"We have now established ourselves on solid ground domestically," said Senior Managing Director Takeo Fujisawa. "Eventually, we'll have to aim to be number one worldwide. So, with that in mind, why don't you go check out the overseas market?" Contact online >>
"We have now established ourselves on solid ground domestically," said Senior Managing Director Takeo Fujisawa. "Eventually, we''ll have to aim to be number one worldwide. So, with that in mind, why don''t you go check out the overseas market?"
American Honda shortly after its establishment
The order had thus been given, and Kihachiro Kawashima, then manager of the Sales Section at headquarters, began his preparations to study the Southeast Asian market. It was a logical step for the company to take, since it had within a mere seven years established itself as a top manufacturer in the Japanese motorcycle industry. And now the expansion of exports to overseas markets was a very real possibility, reflecting a shift in Honda''s policy from domestic fulfillment to a more international profile, featuring such products as the Dream (in 250 cc and 350 cc versions) and Benly (125 cc).
Honda soon began exporting sample motorcycles, about which Fujisawa was emphatic. "Instead of relying on a trading company," he said, "we should first take a look at the overseas market for ourselves. Then we''ll find the best way to do business there."
Honda conducted market surveys in Europe and Southeast Asia from the end of 1956 to early the next year, with the former being covered by Soichiro Honda and Fujisawa and the latter taken by Kihachiro Kawashima.
In Southeast Asia motorcycles and mopeds imported from Europe were making their first appearances in the cities and towns, signaling the emergence of a popular new means of transportation that would soon rival the bicycle. In fact, as the region''s economy grew, motorcycles were expected to outstrip bicycles.
Kawashima conducted a survey that lasted for more than three weeks, after which he returned to Japan and reported to Fujisawa that the Southeast Asian market was indeed promising. In return, Fujisawa told Kawashima, "Now, go off to America and check it out," ordering him to conduct a similar survey in the U.S. The country that Kawashima saw was truly the Land of the Automobile. After all, cars were an absolute necessity amid the vast expanses of rural territory, which had for years lacked a viable commuter network of railroads. And motorcycles were seen merely as adjuncts to cars, like toys one could use for leisure or, if one was daring enough, racing.
"I had always thought that motorcycles provided a means of transportation with which one earned a livelihood," Kawashima recalled. "Sure, they doubled as toys from time to time, but mainly they were used for everyday necessities. So, in my view America didn''t come across as a country that had really accepted the motorcycle."
Upon his return from the U.S., Kawashima made a proposal to Fujisawa: "I believe it would be easier to begin with the Southeast Asian market than America."
Fujisawa considered the suggestion for a moment, then turned and gave a firm reply. "On second thought," he said, "let''s do America. After all, America is the stronghold of capitalism, and the center of the world''s economy. To succeed in the U.S. is to succeed worldwide. On the other hand, if a product doesn''t become a hit in America, it''ll never be a hit internationally.
"To take up the challenge of the American market may be the most difficult thing to do," Fujisawa concluded, "but it''s a critical step in expanding the export of our products."
Fujisawa, though, had already decided not to rely on a trading company, saying he preferred that Honda develop a sales network of its own. Eventually American Honda Motor Co., Inc. (American Honda), was established as a wholly owned sales division of the parent company. Moreover, Fujisawa instructed Kawashima, then just 39 years of age, to relocate to the U.S. as the general manager of the new American company.
Fujisawa had the benefit of considerable experience building Honda''s domestic motorcycle sales network. He was also aware of the pitfalls that awaited businesses when they depended on third parties to do their legwork. He was afraid Honda would not be able to do business as it wished when the other company''s interest took priority. Moreover, he believed that selling durable goods such as motorcycles implied a responsibility for service after the sale.
It was a bewildering question for Kawashima. "I wonder if I''m really up to this big job," he thought. "What a huge project they''ve given me!" He had no choice, then. Knowing he couldn''t simply give up before attempting anything, he went to work on the establishment of American Honda.
Kawashima chose Los Angeles in November 1958 as the most likely location for Honda''s American offices, following a tour of several candidate cities. Los Angeles had a warm hospitable year-round climate, with minimal rainfall. Since climate was a determining factor in sales, the fact that there was so little rain meant the company could be in business all year long. It was the perfect environment for American Honda.
Los Angeles was also home to many Japanese-Americans, about whom Kawashima felt a certain kinship. For Kawashima, who would soon be taking up an enormous task in a land he knew so little about, the presence of this community was a boon to his morale. These were fellow countrymen, he thought, who would be there to back him up.
His investigative tour thus concluded, Kawashima quickly drew up a plan for the establishment of Honda''s new American sales division. This plan, however, would require the approval of the Ministry of Trade and Industry and the Ministry of Finance, since foreign currency was to be taken out of the country in order to establish a corporation overseas. Government regulations were in place to control how much currency could be taken out of Japan.
Honda''s application to take out foreign currency in the amount of $1 million in capital funds (then approximately 360 million yen) was mercilessly denied by the Ministry of Finance. The ministry maintained that a motorcycle maker such as Honda couldn''t possibly succeed in the United States, when even a major car manufacturer that had established a sales company there was experiencing great difficulties.
Kawashima continued his visits to the Ministry of Finance, hoping to settle the issue. Finally, in April 1959 Honda was given the approval to take out foreign currency in the amount of $250,000 in capital funds. This, however, was under the condition that cash equal to just half that amount would be taken out of the country. The rest was to be taken out in the form of products or investment in kind.
Kawashima relocated to his L.A. post in June 1959. His first task was to look for an office property that could serve as American Honda''s official business location. After shopping around, Kawashima decided to buy a former photo studio on West Pico Boulevard using some of his admittedly limited funds.
"I felt that we had to put down roots and establish our own building," recalled Kawashima. "So I thought, ''Let''s not rent for the time being. Why not just buy the building?'' It might have seemed reckless, but I didn''t feel that I was acting out of desperation. Actually, I was dreaming of a rosy future! Oh, I think the building must have cost about $100,000, but that left us with only $20,000 or $30,000 of our operating funds. Even the bank told me, ''You''ve got a lot of guts.''"
The local reaction to American Honda''s presence in the American motorcycle industry was decidedly down. "There is no way that Japan, having lost the war, could produce much of a product," opinion makers would say. "It won''t be easy for them to bring something here and sell it." Absolutely no one predicted any sort of success for American Honda.
The American motorcycle industry was then selling 50,000 to 60,000 units annually. It was a market just one-tenth that of Japan''s, yet several competitors were fighting it out for a share of the territory. Market expansion simply hadn''t yet been considered since, in the U.S., the car was the generally accepted mode of transportation.
Motorcycles were vehicles for outdoorsmen, racing enthusiasts and hotrodders. Most of the motorcycles sold in the market were large, too, with engines displacing at least 500 cc. What''s more, the motorcycle had an evil image heavily influenced by outlaws in black bomber jackets, commonly called "Hell''s Angels" in reference to the biker society of the same name. Motorcycles had a bad reputation in the American community, and were not embraced by common consumers.
Likewise, the motorcycle industry was thought of as being dark and dirty. Most motorcycle dealerships were dark inside, with oil stains on the floors. This was not altogether inaccurate, since it was common to find oil pans on the sales floor, there to catch the fluid as it dripped from the bikes on display. The atmosphere could be far from inviting.
American Honda began its sales activities in September 1959, with a tiny staff of eight. The company''s lead products were the Dream, Benly, and Super Cub (called the Honda 50, in the U.S.), which had just made its Japanese debut. There was nothing small about the monthly sales goal, though. It was immediately set at a lofty 1,000 units.
The thinking was, they simply couldn''t grow without adapting their management strategies to the local community. Employees were hired locally, making for a total sales force of eight people, including Kawashima and his subordinate, Takayuki Kobayashi. In truth, the locally hired people proved beneficial to Honda''s effort, since they had connections with existing dealers throughout Southern California. Mailings were sent to those dealers, while Kawashima himself visited shops in an effort to promote Honda motorcycles. Moreover, the company ran ads in local trade papers and motorcycle magazines, hoping to entice dealers. Not surprisingly, managers from the dealerships began appearing at American Honda, hoping to test-drive the bikes.
They had been handling American brands like Harley-Davidson and European imports like Norton and BMW, so the Honda motorcycles, with their small frames and strange, boxy features, looked like nothing they had seen before. In fact, many of them thought the product would never sell. Those who test-drove the motorcycles were invariably impressed by their performance, and often they would purchase bikes as examples of Japanese design and craftsmanship.
The decade of the 1960s was soon in full swing, and amid this new atmosphere of progressivism and possibility - the fabled Jet Age - Honda''s monthly sales hit several hundred units.
"It looks like we may be able to do it in America," Kawashima thought, but he was simply flushed with the potential of the moment. For just as he had begun to experience some results, along came the news that problems were occurring with Honda products. Several of the engines in American Honda''s main products, the Dream and Benly, had overheated and seized up. In fact, seizing had occurred in more than 150 of them. Mechanics were immediately dispatched from Japan, and Honda went to work in order to deal with the problem. Kawashima knew that a number of the same products were on their way over from Japan to the Port of Los Angeles, so he would have to do something soon. He wracked his brain trying to come up with the answer.
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