Mr. Iacocca, Meet Mr, Honda
Lee Iacocca and Soichiro Honda are, arguably, the two most famous auto men of our time. But that's where the similarity ends.
One is a grease monkey in the grand American tradition of Henry Ford, William C. Durant, and Walter P. Chrysler. An innovator with a common touch, his loathing for government and government bureaucrats is exceeded only by his fascination for motorized travel. He understands not just what consumers want, but also what they need.
The other is a veteran corporate manager, an obedient underling whose career has been a succession of well-calculated steps up the ladder. His passion for authority even extends to government, whose power and bureaucracy he would turn loose for the greater glory of the nation's industry.
If you thought the first was Lee Iacocca, you're wrong. For it is Soichiro Honda who is the genuine article, the spiritual descendant of the founding giants of the Motor City. Here is the Japanese businessman who built what has grown to a $5-billion business by bucking Japan's famous government planners and establishing a corporate culture based on creativity, not obedience. Although it would probably never occur to Honda to write a best-selling autobiography trumpeting these qualities, he spoke volumes recently in a rare interview with INC. His subject: the differing cultures of the American and Japanese auto industries.
It is one of Lee Iacocca's favorite conceits that the basis for Japan's industrial ascendancy was the manipulative planning of Japan's Ministry of International Trade and Industry (MITI). "Japanese industry is not playing by itself," he explained in his autobiography. "It's backed to the hilt in its close relationship to the Japanese government in the form of MITI."
Soichiro Honda's cheeks flush when he hears such accusations. MITI, which has always been the pure expression of Japan's in-bred Tokyo University elite, has never had much use for rough-hewn Honda or his company. When he started revving up motorcycle production after World War II, MITI officials were uncooperative, claiming, as he remembers it, that his fast-growth strategy "bordered on insanity." Then 15 years later, MITI again tried to block his forays into the auto business, claiming that Japan needed fewer, not more, automakers. "Probably I would have been even more successful had we not had MITI," explains Honda, who was forced to wage a bitter struggle against MITI in the Japanese parliament in order to launch his car division. "MITI was incapable of making automobiles, but I was."
Now Honda has done more than simply make cars. The business he started, Honda Motor Co., has created a succession of products, from the tiny, low-end Civic to the tony, highly advanced Acura line. Did his infant company benefit years ago from Japan's tariffs and trade barriers? Sure. But these protections have since been significantly reduced, and can hardly explain away Honda's brilliant assault on the huge U.S. auto market.
In reality, Japan's success in America is a product not of a highly managed Japanese car market, but one that is intensely competitive, a free-for-all crammed with companies such as Honda, which rejected MITI's call for cartelization. And as often happens, competition has generated a tremendous amount of innovation. Toyota, for example, has developed a worldwide reputation for the best manufacturing technology. Mazda, like Honda slated for automotive oblivion by MITI, seized upon the rotary engine and, despite massive engineering and marketing problems, developed one of the most exciting sports cars on the market. Another upstart, Subaru, pioneered the mass-marketing of four-wheel-drive automobiles.
Does the American auto executive draw any lessons from the competitive Japanese domestic marketplace? Apparently not. Lee Iacocca opines that the American auto industry probably needs still further consolidation. He has stated, for instance, that a merger between Chrysler Corp. and his old employer, Ford Motor Co., would make "a lot of sense." And at another time, one of his pet projects was to link up with Volkswagen in a scheme he called the Grand Design. This is the kind of oligopolistic logic for which MITI is famous.
Of course, Iacocca, the father of the Chrysler bailout, is hardly one to talk about too much government interference in the marketplace, although he does it all the time. More recently, Chrysler has chalked up millions of dollars in profits, which Robert B. Reich and John D. Donahue, who have written a book on the Chrysler bailout, attribute directly to "voluntary" import restraints negotiated by those dreaded government bureaucrats. Actually, voluntary restraints were merely a compromise -- what Iacocca really wanted was import quotas.
By contrast, Soichiro Honda has made his way in the auto world by mastering the marketplace, not the political system. His is the entrepreneur's classic faith that a small firm, acting decisively, can outmaneuver larger players in government or in industry, American or Japanese. "We feel that strength is weakness, and weakness turns out to be strength," Honda explained sitting in his modest office in downtown Tokyo. "If they are human, so am I."
It is unlikely Honda would ever become, like Iacocca, the darling of Wall Street -- certainly not with views like: "I always had a stronger desire for work itself than for money -- the desire to explore something new that other people haven't done. I don't want to walk on the path that is already created by other people."
Actually, Honda's preference for the path not taken was more than simply a corporate philosophy. Early on, it became a marketing strategy as well. "Our maketing people were told that Americans would never buy motorcycles," he recalls with an impish grin. "Then we started thinking: 'How can we modify a motorcycle in such a way that the Americans would like to buy them?' Then our thinking pattern went to: 'Well, let's make some kind of motorcycle that can be carried in a car.' If you want to go fishing, you don't expect to find many fish in areas that are accessible by car. So you want to get off from the car and ride on a motorcycle to where you expect to catch many fish.
"I didn't even have money to conduct market research," Honda continues. "I had to rely on intuition, believing that what I like must be liked by other people." And Honda's intuition told him that humans have a "natural desire" to get to remote places quickly, where fish are biting or the wildlife is plentiful -- and it told him that this was especially true of Americans, whose country is so spacious and whose national identity is so caught up with the idea of the wilderness.
"This is the kind of thinking that shattered the existing idea about transportation," boasts Honda of the successful entry of the Honda Super Cub cycle into the American market. The American manufacturers, fixated on their existing customer base, continued to turn out large, powerful motor machines. But Honda's thinking went beyond the identifiable aficionados to those regular folks who might become new customers for the motorcycle. It is that insight that has now led Honda, and later other Japanese motorcycle makers, to world dominance in the space of 20 years.
Although perhaps the best of his breed, Iacocca of Detroit never showed anything like the seat-of-the-pants marketing genius of Honda of Tokyo. His great triumph, the Mustang, was essentially a styling innovation; as a piece of engineering, it was little more than an adaptation of earlier models. His greatest failure, the Pinto, was a corporate nightmare. According to a detailed article published in 1977 by the magazine Mother Jones, Iacocca discouraged any talk of delaying production of the Pinto to deal with basic safety flaws. "Safety wasn't a popular subject around Ford in those days," an engineer who worked on the car told the magazine. "With Lee, it was taboo. Whenever a problem was raised that meant a delay on the Pinto, Lee would chomp on his cigar, look out the window, and say, 'Read the product objectives and get back to work." According to Mother Jones, the Pinto's defective gas tank eventually caused from 500 to 900 burn deaths.
Now at Chrysler, Iacocca's lack of interest in making a first-class subcompact continues. Instead of trying to develop one on his own, Iacocca has embarked upon a joint venture with his supposed blood enemies, most notably Tokyo's Mitsubishi Motors Corp. Chrysler advertisements, in fact, have boasted that the company's cars are the work of "the master car builders of Japan."
Honda's approach could not have been more different. Rather than advertise someone else as a "master car builder," Honda insisted on becoming one. He dedicated his company to producing the best-engineered and best-constructed automobile possible. In fact, so obsessed was Honda with quality that he would dog the workers on the assembly line, sometimes screaming over the slightest quality problem. "Mr Thunder," as he was known by the employees, once even stripped naked before his engineers to assemble a motorcycle engine. On another occasion, infuriated by what he felt was incompetence on the line, he struck a laggard worker with a wrench.
"I have been very servere, [because] we are not selling clothing or apparel. We are selling things that can affect customers' lives," Honda insists. "If a small thing like a bolt or a nut goes wrong, the customer's life is in jeopardy. That is why I regard even the tiniest bolt and nut as very important factors for the protection of our customers. As far as work is concerned, I never make any compromise."
Small thing: Lee Iacocca established a foundation to raise money for the refurbishing of the Statute of Liberty. Honda used his own fortune to establish a large foundation in Japan to promote car safety.
Maybe one reason Honda feels so keenly about safety, and has such a good sense about the consumer, is that he has never lost touch with ordinary people. While Iacocca inhabits the world of elite Detroit suburbs, million-dollar bonuses, private jets, and swanky New York parties -- the "royal class" as he once called it -- Honda prefers to mix it up with the hoi polloi. It is not uncommon to find him in the red-light district of Tokyo, hanging out with the geishas, drinkers, gamblers, and tourists. Though his age has now forced him to cut down on his carousing, he believes it has been helpful in learning about his customers.
"I have never belonged to any secluded society," Honda explains. "I associate with anybody -- rich, poor, it doesn't make a difference. . . . I prefer to have the principle of egalitarianism rather than a class distinction of people.
"The most important thing in the world is not diamonds or gold, but humans. And everbody has to learn about humans. In order to do that, we have to have broad contact."
Honda's insistence on broad contact with consumers extends to broad contact with employees. "We make no distinction between manual workers and white-collar workers. You can see it for yourself if you visit out plant in Ohio, where everybody from the president to the youngest member of the company dines at the same cafeteria, eating the same food. And we don't have an executive dining room."
There is the revealing story told of the time, several years ago, that Honda was entertaining a customer at a Tokyo drinking establishment when the customer accidentally dropped his dentures into a septic tank. Everyone felt sorry for the man, but nobody wanted to retrieve his dentures. So it was Honda, already a man of stature in Japan, who went in after the mouthpiece arms first. "Nobody wanted to pick it up, not even the owner of that particular restaurant or the employees," Honda recalls. "I did it because . . . I wanted to show a good example. If you are a manager, if you are a top man of a corporation, you've got to lead others by showing good examples."
It's hard to imagine Lee Iacocca, dressed to the nines for an evening with his friend Donald Trump, getting his hands soiled in such a way. Indeed, Iacocca's notion of leadership reflects a sort of macho elitism, a desire, as he once put it, to be "numero uno . . . or no dice." But there is a limit to how much such egoism can accomplish. During the dark days at Chrysler in the late 1970s, certainly Iacocca's aggressive self-promotion gave the failing company some much needed pizzazz. But now that the balance sheet is in order, Iacocca, at 62, has in some ways become bigger than the company he heads. What will happen to Chrysler after Iacocca is now a matter of some troubling speculation.
Certainly Soichiro Honda, in his prime, was no less a dominating personality. But his style of leadership has allowed the company to flourish well after his departure from active management. A thoroughgoing individualist, Honda successfully created a firm built around other individualists -- a company capable of duplicating his spirit. A company research-and-development subsidiary was established so that young innovators could develop their ideas without the sort of senior staff interference that often stifles creativity in Japanese business. And the board of directors long ago learned to make its decisions without consulting the company founder: some 10 years before he retired in 1973, Honda encouraged the directors' independence by declining to attend their meetings.
Honda Motor Co. today is a company of remarkable vitality, with sales that have more than tripled over the past decade. A clever and bombastic marketeer from Detroit wants you to believe that the unfair trade practices of the Japanese account for much of that success. A soft-spoken entrepreneur from Tokyo knows it isn't so.