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Saturday, Feb. 4, 2006


How to get ahead in car building

Technology, quality and efficiency: That formula has guided Japan's Big Three car makers to world success. But that's where the similarities end, JEREMY CATO finds

What makes Japanese car makers so successful? To answer that question, the first thing you have to throw out is the stereotype.

There is not really one kind of "Japanese car maker," according to Nissan Motor Co. chief executive officer Carlos Ghosn, who learned this lesson first-hand after arriving in Japan in 1999 to steer what has become a legendary turnaround at Japan's number two auto maker.

"Toyota, Honda and Nissan are very different enterprises, with three very different cultures," says the Brazilian-born executive, who was raised in Beirut and received his university training in Paris. "Characterizing a company as 'Japanese' doesn't really tell you anything about it."

Sitting in a downtown Detroit restaurant, here in the capital of the North American car business, Mr. Ghosn is busy slaying stereotypes of the Japanese auto industry as he describes the experiences chronicled in his new book Shift: Inside Nissan's Historic Revival.


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In Shift, Mr. Ghosn puts an insightful spin on his efforts to understand not just Nissan's corporate culture, but also that of Nissan's main Japanese rivals -- Honda and Toyota -- as he steered Nissan back to profitability.

Before taking up his Nissan post, Mr. Ghosn was a senior executive with Renault, which bought a controlling interest in Nissan in 1999.

He had previously been running Michelin's tire business in North America, where he dealt with all the major Japanese car companies from the vantage point of a supplier. Those experiences taught him that Nissan, Honda and Toyota shared certain common characteristics: "A taste for technology, a determination to refine and improve the industrial process and an insistence on quality," he says.

Beyond those, however, these three Japanese car companies, and, indeed, the other smaller players in the Japanese industry, are quite different, he says.

"Honda is a very technologically oriented company," says Mr. Ghosn, adding that based on his Michelin experience, he would argue that Honda relies on pragmatism, technical excellence and expertise in making product decisions.

Honda also prides itself on being a fast-moving, fiercely independent company, former Honda Canada president Shigeru Takagi said in a recent interview. In an industry dominated by giant companies, Honda is less than half the size of Toyota Motor Co. That reality prompted Honda Motor president Takeo Fukui to suggest last year that the main challenge facing Honda is "survival" -- as an independent company.

Honda officials say the company's strength can be found in its core beliefs, including what they call the "three joys:" the joy of the customer buying a new vehicle, the joy of the dealer selling it and the joy Honda Motor gets in creating satisfied customers.

In today's business world, these ideas may sound either remarkable or simply unbelievable -- at least for those who have not dug into the history of this car company founded by Soichiro Honda. Honda was an engineer who was passionate about the Honda Philosophy, which many in the company refer to as Honda DNA. Above all, Honda wanted his products to have character.

"Engineering without personality doesn't have much value," he said.

Interestingly, Soichiro Honda was 60 years old when Honda's first car, the N360, went on sale in Japan in 1966. It wasn't until 1972 that Honda began selling cars in North America. Today, it operates plants in both Canada and the United States. Those who work there, as do those in Japan, know that Soichiro Honda wanted his employees to be involved in the company's success. More than 50 years ago, Honda set in place certain key principles for employees, including a trust that allows for superior teamwork and the sharing of knowledge within the company.

Toyota, says Mr. Ghosn, is a very different company. In his experience, he has found Toyota a formidable competitor, one imperious and sure of itself. This isn't surprising, given that it is the world's second largest automobile company and is narrowing the gap on General Motors.

Looking back on his Michelin experience, Mr. Ghosn says, "Dealing with Toyota meant dealing with people who were very aloof. They exuded a sense of power. They had a binary vision: On one side there was their system and on the other side was the rest of the world."

Jeffrey Liker suggests this is an apt description of how Toyota views itself. In his recent book The Toyota Way, the University of Michigan industrial engineering professor says the management systems, thinking and philosophy underpinning Toyota's success shape Toyota's corporate culture.

"The fundamental insight I have from my studies of Toyota is that its success derives from balancing the role of people in an organizational culture that expects and values their continuous improvements with a technical system focused on high value-added 'flow,' " he writes.

Mr. Liker, in fact, argues that even though Toyota has more than 240,000 employees worldwide, it is still in many ways a large family business in which the founding Toyoda family exercises a great deal of influence.

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