Senior Managing Director Michiyoshi Hagino is in charge of Honda's global automotive operations.

Has the strategy been working well in the ensuing seven years (Kawamoto has retired, and Hiroyuki Yoshino, also an accomplished engineer, is now president)? Senior Managing Director Michiyoshi Hagino in charge of the company's automotive operation affirmed, "Yes, as a total strategy, it has been working to our satisfaction. With each region directed by its general manager, the decision process and operational efficiency have greatly improved. However, in the business perspective, each region differs, heavily influenced by its economic climate. The Americas, especially North America, are doing fabulously, while Japan and the Asia-Pacific regions are still suffering from the economic malaise, and in Europe we are struggling to establish our presence."

The current Accord series is the first tangible product of the Four Regional Operation strategy. All Accords are based on a common "architecture," a bit broader than a platform, with major components designed and developed by Honda R&D in Japan, a wholly owned subsidiary of Honda Motor Company responsible for product "blueprints." Each region gets its own version of the Accord architecture, best suited to its customer preference and market environment. The U.S. Accord is the biggest car, offered in a sedan and coupe version. The Japanese market gets a sedan and station wagon while the European Accord is sized between the other two market versions and is offered in a sedan and five-door hatchback version. The Asia-Pacific area opted for the larger U.S. size model. The previous-generation Accord was a product of compromise, to better "but not necessarily best" suit both the American and Japanese markets (the European Accord was then on a yet one-more-generation-older platform). It did well in the U.S., but its size and style, so perfectly appealing to the Americans, was perceived a bit too "bloated" in Japan. "So its performance varied on either side of the Pacific," lamented Hagino.

"This time, we have Accords that are best-suited to the specific regions," said Hagino. "Of course, a single body size on the same architecture would have been far more economical in the areas of design, development, and production tooling. The new Accord's performance in America, I firmly believe, is infinitely suited to the American consumers' requirements of a reliable, comfortable mid-size car." Hagino continued, "Back in Japan, the compact and mid-size sedan market is really devastated."

Some industry observers may say, "Why not sell a token number of the American-size Accords and be content with it, if you cannot expect the segment to continue to be stagnant?" Hagino replied, "Remember, this is the country where Honda Motor Co. has its headquarters. We are based in Japan. Therefore, we must have a mid-size car best suited to our customers here. We are doing moderately well, considering the economic climate and the market's shift toward non-sedan types."

The European D-segment front is fiercely competitive. "Had we launched the new American-size Accord there (although the company imports a small number of Ohio-built coupes into Europe), we couldn't have expected to do as well as we do with the new Europe-specific range. Still, our production capacity at the Swindon, UK, plant is not fully utilized, yet. It will be this fall with the addition of the second body type, a five-door hatchback. Europe is a tough market where a brand's image really speaks. Image and quality are two important elements, and it will take time to establish the marque. We have done that in America, and we will do it in Europe," he said.

The next-generation Civic will likely follow the Four Regional Operation strategy. This is another competitive segment, especially in Europe. The current Civic is again a solid success in the U.S. market, but is not faring well in its homeland. Smaller and economical B-segment cars are hard at the C-segment's heels, as seen in the recent Toyota Vitz offensive.

Toyota is now putting the final touch on the new Corolla range, said to be as ambitious and cost-efficient a design as the Vitz/Yaris/Echo. It will crash head on with the forthcoming Civic replacement. Hagino said his new Civic will be very advanced.

The Camry-vs.-Accord and Corolla-vs.-Civic battles, are now extending to the U.S. minivan segment with the Toyota Sienna and the Honda Odyssey. "It is not an intentional confrontation, as far as we are concerned," said Hagino. "Take the minivans. We did not plan to outsize the Sienna. By the time we saw it, our Odyssey design had been firmed up. We chose what we thought the best size for the U.S. market. Our target in the American minivan market was and is the Chrysler minivan, the country's best-selling vehicle."

The new Odyssey is the biggest vehicle Honda has ever built. And it incorporates typically sophisticated Honda features, including a quad-cam 24-valve V6, electronically controlled automatic, all independent suspension, and electrically operated sliding doors.

Is it more expensive than the minivan norm, which is content with a rear live axle on a pair of leaf springs? "Cost is indeed our livelihood. But what cost, if a product does not sell?" asked Hagino. "The Odyssey is the same in size and general appearance as the class-leading competitor. Chrysler packs a marketing clout that sells more than half a million minivan units a year. If we offered the same type of vehicle, what advantage would we have?" Honda's goal was to develop a "carpool-lane express" of a minivan, sure-footed and confidence inspiring.

Hagino is extremely pleased with the new Odyssey, with Honda's SED team who comprise marketing, manufacturing, and vehicle development groups. The new Odyssey project is called MAPLE, short for "Minivan for Americas, Produced through Lean Engineering." It also signifies its manufacturing base in Canada. Senior Managing Director Masami Iwai is Honda's manufacturing specialist, whose exacting demand on efficiency has born fruits in the new Plant 2 of the Alliston, Ontario, complex, said Hagino. It is by far the most efficient and compact production plant among the Honda factories, where the company's biggest vehicles are produced.

A pragmatic American Honda marketing executive once remarked, "Why not design and develop our next car in Japan. It would have been much quicker." Hagino grants the sentiment, "Yes, it would have been 1.5 times more expeditious in Japan, where we have all the facilities, material, and human resources. Nonetheless, it is our profound belief and philosophy that where we sell a large number of products, as in North America, we produce them locally. And where we produce a large number of products, we undertake a significant portion of research and development, including whole vehicle projects such as the new Acura TL." He added, "Some of our competitors sample our recent American-designed and developed cars, and often ask, 'Did they really do it in America?' Yes, truly and unequivocally, the new Acura TL, for example, was designed, engineered and developed by Honda R&D Americas, based in Ohio and California."

As for Europe, Hagino said a production volume of 300,000 units per year would not justify a full scale R&D center, therefore, the European R&D remains a testing and validation arm of the R&D headquarters in Japan. Any research and development organization in Japan is usually blessed with stable work forces, whereas in western countries as in the U.S., designers and engineers seek opportunities outside, and many move from company to company as means of promoting themselves.

Wouldn't that alarm Honda, especially now that Honda R&D Americas is capable of developing products? "No, not at all," said Hagino. "We obtain outstanding people from other companies. They should have every right to do the same from us. It's mutual. You cannot be selfish in this free country!"

In this age of mergers, affiliations and, companys aspiring to join the "Four Million Club," Honda appears determined to go on its own way. "We have never decided to go at it alone," said Hagino. "It is just that no right partner has emerged. One thing is certain. We would never repeat a Honda-Rover type affiliation. With Rover, their own buck did not stop there, but was merely passed onto us. On the other hand, we believe in an even, friendly affiliation. We do not believe in dominating the partner, which would generate tremendous frictions."

"Of the two recent major mergers and affiliations," Hagino commented, "DaimlerChrysler is a grand experiment. The Renault-Nissan affiliation is much smaller in scale. Some blood-shedding may be necessary for them to step forward."

Of the emergence of mega-suppliers, Hagino is wary. "What symbolizes the trend is modularization. They could readily package major components, be it a dashboard module, brake system, and suddenly an automaker finds itself as a mere assembler of those modules. It might certainly improve production efficiency, as has been apparent in the personal computer business, but I believe there is a limit to how far we would and should go. For example, we would never allow outside companies access to the fundamental of our internal combustion engine, intake, combustion, and exhaust technology. We are making our own fuel injectors." Hagino continued, "We purchase components, but we continue our research of those parts. Toyota buys components from its affiliate Denso, but they, too, undertake their own research. It is the supply industry's common knowledge that Honda knows every nook, corner, and depth of the components we buy. Because we do our homework well. At one time, we even made our own seatbelt buckle; that's the only way to learn the belt system. Several years ago, we mixed powder to bake brake pads. Our pads possessed outstanding properties—non-asbestos, high frictional coefficient, and wear resistance. We commissioned our supplier to produce them in quantity."

"We can never dream of buying fuel cell stacks from an outside specialist. That would be the heart of our fuel cell vehicle technology. We do our own. For electric vehicles, we wind our own motors. After all, we are Honda Motor, and the name includes electric motors."

Hagino recognizes that Honda must sail into more uncharted waters. "Chemistry, for one. That's what the fuel cell is all about. We are short of people versed in chemistry, as well as in electric and electronic areas. We must recruit more specialists, but it's not easy. On the other hand, hardship presents challenges and excellent opportunities. We moaned, groaned, and struggled when we entered the automobile industry, led by the founder Soichiro Honda. We made mistakes along the way, but that's part of the business. The people that made the move to the automobile industry are now Honda's management people. Surprisingly, Soichiro's pioneering spirit is intact and thriving among our engineering team."

Honda loves racing. It is expensive, especially since the company is returning to the Formula One arena. Hagino proclaimed, "How much we at Honda love to race, but it is so hard a toil. It is hard to win, and yet harder to lose. But we love winning and even occasionally losing. It is hard on our engineering resources, not to mention huge expenditures that need to be poured into the competition activities."

Hagino directed the development of the first generation Legend luxury car. That is one area Honda has not quite won, against such formidable forces as Mercedes, BMW, and Toyota. Hagino responded, "Ouch, that wasn't in the original list of questions! Yes, it is not just brand image, but corporate image at stake. We continue to challenge the cream of the world, with, if not a Mercedes S-class, but certainly an LS400 competitor. Else there won't be a car I could enjoy driving."