What we now call 'glocalization' is the long-standing philosophy to build and develop products in the local markets where they are sold.
Today, we have more than 100 plants in 34 countries. This is part of the 'universality' of Honda - making products close to the customer. We don't need to merge with anyone to gain factories around the world.
To understand where we will go in the 21st century - and why we believe independence is not only desirable, but necessary - I would like to explain what we call 'Small is Smart.' By analyzing our efforts to become faster, more flexible and more efficient, you will understand Honda's direction.
An important way to understand Honda is to recognize the great synergy of our automobile, motorcycle and power products businesses. With those three business lines, we earn more than 10 million customers every year.
Not all of those products are automobiles, but all of those customers are Honda customers. And each product is powered by Honda.
The experience gained from our nonautomotive business - where we generate profits from lower-priced products with shorter life cycles - is where our DNA for speed, efficiency and flexibility began.
You can see where our motorcycle manufacturing experience shaped our approach to Honda's global manufacturing strategy.
We call it a 'Small Born' strategy because we start on a smaller scale with a lower investment. Then we expand as local demand increases and as Honda DNA takes root with our new associates. That approach allows Honda to achieve more efficiency and profitability, even at low production volume.
Conventional wisdom says an auto plant must have an annual capacity of 200,000 units to break even. In the past few years in China, Brazil and Thailand, we established successful auto plants with capacities ranging from 10,000 to 30,000 units. Each was based on investments that are many times smaller than the traditional industry requirement for a new factory.
And in each case, we entered the market with motorcycle production that requires only one-tenth the investment of an auto plant. That is an effective stepping stone to auto production. If we are successful with motorcycle production, we make a profit and move into auto production using the same resources, people, knowledge of the local community and positive image gained through our motorcycle business.
But I don't want you to think the Small Born concept applies only in developing nations. The plant in Japan where we produce the Acura NSX and the new S2000 sports car is a Small Born plant - as we produce profitably at a relatively low volume.
The S2000 will debut in the United States this fall with an advanced new engine that achieves very high performance, yet is a low-emissions vehicle. And it will be sold at a relatively low price. The efficient Takanezawa plant is the key. With just 100 units a day on two shifts, the S2000 line is already profitable after less than six months of production.
Considering the size of the North American market, even the new auto plant that we announced for Alabama is Small Born. For a $400 million investment, we will obtain dual capacities of 120,000 vehicles and engines. Through such efficiency, we will replicate our DNA with the local work force and determine whether market demand warrants an additional investment - all the while achieving profitability. That is what we mean by Small is Smart.
This column was excerpted from a presentation this month at the University of Michigan Management Briefing Seminars.