineering Design Division in his article entitled "Recent Structural Changes." In the article, he supported the Research Center’s independence, stating, "the Design Division is scheduled to be set up at the Shirako Plant after unifying the Design divisions of Saitama and Hamamatsu factories. This development, along with the completion of test manufacturing facilities and others, constitutes the basis of the future research center."

Japan was at that time flourishing amid the so-called Jinmu economic boom (1955–57). Accordingly, sales of the Dream and Benly models grew rapidly, causing Honda to increase its production targets. Such changes numbered among the many structural improvements at Honda, all of which were intended to streamline the management for maximum efficiency.

The July newsletter issued the following five-page article by then-Senior Managing Director Takeo Fujisawa, who wrote about the current state and future plans of the company. His chosen title for the piece was quite telling: "In Response to the Question You Have Always Wanted to Ask."

Fujisawa’s article clearly stated the importance of research, and outlined his stance regarding the Research Division: "The reason American corporations are able to achieve such gigantic profits is that they have the ability to sell the products their customers’ demand. The more research and development a company has done, the more this becomes possible. U.S. corporations are generally said to spend 3 percent of their revenues on research, which is truly a significant amount." ... "The most important thing for companies from now on is to emphasize engineering design and prototype fabrication." ... "The products produced through that process will be the driving force in our future stability."

President Soichiro Honda also stressed the Research Division’s importance during a shareholders’ meeting held in April 1957. Referring to the enhancement and improvement of the division, he said, "Basic research regarding design and experiments as well as research with prototype models are not things that are directly reflected on our balance sheet. Instead, their nature is extremely modest in that their effects cannot actually be measured. Their importance, however, is indeed significant. We have invested this division with 200 workers and monthly expenses of up to 20 million yen. This has enabled us to continue improving our products and ensure that they meet the immediate demands of the market. These activities are not simply the foundation of our corporate stability; they enable us to perform our duty as a leader in Japan’s motorcycle industry."

Thus, Honda and Fujisawa fully and honestly shared their perceptions regarding the Research Division.

The position of first general manager at the R&D Center was awarded to Yoshihito Kudo, head of the Design Division. An opening ceremony was held June 1 at Shirako Plant’s second cafeteria. In a moving speech, Kudo expressed his hopes for the endeavor, saying, "With the establishment of our Research Center, we now take our first step toward a new phase. It is part of our growth from the attainment of an international level to leadership on the global level. It must be our goal to progress from being Japan’s leading maker of motorcycles to the top motorcycle maker in the world. Our next goal is to advance into the international market."

Honda R&D, as if to prove the point, almost immediately launched the Agricultural Equipment Section, on January 15. Originating at the Hamamatsu Annex three years earlier with the goal of diversifying the Honda business, it was structured as a research and development division emphasizing agricultural machineries. By transferring it to the Shirako R&D Center, it became an independent section. The result of this restructuring bore fruit in the form of the Type F-150 tiller, which in its debut the following May became the foundation for future expansion into the power-products sector.

A much-awaited high-speed test course was completed along the bank of Arakawa River in May 1958. It was a straight, asphalt-paved course 3 meters wide and 1,450 meters long. Significantly, it was also Japan’s first high-speed test track. At the May 27 course opening, Dream motorcycles zipped past the audience at speeds of 150 km per hour, stunning spectators and winning the industry’s full attention. Additionally, Date recalled, "The motorcycle Grand Prix riders demonstrated their skill at flying acrobatics."

Even the course’s established length of 1,450 meters was not sufficient to keep pace with the advance of technology, however, since within a year motorcycle performance had improved so dramatically that additional pavement was needed in order to reach top gear. Subsequently, expansion work was performed at Arakawa. The grand course, completed in February 1959, measured 5 meters in width by 2,200 meters in length. An article in the February 13, 1959, issue of the Yamato Factory Bulletin magazine expressed considerable hope for the high-speed test course:

"The timing is perfect, now that Honda is about to participate in the TT race, where Japan’s motorcycle-manufacturing technology will be tested against the best the world has to offer. With the Dream and Benly securing a place where they can let their ultra-speed come into play, our rapid progress in technology should pick up even more momentum."

Hideo Sugiura, who participated in the study meeting, related details of the situation in his article entitled "Remembering Takeo Fujisawa, Supreme Advisor," published in a special issue of the Honda newsletter on April 7, 1989:

"In May 1960," Sugiura wrote, "it seemed it was our Uncle (a.k.a. Fujisawa) who had set up the two-day meeting of section managers. I remember that on the first day he had led us to the conclusion that we shouldn’t merely ‘produce and sell,’ but ‘produce what sells.’ It was the initial phase of a strategy designed to make the Research Center truly independent. He made us understand what ‘the most important thing for makers to grow’ was, and that it was ‘the foundation for the company on every level of its existence."’

"That evening," he continued, "we went to the Oiso Prince Hotel. The theme of the debate there was whether to make the Research Center independent. We only had practical ideas, so we debated ad infinitum about how the blueprint would be handed over, what the areas of service would be, how the center should be managed, how expenses should be managed, and so on.

"I showed up at the presentation with our conclusion. I still vividly recall the second floor of the hotel, from which we could see the ocean. Seated at the rear of the room was our Uncle Fujisawa.

"He continued to watch me right through to the point when I said, ‘I will now report on our debate.’ He appeared to be on the edge of his seat in anticipation of what I was about to say. However, as soon as I announced, ‘I will first give you our conclusion: We have agreed that at present there is no need for the Research Center to be independent,’ he turned his eyes toward the sea and stared out, unmoving. After that, no matter how loudly I spoke, he would not even attempt to look at me. Looking back now, he was probably feeling like a frustrated father, thinking, ‘These kids have no idea what Iím doing for them."’

The prospectus stated that while an indivisible relationship with Honda Motor would be maintained, Honda R&D would be founded to ensure the ongoing prosperity of both companies.

The Research Center’s optimal environment was also discussed in the article, "Research Center Independence, from the Perspective of Personnel Relations." That piece mentioned a course of thinking that led to flexible working hours, which had recently begun to be applied at research divisions everywhere: "We must first create an environment in which researchers can concentrate on key issues relating to their expertise, without having to worry about time, job ranking, or other formalities." In 1969, Honda R&D became the first among Japan’s private R&D centers to implement flexible working hours for its research members. Another statement from that period read, "We must realize a new form of personnel management for the Research Center; one that combines the abilities of individual researchers as equal partners and enhances their collective wisdom." Such a statement clearly illustrates Honda’s unique thinking regarding the structure of research centers, which later became known as the "paperweight structure."