HONDA The Power of Dreams

The research team thus began to focus on West Germany, the EEC's most stable economic power, as the best candidate for factory operations. The team decided to stop by European Honda in order to get a briefing on the market situation, after which the research would continue in West Germany. Therefore, at the end of January 1962, the trio of researchers headed for Hamburg, with Iwamura leading the way.

The three members of the research team spent more than two weeks traveling through West Germany's major industrial cities, collecting information for analysis. Along with the progress in their work came a certain realization regarding the European market; an assessment that no preliminary research, book, or other resource could have provided.

It was the moped^*1 that had entered the picture. The wide use of these vehicles throughout the region was much more than the team could have anticipated. Of the estimated annual demand of 2 million motorcycles in Europe, about 80 percent was for mopeds. Many European streets even had special bicycle/moped routes bordering the sidewalk. Thus, the moped had long since established itself as a popular means of transportation in the region.

France was the EEC's top producer of mopeds, with annual production exceeding 1 million units. Other major producers of mopeds were Italy, West Germany, and England. Much like the Japanese motorcycle industry surrounding Honda in its earliest days, a number of small midsize manufacturers were producing mopeds in different factory locations.

Moreover, it was soon apparent that West Germany had numerous drawbacks. For example, it was home to several major manufacturers of motorcycles and mopeds, including BMW. Its labor market was nearly fully employed, and the minimum wage had reached a fairly high level. West German prices were also higher than any of the remaining five EEC countries. It would therefore cost considerably more to obtain a decent-size lot for the construction of a factory, buildings, facilities, and the employment of many people.

The research team thus expanded its purview to include all the EEC countries, with the exception of Luxembourg. Soon, as the team compared and examined conditions in each country, Italy and France were scratched from the list for much the same reason as West Germany. In the end, only two countries remained: the Netherlands and Belgium.

Among the EEC countries, the Netherlands and Belgium were somewhat behind in terms of modern industrialization. However, since the launch of the EEC they had been working to promote industrialization by actively soliciting funds, including foreign investments. Therefore, both nations greeted Honda's research team with open arms, enthusiastically inviting Honda to establish a factory in their country. Government officials personally escorted the research team on tours, introducing a variety of possible sites.

After seeing first-hand the conditions in the two countries, the researchers began to favor Belgium as the more appropriate location.

Belgian cities already had many factories. Though small, these factories were known as highly reliable suppliers of parts to the carmakers of West Germany. Moreover, the minimum wage was low compared to West Germany's, and the prospects were good concerning a sufficient pool of skilled labor. Added to that was a major push by the small city of Aalst, which began to woo the research team during their tour.

Aalst was a small town with a population of about 50,000, located within a 40-kilometer radius of both Brussels (the capital) and Antwerp, a free-trade port city. While Aalst and the two cities were connected via expressways, there also was a canal connecting Aalst to Antwerp, upon which goods could be transported. Moreover, the city fulfilled all the conditions for corporate activities, including materials procurement.

The research team ultimately chose Brussels as its candidate site for the construction of Honda's European head office, which would double as a sales base, while Aalst was selected as the candidate site for factory construction. The two-month research tour had at last concluded, and the team was ready for its return to Japan.

Note:
*1 Moped. Mopeds refer to European bikes that are equipped with pedals. In Japan, they are now called 'mopetto.' While mopeds were by law restricted to engine displacements of 50 cc or less and a maximum speed of 40 kilometers per hour (varying somewhat amoung countries), they also were given tax privileges in taxes, insurance, and special traffic rules. Moreover, the minimum operating age without a license was sixteen years. The moped - actually a kind of motorized bicycle, belongs to an entirely different category than motorcycles such as the Super Cub and scooter.

The official groundbreaking for Belgium Honda's factory at Aalst took place in October 1962.

Hoping to be ready for the coming spring's motorcycle sales season, Iwamura needed to have some completed products, even if it meant only a few of them. He gave instructions to proceed with construction on the factory operation, which was set to begin in February 1963.

The construction schedule allowed just over four months, from start to finish. For the Belgians, however, such a plan seemed rather unreasonable. The work had been contracted to a Belgian firm whose company officers came to Ryoji Matsui, the man in charge of factory completion, landscaping, and power, with a different suggestion. "In Belgium," they said, "it rains or snows more than half the year. We simply cannot make an irresponsible promise regarding the exact date that work will be finished. So, we'd like you to think in terms of the number of actual work days written here." With that, they began to explain the process, referring to their schedule.

That document detailed the various processes of construction and the schedule for work, including the number of actual work days needed to complete each step. However, the scheduled completion date for each process had been left blank.

"In Japan," Matsui said, "when construction falls behind schedule, the contract assignor and the contractor know what to do without having to discuss much. They'll try hard to catch up, even if it means increasing the number of workers or speeding up construction by working overtime and on weekends and holidays. But things didn't work that way in Belgium. In fact, the law prohibited them from working on weekends or holidays."

The actual construction, however, moved along at an incredible pace. In fact, at one point it seemed their work would be completed in time for the start of operations in the spring. Winter was still upon them, though, and soon the entire region found itself in the throes of a major cold snap. The ground froze solid, and was then buried under deep drifts of snow. Construction had to be delayed, forcing an increase in the number of days needed. The Japanese employees stationed at Belgium Honda began to worry, saying, "At this rate, we'll never make it in time for the start of operations this spring."

To make matters worse, that December the Belgian government issued an order prohibiting outdoor construction out of concern for those working in the extreme cold. As a result, Honda's entire construction process had to be put on hold. Therefore, Belgium Honda's Japanese associates decided to use that time to establish routes for the procurement of parts. After all, these routes would be their lifelines for regional production. Still, they knew there would be many obstacles. Although they searched all of Belgium for companies that could supply parts made to Honda's specifications, they could not seem to find one. The search had to be extended to the Netherlands and West Germany.

Laws were already on the books in Europe concerning consumer protection and the assurance of product reliability. Manufacturers were obliged to continue product supplies for at least ten years once they were on the market. Moreover, they were obliged to maintain sufficient inventories for that period. Such laws affected local parts manufacturers greatly in the way they managed their businesses.

For example, the leading production method was to complete a lot of parts on order. Therefore, for a company to supply Honda, it would have to employ new facilities to meet the demands of mass production, if it did not already have them. It was hardly a positive situation, since the price quotations Honda began receiving were several times higher than those it could get in Japan.

Further creating difficulties for Honda was the fact that Belgium had no industrial standards resembling Japan's JIS (Japanese Industrial Standard). That the situation varied among different countries in Europe made obtaining parts even more difficult.

The winter delay had dragged on for four months, but at last construction work could be resumed. It was March 1963. "It was one crash project after another," Iwamura recalled. The local people, too, were astonished at the speed with which things were being done. On May 27, 1963 despite the fact that a portion of the building was yet unfinished, the factory shifted into operation, producing its very first Super Cub (C100).

"We were able to complete factory construction in the eight short months, counting the period in which work was suspended, only because of the dedicated efforts of Belgium Honda's staff, along with our contractor," explained Okayasu. "The local people had at first found it difficult to comprehend our method of first deciding on the factory's opening date and then finding ways to meet that goal. But once we reached our goal, they said, "This is certainly a different way of getting work done!" After that, they really began to trust us."

Becoming the first Japanese manufacturer to initiate production operations in an EEC country, Belgium Honda now found itself in the limelight, both in Japan and throughout the world.

Even so, many difficulties lay ahead for the Japanese associates stationed at Belgium Honda, as well as the 180 or so local people who worked with them at the factory. At that time, Honda Motor had just begun to employ knockdown parts for its export products. Accordingly, there was as yet no thorough system for knockdown operations, so no one could call themselves an expert. Therefore, at Belgium Honda, they had to build a knockdown production system from scratch, developing as they went their particular form of expertise. Daily production activities would serve as their guide.

"At first," Iwamura recalled, "some parts we received were found to be defective. And often we weren't able to operate the line because the parts hadn't come in on time. Once, when the parts didn't arrive because of a strike at Customs, we even went to talk with them directly. We had to plead with them to end the strike."

Many of Belgium Honda's local associates had no experience in mass-assembly operations, further complicating matters. Therefore, the number of motorcycles produced per day was initially a very small number. Under instructions of the Japanese staff, the associates would repeat the process of assembly and disassembly over and over, thus enhancing their skills. And eventually production activity got under way on a respectable level.

"The problem of maintaining quality was the first thing we had to deal with, once we had started factory operations," Okayasu said. "But we also worked hard to create a friendly, trusting environment in which the Belgians and Japanese could work together."

The greatest hurdle for Belgium Honda's Japanese staff, in fact, was the difference in customs and languages. Given that Belgium was, and still is, a country with two national languages - French and Flemish, the latter being the Dutch-derived dialect of northern Belgium - the regional culture was an equal mix of those traditions. Thus, it was not at all like the situation in Japan. Moreover, the capital city of Brussels was the dividing point between the two languages. Flemish was spoken mainly in the area north of Brussels, including Aalst, while French was spoken in the south. This considerably affected communication among the associates. In addition, most Japanese staff spoke only a little English, and only one of them was fluent in both English and French. Business instructions from the Japanese staff, both at the production site and sales office, were conveyed to the associates through English-speaking Belgian managers. Therefore, it was not long before the Japanese staff began to experience the frustration of not being able to communicate their opinions freely. They were constantly aware that extra time and effort would be needed in order for them to communicate through interpreters.

The Japanese staff also had difficulty understanding the local way of thinking which was based on a contract-oriented social structure and age-old hierarchal class system. Accordingly, opinions and perceptions would often be at odds during the process of cooperative work. Such issues were always resolved, though, thanks to the mutual efforts and discussions of all involved.

"Even if there were differences in languages and ways of thinking, we couldn't make great products without conveying our thoughts to one another," Iwamura said, looking back at the period. "I'd always told the [Japanese] staff in the field to discuss what they wanted to do with the local people, no matter how long it might take."

Belgium Honda celebrated its first anniversary with a factory opening ceremony on September 5, 1963, when Honda Motor was about to celebrate its 15th anniversary. The following day, with the help of local officials, a grand gala was held in an 18th century castle rented for the event. The party was attended by many, including officials from the Belgian government and officials from Aalst. Soichiro Honda, the president and founder of Honda, also flew in from Japan.

"Honda swept the Isle of Man TT Race, and now the company's boss is coming to Belgium," the locals said of Mr. Honda's visit. In the sky was a light airplane slowly circling with a streaming banner carrying the message "Welcome, Mr. Honda!"

Europe was at the time a heavily class-conscious society in which there was great distinction made between management and factory workers. It was simply a matter of course that there was a clear difference in status between white-collar staff and blue-color workers. Thus, it was unthinkable for the president of any company, no matter how big or small, to speak directly with his associates or even shake their hands. Therefore, when Soichiro Honda addressed the local associates in the opening ceremony he said, "Let's have fun working together as one." He even approached a circle of associates saying, "Let's have our picture taken together."

The locals were not only happy to be greeted that way, but were truly astonished at the company president's forward manner. It helped set the tone for the gathering, and everything went smoothly from that point on.

The local community was generally very friendly toward the Japanese associates at Belgium Honda. They delighted in having the company of Japanese people, who were then very rare in the region. Moreover, the families of the Japanese were always being invited to parties as part of an effort by the local people to engender their friendship.

There were those, however, who frowned upon Belgium Honda's participation in the regional market.

The use of mopeds in Belgium and the Netherlands was comparatively high with respect to the other EEC nations. Therefore, Honda was perceived as a threat in certain ways, having demonstrated world-class performance in the Motorcycle World Grand Prix and the Isle of Man TT Race.

"There was initially a period in which we couldn't get as many applicants as we wanted," said Iwamura, "despite the ads we'd placed in the newspapers. But the local papers were running such reports as, The General Motors of Japan arrives, rampaging through the market," and Honda invades the market." So, we decided to run an ad pushing our concept into the spotlight, saying something like, We're launching our activities for the development of the Belgian motorcycle industry. We'd like to see our products used not only in Belgium, but in other countries as well." And that was the turning point. It helped clear up any misunderstandings among the local people, and the number of job applicants grew dramatically."

Despite having conquered a number of obstacles before and after the factory's opening - including a ferocious cold wave and differences in corporate culture, language and tradition - more problems lay ahead for Belgium Honda in its effort to get on a path to full-scale production.

The most troublesome of these was the fact that the company's new moped (Type C310), which they'd worked so hard to create and market, simply was not meeting their sales expectations.

Moreover, problems began to occur with the customers' products soon after the startup of the new sales network. Increasingly, products were being returned to the factory with user complaints attached.

The C310 moped had not been designed and developed as a specific response to local market demands. Actually, it was a remodeled version of an existing product, put together after it was decided that Belgium Honda was to be established. Therefore, only a limited amount of time could be devoted to meeting the moped regulations stipulated by European nations. There was a greater need to concentrate on the factory's opening.

The C310 was a remodeled version of the Super Cub, a product that had achieved monumental success in Japan and the U.S. In the moped configuration, though, the power of the Super Cub's four-stroke engine was cut back so as not to exceed the maximum speed of 40 kilometers per hour. As with other mopeds in Europe, pedals were also added to the product. The Honda version, however, was larger and heavier than the two-stroke mopeds then so common in Europe. To the local public, the Honda moped looked more like a motorcycle than a moped.

Honda's moped was marketed based on the assumption that Europeans, who were generally taller and more heavily built, would embrace it. However, the C310 never managed to capture the hearts of local riders.

Mr. Fujisawa paid a visit to Belgium Honda out of concern for the situation. "In the end," he said, "the basic rule of factory operation is to produce only as much product as can be sold." Therefore, after that, Belgium Honda began working together with the local associates in an effort to rebuild. So valiant was the effort, in fact, that not a single associate was laid off. The associates of Honda factories in Japan, as well as the R&D Center, even contributed, helping to support Belgian production and product enhancements. For their own part, most of the local associates chose to stay with the company and share in the hardships faced by the Japanese staff.

Unfortunately, though, the challenges were to last many more years, despite numerous attempts to improve things.

In 1964, Koichiro Yoshizawa was assigned to manage the Sales Division at Belgium Honda, in the hope that the company could be revitalized. Several times, Fujisawa told him "Once you withdraw, you'll never be able to come back again. To do so would entail a tremendous amount of money and effort, and it would most certainly hurt our reputation. So, we'll also help you out from Japan. Please see the situation through, no matter how tough it gets."

The EEC's original policy had thus been a very real threat to Honda's business activities in Europe, and in response, the company's top leadership had decided to establish factory operations in the region. Accordingly, the factory was launched through the concerted efforts of numerous associates, who in overcoming differences in language and culture managed to establish a system of their own.

The Japanese way of thinking and doing things, however, was not always compatible with the ways of its European hosts. As a result, the company could not fully comprehend the demands of the European market, and this brought significant hardships to Honda's people, including many local associates.

The hardships, on the other hand, became assets that Honda could apply to its eventual expansion overseas. Many of those who experienced trying times in Belgium later became involved in Honda's global growth, helping run production bases around the world. The bitter lessons of their Belgian experience were to be quite useful in the success of future efforts.

"The Belgian experience was one of hardship in every aspect of work, including production, sales, development, and management," Yoshizawa recalled. "But through such experiences, I believe the lessons learned about corporate activities overseas were effectively conveyed to the Honda associates by word of mouth. It probably wasn't even necessary to put them down in writing."

Belgium Honda did rebuild, though, and is now an important producer of automotive parts as well as a marketer of motorcycles, cars, and power products. Prior to that, in 1978, Honda Europe was established in Gent, Belgium, as a center for the distribution of products and parts located along a canal front, convenient to expressways and railroads. Today, Honda Europe single-handedly prepares the distribution of automobiles shipped from Japan for the European market, and provides supplies of locally obtained parts. By removing some of the burden that would otherwise be placed on Honda corporationas throughout Europe, it plays a major role in improving services and the distribution of goods throughout the continent.

Honda Europe enjoyed a very smooth launch, thanks in large part to years of work in Belgium, during which Honda earned the praise, understanding and cooperation of the local community.

Accordingly, the Honda Belgium Fund was established in 1981 for the purpose of supporting cultural and technical research exchanges between the two countries. The offices for this venture were set up Belgium Honda, which continues as a leader in Belgian-Japanese cross-cultural activities.

Belgium Honda, having gone through years of hardship, had thus succeeded in extending its range of activity to many areas. It is a success story that would not have been possible if it were not for the hard work, dedication, and integrity of so many, including the Japanese staff, local associates, and people of Belgium.

Note: Honda's employees are also referred as to "associates."