Friday, July 04, 2008

Honda Motor Company Limited : The new hero of Japanese auto-Industry

You can call it a windfall gain or simple luck but like it or not Japan’s second largest automaker Honda Motor Company is now at its peak. Where car makers around the world are grappling with rising cost of fuel and raw materials, Japan’s second largest automaker is making profits. What is the secret behind this success? Well, there is nothing. The whole situation just went to Honda’s favor. In this series I will be focusing Honda Motor Company, its background and major products.

Company Background:
Honda Motor Company Limited (TYO: 7267) is a multinational corporation. Headquartered in Japan, the company is an engine manufacturer and engineering company. Honda is the 5th largest auto-maker in the world and the second largest in Japan. Every year, the company produces more than 14 million internal combustion engines. Its products include: cars, motorcycles, trucks, scooters, robots, jets and jet engines, All Terrain Vehicle (ATV), water craft, electrical generators, marine engines, lawn and garden equipment, and aeronautical and other mobile technologies. Along with these products Honda has now started producing luxury cars and mountain bikes.

Honda shares are traded around various stock exchanges around the world. For example, Tokyo Stock Exchange, New York Stock Exchange. Other major stock exchanges include: Osaka, Nagoya, Sapporo, Kyoto, Fukuoka, London, Paris and Switzerland.

Head quarters and joint ventures:
Honda Motor Company’s main head quarter is situated in Tokyo Japan.

The United States of America:
American Honda Motor Co. is situated in
Torrance, California.

Honda Canada Inc. is situated in the
Scarborough district of Toronto, Ontario. The company is building its new headquarters in Markham. The manufacturing facility is situated in Alliston, Ontario.

Honda has a joint venture with the Hero Group of
India. Currently, Hero Honda is the largest two-wheeler manufacturer in the world. Honda has also other joint ventures in India such Honda Siel Cars India Ltd,

Soichiro Honda:
The story of Honda Motor Company would be incomplete with Soichiro Honda, the founder of Honda company, the man who single handedly change the history of two-wheeled vehicles that you ride today.

Born on November 17 1906, at Komyo Village, which is now known as Tenryu City, to Gihei Honda and his wife Mika. Soichiro Honda had a fascination about machines since childhood. Gihei Honda was a blacksmith and his wife was a weaver. Despite poverty, Gihei instilled the ethic of hard work and love for machines into Soichiro. There was a rice mill in Yamahigashi that ran on a small engine. As a child, the sound of the motor fascinated Soichiro. Since his childhood, he used to work with various mechanical tools.

At the age of 15, without any formal education, Soichiro Honda came to Tokyo and obtained apprenticeship at a garage in 1922. It was a hard time for him. He moved around here there. Finally, at the age of 22, he started his own auto business. In 1937, Soichiro started to produce piston rings for small engines. In 1948, he established Honda Motor Co. Ltd. to build small capacity motor cycles. From there, he turned Honda Motor Company into one of the biggest auto-makers in the world. Soichiro Honda died from liver failure in 1991.

Honda wining Japanese auto market:
Till now, Toyota Motor Corporation used to be the top automobile seller in Japanese auto-market but the reign of
Toyota is coming to an end. For the last eight month, Honda Motor Company has remained in the top position in passenger car sales. Honda’s Fit compact is now the most popular passenger career. According to the data of Japan Automobile Dealers Association, In June, sales of Fit compact rose 77% to 14,702 units. Toyota’s Corolla made it to the second and third position with Toyota Corolla and Vitz. Bloomberg reports:

Demand for the Fit and new Freed minivan boosted Honda's domestic sales, excluding minicars, by 4.1 percent last month. The latest version of the Fit, introduced in October, helped Tokyo-based Honda end the Corolla's four-year reign as Japan's bestselling car model in the year ended March 31.
Honda winning the USA auto market:
The USA is the biggest auto market in the world. After price gas rose to $4 per gallon, consumers started to shift their attention to small fuel efficient car where Honda is the pioneer. Even its major Japanese competitor Toyota Motor Corporation is incurring losses in the USA. SF Gate reports:

The No. 2 Japanese automaker, with the most fuel-efficient model lineup in the industry, never put both feet into the U.S. truck market, focusing instead on slow-but-steady growth with popular cars such as the Civic and the Accord.

It paid off in June. While its major competitors reported double-digit declines in sales and burgeoning truck and sport utility vehicle inventories, Honda had a modest 1 percent sales increase. Its car sales were up almost 20 percent from the same month last year; the Civic and the Accord were among the industry's top sellers.

John Mendel, Honda Motor Company’s executive vice president said that they were not geniuses but they were consistent. Auto industry analysts pointed out two reasons behind Honda’s success. One, they have a good line-up of small fuel-efficient vehicles and their factories are very flexible. They can produce more vehicles if necessary.

Poor conditions of American manufacturers:
When it comes to American manufacturers, three come to mind: General Motors, Chrysler, and Ford. All these companies produce large vehicles like pickups, SUVs which are now shunned by the US-consumers. More than half of the factories owned by these three companies produce trucks. With the rising price of oil, the US car market now consists of 56% cars and 44% trucks. This has resulted into huge sales drop. Now the three companies are planning to shut down many of its factories. Their condition is so bad that they could not even switch to producing large amount of small fuel efficient vehicles in the short term. Share prices of the companies dropped as well. Now, they have nothing but to prepare to accept a huge loss in their business.

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