Case Honda Moves To The United States

Case: Honda Moves to the United States
Honda has debunked the auto industry’s claim that “nobody can make an economy car in the
United States at a profit.” Not only is Honda’s plant in Marysville, Ohio, profitable, it is said, but its cars
are as well built as those made in Japan.
Since Honda holds only a relatively small share of the Japanese car market, it needed and outlet
to grow. In early 1970s, when gas became scarce and expensive, Honda introduced its fuel-efficient cars
in the United States. Strong demand and growing trade friction convinced Honda that it needed to
repeat the strategy that worked for its motorcycles: build a U.S. year quotas became effective. In 1985,
Honda outsold both Nissan and Toyota and became the fourth largest car manufacturer in the United
States.
The Marysville plant is not demonstrably more automated than American factories, but it works
differently. All employees are treated as equals. Workers are chosen for their team skills as well as their
expertise. A quarter of the first employees spent up to 3 months in Honda’s plant in Japan. When they
returned, they taught their coworkers how to assemble cars in teams.
New workers spend several weeks practicing on training cars before they are assigned to a
team. Team members trade jobs and learn as many tasks as they can. Team leaders check the
workmanship and help the team in any way they can (solving problems, replacing and absent member,
and so on).
Honda attributes its success to workers who are willing to work hard for the company. The
“equal partnership” gives employees a stake in the company. Mr. Honda believes that all employees are
equality important. Everyone, including the plant manager, wears coveralls and shares the facilities
(same lunchroom, washrooms, parking). All employees can help make decisions. Initially, workers were
surprised that their supervisors asked them for advice.
The workers are very proud of their work. They like working at Honda, even though they earn
roughly 20 percent less than other U.S. auto workers. Honda’s labor costs are about 60 percent lower
than the industry average because it has a lower overhead per worker.
Honda expects suppliers to establish the same quality standards it uses. It was willing to help
U.S. parts suppliers that did not meet them. Those who insisted that Honda could simply return
defective parts were replaced by Japanese suppliers. Some of them have built plants near Marysville,
which, in turn, has helped Honda minimize inventory.
Although most U.S. manufacturers barely break even on compacts, Honda earns a handsome
profit on each car, and it sells every car it makes. And while this is only half the profit Honda earns on
the cars it imports from Japan, it expect the difference to narrow as the workers in the U.S. plant learn
to be more efficient.
Now that the company is well established in the U.S. car market, Honda plans to double its U.S.
capacity and build luxury cars, which U.S. capacity and build luxury cars, which should be more
profitable than the less expensive cars. Honda attempts to avoid problems from its low-cost image by
selling its luxury cars under another name – Acura – through different leaderships. Far from importing
the large, old-fashioned Japanese luxury cars, Honda is developing “European-style” models specifically
for the U.S. market. European styling has two advantages: It appeals to the growing number of young
professionals, and the cars are small enough that can be built on Honda’s existing compact-car
production lines.
1. Why did Honda build a plant in the United States (what were the objectives)? How is the
plant in the United States affecting the company in Japan? What problems or advantages
might the U.S. operation give Honda in the future?
2. Why was Honda able to build economy cars in the United States when American car
manufacturers could not? What advantages does Honda have over the American
companies?
3. How much of Honda’s success is due to its policies? How much is due to nonmanagerial
factors?
4. Apply the steps in planning to the case.

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