The global company

FINANCIAL TIMES WEDNESDAY OCTOBER 15

Case study: Ford and Honda


Haig Simonian on two car

groups' different routes to the global market

Rising costs and the worldwide spread of shared tastes in car styling have prompted the indus­try's giants to exploit

5 global economies of scale. But rivals such as Ford and Honda have approached the task very differ­ently.

Ford is one of the world's earliest

10 multinationals. Its first foreign production unit was set up in Canada in 1904 - just a year after the creation of the US parent. For years Ford operated on a regional basis.

15 Individual countries or areas had a large degree of auton­omy from the US headquarters. That meant products differed sharply, depending on local execu­tives' views of

20 regional require­ments. In Europe the company built different cars in the UK and Germany until the late 1960s.

Honda, by contrast, is a much

25 younger company, which grew rapidly from making motorcycles in the 1950s. In contrast to Ford, Honda was run very firmly out of Japan. Until well into the 1980s, its

30 vehicles were designed, engi­neered and built in Japan for sale around the world.

Significantly, however, Honda tended to be more flexible than

35 Ford in developing new products. Rather than having a structure


based on independent functional

departments, such as bodywork or engines, all Japan's car makers

40 preferred multi-disciplinary teams.That allowed development work to take place simultaneously,'rather than being passed between departments. It 45 also allowed much greater responsiveness to change.

In the 1990s both companies started to amend their organisational structures to

50 exploit the per­ceived strengths of the other. At Ford, Alex Trotman, the newly appointed chairman, tore up the company's rulebook in 1993 to create a new

55 organisation. The Ford 2000 restructuring programme threw out the old func­tional departments and replaced them with multi-disciplinary prod­uct teams.

The teams were based on five

60 (now three) vehicle centres, responsible for different types of vehicles. Small and medium-sized cars, for example, are handled by a European team

65 split between the UK and Germany. The develop­ment teams comprise staff from many backgrounds. Each takes charge of one area of the process, whether technical, financial or

70 marketing-based.

Honda, by contrast, has decentralised in recent years. While its cars have much the same names around the world, they are

75 becoming less, rather than more,stan­dardised.‘Glocalisation' - a global strategy with local management -

 


is the watchword. Eventually the group expects its structure will

80 comprise four regions - Japan, the US. Europe and Asia-Pacific -which will become increasingly self-sufficient.

Two reasons explain Honda's new

85 approach. Shifting to produc­tion overseas in the past decade has made the company more attuned to regional tastes. About 1m of Honda's 2.1m worldwide car sales

90 last year were produced in the US. A further 104,000 were made in the UK. No other manu­facturer has such a high propor­tion of foreign output.

95 Honda engineers also reckon they can now devise basic engi­neering structures which are com­mon enough to allow significant economies of scale, but sufficiently

100 flexible to be altered to suit regional variations. The US Accord, for example, is longer and wider than the Japanese version. The European one may have the

105 same dimensions as the Japanese model, but has different styling and suspension settings.

Both Ford and Honda argue their new structures represent a

110 correct response to the demands of the global market. Much of what they have done is similar, but intriguingly, a lot remains different.