In 1959, a little-known Japanese motorcycle maker with the name Honda set up its American outpost in a small storefront along Pico Boulevard. It was the heyday of chrome, tail fins and Detroit iron.
No one could have imagined how it would all turn out.
Fifty years later, American Honda Motor Co. Inc. is celebrating its golden anniversary this week at an uncomfortable time: during the virtual collapse of the domestic auto industry that hasn’t entirely avoided the Japanese automaker but also has left it one of the strongest on American shores.
“This is a number of challenging issues all facing us at once,” acknowledged John Mendel, executive vice president of auto sales for American Honda. “But we know adversity well and have always been able to survive through focusing on small and steady growth.”
And that small L.A. outpost?
It has morphed into a 110-acre Torrance campus where the now No. 4 U.S. automaker strategizes and turns out designs, including one for its highly regarded Acura luxury nameplate.
But, make no mistake, the Japanese automaker is facing real challenges. Sales are down by more than 40 percent from last year, and the company, with its conservative design and business strategy, has sometimes struggled to adapt to changing U.S. tastes.
For the last two decades, consumers wanted big sport utility vehicles and trucks that Honda largely refused to make until 2005 when it introduced the Ridgeline truck, not long before consumers started to shy away from big vehicles.
And while the company had launched a few hybrids over the last decade, becoming the first major automaker to do so, none stuck, allowing the Prius to solidify Toyota’s reputation as a green company that makes hybrids
“I think they are a brand that has lost a bit of their direction,” is the harsh assessment of Wes Brown, principal of Westwood-based Iceology, a consumer research firm. “They used to push the envelope but now seem more focused on just retaining their customers and not taking steps to gain younger ones with exciting products.”
Still, auto industry analysts agree that Honda, with its broad lineup of sturdy fuel-efficient vehicles, is better poised than other domestic and foreign automakers, even giant rival Toyota, to weather the current downturn.
For example, in May 2008, when Civic demand surpassed 45,000 a month spurred by gas prices hitting $4 a gallon, the company quickly retooled some plants to shift production away from slower selling larger models like the Ridgeline truck and toward Civics and Accords.
One analyst cited two good decisions by the automaker.
“First, Honda’s product lineup consists of mostly small to midsize, highly fuel-efficient vehicles such as the Civic and Accord,” said John Wolkonowicz, who covers the auto industry at IHS Global Insight Inc. in Lexington, Mass. “Second, over the last decade, Honda has designed its factories to be flexible.”
SoCal upstart
Honda first set foot in America when it opened its Mid-City storefront June 11, 1959, and sold motorcycles out of the back of a Chevrolet pickup truck around the city.
The first car wasn’t imported until 1970, when Honda introduced the tiny N600, selling about 20,000 in the first year. Five decades later, the company sells about 1.5 million cars in the United States annually, some made in Japan and others at five U.S. factories.
The American subsidiary has always had its headquarters in the Los Angeles area. After outgrowing the Pico Boulevard storefront in 1963, it moved to a 58,000-square-foot building and warehouse in Gardena. Finally in 1990, it opened its Torrance campus. The South Bay city is the hub of Southern California’s auto industry, with Toyota Motor Sales U.S.A. Inc. just a few blocks from Honda.
Honda, which came to Los Angeles two years after Toyota, has a particularly close relationship with the city. Its sprawling campus is the north anchor of an ambitious redevelopment effort begun in the mid-1980s that has transformed abandoned eastside industrial sites dating from the city’s smokestack days.
About 2,500 employees work at the campus, which has 12 matching off-white buildings with nearly 1.5 million square feet of mixed-use office space among highly manicured grass and gardens that resemble a college. Employees can hit the gym or a recreation complex that has basketball and racquetball courts, soccer and softball fields, and sand beach volleyball pits.
“Our spiritual base is here and I couldn’t imagine us being anywhere else,” Mendel said. “The talent is here, the market is here and the sense of community of who we are is here; so we don’t plan leaving anytime soon.”
In addition to its corporate headquarters, American Honda has set up car design facilities in Torrance. Honda R & D; Americas Inc. was originally established in 1975 in Gardena to conduct local market research and design activities; it now oversees 13 R & D; facilities in North America that develop new vehicles. Most recently, the company opened an Acura design facility on the Torrance campus in May 2007.
Locally based designers helped research, design and develop six of 16 Honda and Acura models, including the Acura MDX and best-selling Acura TL, as well as the Honda Pilot, Element, Ridgeline truck and Civic Coupe.
Honda has thoroughly integrated itself in the U.S. car culture, with roughly 1,000 dealers nationwide and a 12 percent market share. It surpassed Chrysler last year to become the fourth largest auto seller: General Motors, Toyota and Ford are Nos. 1 through 3, respectively. But that acceptance didn’t come easy.
“When my father first started selling Hondas in the Midwest, there were still people who refused to buy anything made from the Japanese because of World War II,” said David Conant, chief executive of Conant Auto Retail group, which owns three Honda dealerships in Los Angeles County including Norm Reeves in Cerritos.
Taking gamble
Honda took a big step forward in 1964 when it spent $2 million to sponsor the Academy Awards ceremony and showcase its motorcycles.
“Dealers were flooded with calls about the motorcycles. It was a risk because not many people nationally knew about Honda,” Mendel said.
Later that year, the Beach Boys penned a song, “Little Honda,” that became a tribute to the small Honda motorcycle, specifically the Honda Super Cub.
Honda soon became synonymous with motorcycles, but it wasn’t until the introduction of the Civic with an advanced small, peppy engine that the company began to make headway in the auto market. The car debuted in 1973 amid the oil embargo and a sudden desire for more fuel-efficient vehicles. The Accord followed suit for the growing baby boomer families and has remained one of the top five selling cars for decades.
But while Honda has built its success on a lineup of fuel-efficient vehicles, auto analysts said Honda needs to be prepared for the next challenge in car making: alternative fuel vehicles.
Honda introduced the first hybrid the Insight 10 years ago to the U.S. market, five years before the Toyota Prius showed up and became the benchmark for mainstream hybrids.
But the small original Insight never caught on. So in 2004 the company did an about-face and introduced its Honda Accord hybrid which with its V6 engine focused more on performance than fuel efficiency. That car cost up to $6,000 more than a regular Accord, didn’t sell well and was pulled off the market. Honda sells a Civic hybrid, but that hasn’t rivaled the original in sales either.
Now, Honda is back with the second-generation Insight, a sedan with a teardrop shape that started selling in late March at $19,800, less than the Prius. The car has garnered great press and early sales look promising.
“In a way, it’s back to the future with the push again for fuel-efficient vehicles,” Conant said. “But what I found is that people stick with the brand because it is reliable. Maybe with this economic crisis, people will once again turn to Honda to meet those needs.”
On the Go
The U.S. branch of the Japanese automakers has always been rooted in Los Angeles. Here are some notable developments.
1959: American Honda Motor Co. Inc. is established when a handful of associates begin selling Honda motorcycles out of a truck and a small storefront on Pico Boulevard in Los Angeles. The Honda 50 (Super Cub), Dream and Benly motorcycles are the first sold in the U.S.
1963: American Honda moves its national headquarters from its original Pico Boulevard location to a 58,000 square foot building in Gardena at 100 West Alondra Blvd.
1964: American Honda shows up in mainstream pop culture. The Beach Boys record a song called “Little Honda” that reaches the top 10, and the company sponsors the Academy Awards, spending $2 million.
1975: Honda Research California, which later becomes Honda Research & Development Americas Inc., is established at Gardena headquarters to help design and develop products.
1984: To mark its 25th year in the U.S., Honda establishes the American Honda Foundation for philanthropic causes at its headquarters. Since its inception, the foundation has provided more than $20 million in grants.
1990: American Honda moves its headquarters from Gardena to Torrance after six years of construction.
2001: Honda opens a solar-powered hydrogen production and fueling station for fuel cell vehicles on the Torrance campus.
2006: Honda R & D; Americas celebrates the opening of its 5,700-square-foot Advanced Design Studio at 45 N. Raymond Ave. in Pasadena, not far from Art Center College of Design.
2007: Honda opens its Acura Design Studio in Torrance, responsible for chief design of the luxury brand.
Source: Business Journal research
