That led to a timetable that itself was something of a first for the auto industry, where all manner of hiccups, from the weather to environmental permits, can knock a manufacturing plant off schedule. Even years after it opened, people in the industry are still amazed at how quickly Honda opened the Lincoln factory, particularly given all the risks that the venture involved. Honda announced the $580 million project in May 1999, with an initial completion date set for two years later. It planned to hire 4,300 workers, who would build 150,000 vehicles a year in a plant that had 1.7 million square feet. Honda broke ground for the factory in April 2000. It went into production in November 2001, six months earlier than Honda had first planned. Not only that, but before Honda even finished the plant it announced that it would expand it. By the time the expansion is complete, Honda will have invested $1 billion in the Lincoln plant, which will employ 4,300 workers, cover 2.8 million square feet and produce 300,000 vehicles a year.
The project was a breakthrough assignment for Lincoln’s plant manager, Chuck Ernst, a native of Middletown, Ohio, who had begun his manufacturing career working in the steel industry. But Ernst heard positive stories from friends in Ohio who had joined Honda, and he signed on there in 1985 when Honda began hiring staff for an engine plant it planned to build in Anna. He became the second American assigned to the plant, which Honda announced three years after it began building cars in Marysville. When Ernst arrived, Honda didn’t even have a trailer parked on the site for the factory, so Ernst and his small staff made do with offices in a house. Ernst, who looks more like a banker than an automobile industry manager, with neat graying hair and fashionable small glasses, spent time in Japan training in the ways of Honda’s manufacturing operations and learning to understand the Honda Way. “Honda’s corporate culture is made up of a lot of little things,” said Ernst.
He loved his job at the engine plant, which built engines not only for the Honda Accord and Civic but also for the Gold Wing motorcycle, Honda’s premier touring bike. On the first day of production, he remembered looking at the engines coming off the assembly line and thinking, “Will it start? Of course it will start!” He draws on his engine-building expertise every day at the Lincoln factory, which has emerged within the Honda network of factories as a collaborative effort, drawing from the company’s experiences around the world. Walk through the plant and you’ll hear a collection of accents, many from the South, of course, but others from Ohio, from Japan and from Canada. The Lincoln plant has relied heavily on its sister plant in Alliston, Ontario, for advice and a road map as it has begun producing the Odyssey. It isn’t so much the minivan’s size that sets it apart, said Ernst, as the fact that it is not a car, and the production lines here draw a number of visitors from all over Honda’s operations to see the company’s only dedicated truck plant.
Lincoln has borrowed from elsewhere in Honda in other ways. It was able to keep its investment costs low and speed up its timetable by procuring unused equipment from Honda’s factory in Swindon, England. Over came a giant machine used for machining, or polishing, engine blocks, saving the plant $600,000, while from Honda’s plant in Wako, Japan, came a big casting machine used to produce the blocks themselves. That saved another $500,000. Meanwhile, its stamping pressures, which make sheet metal parts for the Odyssey, are so productive that they are making extra parts and shipping them up to Honda’s plant in Canada.
But along with the savings, Honda is paying an attention to detail inside the Lincoln factory that is remarkable even in a company that is known for the care it takes in building automobiles. One such example is in the stamping plant, where, standing on a catwalk above the plant floor, visitors can watch big metal presses in action. They make a constant thumping sound as they hammer through layers of steel to make roofs, side panels and hoods. Larry Hughes, the stamping plant’s manager, knew nothing about this process when he joined Honda at its Alliston plant, but he is here now to train Honda’s Alabama workers in the intricacies of making sheet metal parts.
Half a dozen workers, wearing protective goggles and cotton work gloves, stand in anticipation next to a conveyor line at the end of one of the stamping presses, waiting for roofs to be completed. When one appears in front of them, they pore over it, looking for nicks and scratches and any kind of minuscule defect that might cause a customer to complain to their dealer. Every so often, one of the roofs is taken off the conveyor line and walked over to a special inspection area. Here, one of the Honda workers rubs a stone coated with oil across the metal hood, a process that is supposed to expose any flaws within the metal surface itself. “You can pretty much see the deformities,” said Gordon Hammond of Talladega, Alabama, demonstrating how he uses the stone, much like an eraser, to see if there is anything amiss. Perhaps 10 to 15 times during an eight-hour shift, Hammond might spot something wrong, and if that happens, the inspector immediately shows the flawed hood to a supervisor. Together, they take action. “We stop the press, and go in and clean out the die [before the press is allowed to resume operations],” said Hammond.
That same care can be seen in the engine plant, whose foundry is quiet, clean and virtually odor free, in contrast to the filthy, noisy and smelly foundries that auto companies have operated since the earliest years of the industry. Soichiro Honda would have a hard time finding anyone to slap here, and he would probably be likely to be pleased by all the care that is being taken with the engine components. Months after the plant began production, the engine plant staff noticed that Alabama’s humidity was having an effect on the metal bearings and cylinder parts that were being shipped to the plant. The heat and the stickiness caused them to weep moisture. So engineers decided to store the parts in air-conditioned trailers until they were needed on the assembly line. It was a minor detail, but if an engine were to fail on an Odyssey, Honda would wind up with an unhappy customer and lose a chance for positive word of mouth. Appearances count here, too, even in places owners might not think to look. After each engine is finished, it gets a protective wax coating that takes 45 minutes to cure. It provides an attractive sheen and also protects the engine from wear and tear.
John Penrose, the manager of the plant’s paint shop, is even more concerned about the way vehicles look when they leave this plant, because the Odyssey’s finish is one of a customer’s top priorities. Like the foundry, the place is scrupulously clean. Nearby, a line of workers is inspecting vehicle bodies under bright white lights that, combined with their gleaming uniforms, seem to cast a halo around the minivans. Penrose, a veteran of 20 years at Honda, said he has not yet gotten bored at the company in a range of assignments, from the R&D center at Marysville to three years spent in Japan. “Honda’s approach is that they give everyone a chance,” said Penrose, who is stocky with blond hair and looks like he’d be right at home running the rowdiest fraternity on campus. “If you take half an interest, they’ll let you try.” But he points out that Honda’s preciseness is not for everyone, and he admits that over the years he’s been the subject of calls from headhunters many times. “I know a lot of people who didn’t like it. It’s not an easy company to work for,” Penrose said. Still, after 20 years of the Honda Way, “I’d be a fool to go anywhere else. What I give them, I get back in respect.”
Back on the plant floor, the day’s production of Odysseys is winding through the assembly line, passing before the eyes of two tour groups—one of senior citizens, the other of high school students—who have come to see the Lincoln plant. The seniors look amazed by the robots and the rest of the technology, while the students are trying hard to be blasé about the field trip, but it’s clear that this is a sight that has all of them transfixed. When production is complete, the minivans go through a series of tests, checking their engines, their gauges and tires, before being taken out on a short test drive. Then it is off to a marshaling yard, which sits in the distance beyond the construction site for the new plant. The yard is filled with Odysseys as far as the eye can see, and as fast as they arrive from the
factory’s back door, they are lined up in order to be driven onto delivery trucks. Every one of them has a customer waiting for it.
And that’s no more than the minivan’s engineers—Odagaki, Benner and Berkman—could have hoped for when they spent so many miles crisscrossing the United States. Long before the Odyssey went into production in Lincoln, the trio had already gone on to their next engineering projects—Odagaki in charge of the Honda Civic, Benner assigned to the Honda Element and Berkman to work on the Acura CL and TL luxury cars. Even now, however, the Odyssey stands out in their memory as a project that typifies what Honda is all about: coming up with the best vehicle in its market segment, no matter how long it has been dominated by the competition. Said Berkman, “The Odyssey has become a pillar” for Honda and for its determined engineers.
CHAPTER FIVE
HOT DOGS, APPLE PIE
AND CAMRY
A VISIT TO TOYOTA’S CHAIRMAN, Hiroshi Okuda, can be an intimidating experience. His office is in Nagoya, Japan, two and a half hours west of Tokyo on the bullet train, and an hour from Toyota City, the sprawling complex of factories, engineering labs and research facilities that is the center of Toyota’s global empire. Upon arriving at Toyota’s office building, visitors shoot down a ramp to an underground garage, where an assistant to Okuda stands waiting at an entrance near the elevator to greet them and whisk them upstairs and down silent corridors to a conference room, sparsely decorated with ten chairs, with low coffee tables in between and subdued paintings on the walls. Though it is a warm March day, a smartly dressed receptionist brings cups of steaming green tea. Then Okuda’s assistant returns, to remind his guests that the chairman has a full schedule. The meeting must start precisely on time and end on time, for he has a meeting afterward in connection with his role in charge of the Keidanren, the Japanese equivalent of the Business Council, a symbolic yet influential group of the country’s most important companies. The warning simply adds to the sense of tension, and the room falls silent.
Ten minutes early, Okuda bursts in. Unusually tall and broad-shouldered for a Japanese man, his face breaks into a smile beneath a sweep of jet-black hair, giving him a jaunty look that belies his 69 years. Greeting his visitors in English, he gives a quick command to his assistant. Within minutes the receptionist returns, removing the green tea and replacing it with refreshing glasses of iced tea, and makes yet another trip a bit later to bring orange juice and then ice water. In contrast to the formal atmosphere before he arrived, Okuda is relaxed, loquacious and happy to talk about where he thinks Toyota is headed, particularly in the United States, which in 2001 became its biggest market, outdistancing Japan for the first time. Speaking through an interpreter, but clearly understanding questions asked in English, he stays on for 20 minutes beyond the allotted time for the meeting, clearly enthusiastic about his role in crafting Toyota’s future.
The experience is analogous to the situation that Toyota itself is in—encumbered by formality and tradition, yet with executives who see that there is an opportunity to grow if Toyota can change the way it does things, and who are seeking the right pace and strategy for the company to achieve its goals. Though Okuda’s title is now mostly ceremonial—in Japanese companies, the chief executive has the greatest day-to-day influence—Okuda was a key driver in Toyota’s efforts during the 1990s to position itself for the global growth that is occurring now. During those years he served as chief executive, the first time the role had not been filled by a member of the Toyoda family. It was Okuda who backed Toyota’s expansion in American manufacturing, traveling to a farmer’s backyard in Princeton, Indiana, for the groundbreaking when Toyota launched its truck plant there. Okuda approved Toyota’s push into the light truck market, and he played a key role in the selection of his successor, Fujio Cho, who is now putting into motion the plans that Okuda crafted.
It’s tempting to say that what’s happening to Toyota is an Americanization process. That’s certainly how its efforts have been perceived by the media in the United States and Japan. It’s more accurate to say that Toyota is breaking out of the mold of a traditional Japanese company to become the world’s first truly global auto company. More than General Motors, Ford or DaimlerChrysler, Toyota has the best opportunity to be a player that meets the needs of consumers around the world, no longer relying on its traditional home market for the vast majority of its sales and revenue, as the Detroit auto companies do. Since 2001, the United States has been Toyota’s biggest market, followed by Japan, Europe, Asia and Latin America. While it has yet to make a significant impact in the European market, it has not yet given up. Its cars score top ratings on J.D. Power surveys there, and its plant in France is considered within the company to be its most efficient and advanced.
What’s more, Toyota has enormous financial strength from which to launch its plans. It earned an operating profit of nearly $12 billion in 2002, more than the combined profits of the Detroit auto companies during the past 5 years. It has $34 billion in cash and $100 billion in assets, and it is basically able to act as its own bank. Toyota’s quest to become the biggest global auto company by 2010 would be unthinkable without its Japanese roots, sunk deep in Toyota City, but it also would be unthinkable without its strength in the United States. In that, Toyota is pulling off something Detroit companies have not yet been able to do—provide itself with both a solid foundation and opportunities for seemingly endless growth for the future.
Until 2003, Toyota was the most Japanese of auto companies. It was governed by a 58-member board of directors, all of them Japanese males, many of whom had responsibility for Toyota’s day-to-day operations along with their directors’ jobs. The board had no women, no Americans, no Europeans and no one from outside companies. It was quintessentially Japan-centric. The structure was vastly out of sync with the way companies are run in the United States, where directors have oversight over company management but do not play an active role. And it was even at odds with other Japanese companies, particularly Honda, which had only a 25-member board, and Nissan, which was aiming to cut the size of its board to seven members. Throughout 2002, Okuda, Cho and the company’s management debated the best structure for the company going forward. Some of Toyota’s most conservative managers argued that no change was necessary: Toyota could keep the same structure and keep its power centered in Japan, just give more power to the regional executives. Their view represented a small faction within the company who thought that the American market’s dominant role was just temporary. Once Japan rebounded from its decade-long economic slump, they said, it would be Toyota’s primary market again. So there was no need to change. A few rebels, particularly those who had spent time working overseas, called for the board system to be completely dismantled and an American-style board created. They wanted to see a complete reorganization of Toyota’s management functions to reflect its global reality. “I have a lot of frustration, as a manager who’s been here 22 years, that Toyota is not globalized enough,” said Illingworth, the executive who left Chrysler for Toyota, subsequently ran Lexus and is now Toyota’s senior American strategist.
But Cho resisted efforts for a quick resolution, saying that the right structure would be announced when Toyota was ready. The result, like many things at Toyota, seemed like a modest first step. In March 2003, the company said it would cut its board by about half, to around 30 members. Below them, for the first time, Toyota would create a new layer of managing directors. This group included Americans, Europeans and executives who were younger than traditional board members, who generally got their appointments in their fifties and sixties. It was not radical change, but it was change. And it will not be the last step Toyota will take on the matter. Its history has shown that when it comes to key developments, it reaches its goals by evolution, not revolution.
There is no better illustration of how Toyota achieves its objectives than the creation and gradual dominance of the Toyota Camry. Just as the Model T symbolized Ford’s early history and the K-car th
e renaissance at Chrysler in the 1980s, the Camry sums up everything that Toyota has become in the United States. “The Camry is literally the straw that stirs the drink for Toyota,” said Peter DeLorenzo, editor of Autoextremist.com. “This one car was responsible for convincing a generation of Americans that there was a whole other world of transportation out there. It is transportation that is reliable—meaning where things just didn’t go wrong, a totally alien notion to American consumers. It changed the American market forever.”
Camry is the centerpiece of Toyota’s growth and achievement in the United States. While Toyota’s focus most recently has been on expanding sales of light trucks, none of it would be possible without the Camry as its linchpin. The Camry has been the best-selling car in the United States since 1997, despite a strong challenge from the Honda Accord. It has become to the car market what the Chevrolet Impala was in the 1960s, what the Ford Taurus was in the 1980s: the indisputable leader. It is the quintessential American family car. Every Camry sold in the United States is built in Georgetown, Kentucky, just north of Lexington, where it rivals Thoroughbreds and bluegrass as the most treasured icon in the state. “If there’s such a thing as a politically correct car in central Kentucky, it’s a Toyota,” said Mike Tewell, a local Toyota dealer. John Stewart, an assembly line manager at the Georgetown plant, said everyone there sees Toyota as a local company now. That wasn’t true when he was growing up. “When I first got hired here, I didn’t even know what a Camry was,” said Stewart.
But there are millions of other people who did. In the 20 years in which the Camry has been on sale in the United States, Toyota has sold nearly 6 million of them, whether sedans, coupes or station wagons. Moreover, nearly 5 million of them are still in operation, according to statistics from R. L. Polk & Co. Year after year, Camry gets high ratings from Consumer Reports, whose recognition of the car in the 1980s set it on its road to American dominance, despite whatever challenges have been posed by the Accord, the Hyundai Sonata and the Nissan Altima. One reason is its resale value. In 2003, a five-year-old Camry was still worth 52 percent of what a customer paid for it, versus less than 40 percent for a Chevrolet Malibu, according to calculations by Edmunds.com. Camry received an unexpected tribute in February 2003 from one of its rivals, proof how even Detroit companies can’t ignore what the Camry has come to symbolize. “Very frankly, Camry is a better product than Taurus today,” said Jim O’Connor, head of sales and marketing for Ford. O’Connor’s comments, made to journalists at the Chicago Auto Show in 2003, came as it was becoming clear that Ford would probably lose to Toyota its title as the number-one car-selling brand in the United States.
The End of Detroit Page 12