Remarks by Erik Berkman President, Honda R&D Americas, Inc. Center for Automotive Research Management Briefing Seminars Traverse City, Mich.

Thinking about our theme for today, there are a lot of ways to look at the concept of leadership and I suppose that is...

Thinking about our theme for today, there are a lot of ways to look at the concept of leadership and I suppose that is the value of a good theme we can each interpret it in our own way.

I don't want people to attach too much significance to the idea that there is now an American president of Honda's U.S. R&D operations. Certainly, within an organization, leadership is something that must come from individuals. It's critical to success.

But my position is simply a reflection of the growth and maturity of a great number of engineers who have grown up with Honda in the U.S. And I'm honored to lead their efforts.

Within an industry like ours, we also can look at "leadership" as something provided by the actions of a company. And I think this is a role Honda has played within our industry. That is especially true over the past three decades as we have continued to advance our product development and production capabilities in North America.

This fall will mark the thirtieth anniversary of the start-up of auto production in Marysville, Ohio. Naturally, this will be cause for celebration in Ohio and at all of our operations in North America. But today, I'm going to talk about how we are leveraging that leadership to take the foundation of what we have built here in North America to the next level in the area of global product development.

For me personally, the 30th anniversary serves as a reminder of how these last three decades have seemed to fly by. In early 1982, I was working for an upstart company with Chris Theodore and Bob Lee turbo-charging Fiats and the DeLorean DMC12. Legend Industries eventually went belly up, but it's great to see that downsized turbos are making a comeback.

I had just purchased a new Honda Civic and was impressed with the engineering. So, when presented with the opportunity to join Honda to build cars in America, I had to jump at it.

I started with Honda in 1982, not on the R&D side, but at the Marysville Auto Plant, where preparations were already underway to begin production of the Accord in Ohio. Lee Iacocca had famously challenged Japanese automakers, saying, "if you're going to sell them here, you better build them here." Iacocca was a visionary leader, but in this case, Honda's decision to build cars in America had come in 1979 and our plant was already under construction.

I remember feeling a little rebellious working for Honda in America's heartland. It wasn't just about working for a "foreign" automaker it was the idea that was foreign. By that time, Japanese quality had earned a great reputation people wanted to buy Japan-built cars. We were confident we could succeed, but many had doubts including our own dealers. We brought them in for tours of the plant just to assure them that we could build Honda quality in Marysville, Ohio.

Ultimately, we did a lot more than that. We achieved high levels of quality, flexibility and efficiency that helped to re-shape the U.S. auto industry. We ushered in a new era of teamwork between Honda associates and suppliers to meet customer expectations for quality and value. And soon enough, it wasn't our dealers who were visiting the Marysville Plant but our competition. Other carmakers wanted to see what we were doing differently and better. And, today, production quality in the U.S. auto industry is at an all-time high.

What I learned in those early days shaped my understanding of what it meant to be a carmaker. I was struck by how the customer was at the center of every decision we made.

We launched production of the 3rd generation Accord in 1985, with a racing-inspired double-wishbone suspension, which Honda pioneered on its front-wheel-drive lineup. Most people wouldn't know why rack-and-pinion steering was important.

But once they got in the car, they could feel the responsiveness. Suddenly, Accord went from being a customer's second car to being their first car. Honda invested in the product in places where the customer might not see it, but where they could feel and understand it. This is the Honda I am determined to help lead into the future.

But leadership is a moving target. So, in 1987, we announced a strategy that would accelerate our business in North America particularly for the growth and maturity of young engineers like me.

We called it our 5-Part Strategy for North America. This included our second U.S. auto plant in East Liberty, Ohio, and plans for the creation of a new R&D center in Raymond, Ohio, for product development. It was a bold plan that would lead to both development of products in America and exports from America. We have continued to advance along this basic course ever since.

I made the move to R&D in 1991, just as we were opening the new automotive engineering center. Today, we have 14 R&D facilities in North America, including styling design studios and product engineering centers.

At our Ohio Center, we have continued to invest in capabilities that help us meet Honda's corporate objectives to advance safety and environmental performance. A decade ago, we built one of the world's most sophisticated safety research and testing facilities that has made a major contribution to our achievement of top safety ratings from the I I H S. And last year, we added a wind tunnel as part of our commitment to increase the fuel efficiency of future models.

One of these models is the NSX supercar. And the news that we would lead global development of the NSX in the U.S. received a lot of attention.

It made quite an impression on me to hear the positive reaction of the crowd in Detroit when Mr. Ito, our global president, announced this new challenge at the North American International Auto Show. Our team will be developing the NSX for world markets, including left-and right-hand-drive models and as an Acura and a Honda, depending on market destination. But the reality is that while creating a super car in America is a new challenge for us, developing products is not.

We have conducted automobile product development in the U.S. for many years. Developing new models from the initial concept through styling platform and upper body engineering right through mass production start up.

This began 20 years ago with the development of derivative models such as the Accord Wagon and Civic Coupe projects. Over the past two decades, we have developed more than 20 distinct new models and now we have global leadership of Acura products and light-truck development including models such as the Honda Pilot, Odyssey and Ridgeline and the Acura MDX.

It's been a step-by-step process. Because if the goal is to develop products that truly reflect the DNA of a company … it takes a long time to transplant the culture, beliefs and know-how of a company into new soil and then to execute it consistently and at a high level.

For us, the key has been the organic growth of our people and our capabilities which reflect a deep knowledge of Honda … something that will be even more important as we take on greater responsibility in the future.

As one example, after a lead role in the development of the second-generation Honda Accord Wagon, my next big project was to lead the development of the 1998 Accord Coupe. The '98 sedan was being developed in Japan and we had responsibility in North America to make a sporty coupe derivative.  

We had a great team with a lot of talented young engineers, including a test engineer named Ted Klaus. And we're sharing for the first time today that Ted now has responsibility for leading global development of the next generation NSX supercar. Ted is in Honda parlance the Large Project Leader, or LPL, for this development. That means he is responsible not only for leading a team of engineers, but ensuring that every aspect of the development is sharply focused on the customer.

Within our R&D organizations, we used to say a car was a Tochigi development meaning it was being developed at our Tochigi Center in Japan or an HRA development, meaning we were developing it in the U.S. But it's not so simple anymore and probably never will be again.

While we're leading NSX development in the U.S., it's a global project and Ted is spending a good deal of time working with our engineers in Japan as well where the new Sport Hybrid Super Handling All Wheel Drive system is being developed.

In this way, our U.S. R&D team is taking the next step in our growth toward an even larger responsibility for meeting the needs of our customers in North America.

We have become a valuable partner in Honda's global R&D network. I am not saying the scope of our activities and experience is on par with R&D operations in Japan that were established more than 50 years ago. But as an organization, our U.S. facilities and the skill level of our engineers have achieved full citizenship in R&D which has real value to Honda as a global organization.

In that respect, our role in managing this global network is a lot like being the general manager of a baseball team and the "Moneyball" concept made famous by the book and movie. In short, you have to consider the skills of your people regardless of where they are located to put together a winning team for each project.

And while the NSX is the tip of our spear the pinnacle product our associate's passion and determination to innovate and to create new value for the customer is inherent to every product we develop.

Achieving full citizenship within our global R&D network means not only taking on a greater role within global Honda. We will also be taking on responsibility for most of the customers in our backyard here in North America.

Already, our North American manufacturing operations have begun taking a larger role within global Honda to evolve toward a lead role in production of key global models here in North America. That's a big deal. But 30 years into making cars in America, I know we are up to that challenge.

On the manufacturing side, we're already making over 85 percent of the vehicles that we sell here in North America. On the research & development side about 30 percent of our North American model lineup was developed here.

We've focused a lot on the Acura brand recently. Now, we plan to shift some bandwidth to core Honda models that represent greater volume in North America and globally.

Until earlier this year, I headed our racing company - Honda Performance Development - for more than four years. One of the first moves I made back in 2008 was to suggest to IndyCar the adoption of the Automotive Manufacturers Round Table inviting carmakers from around the world to discuss the next generation of IndyCar. We wanted their ideas even if they were not going to join the series. Now, it's really great to have Chevrolet back as a part of the IndyCar Series. We have restored a level of competitive interest to what had been a single engine series powered by Honda with close on-track dueling this year.

For this season, we also went with our own U.S. race engine development team. We're proud to have won the Indy 500 but we're also really happy to have competition again. Now, I can't say we're happy that we aren't winning everything. But in the spirit of Mr. Honda … we love the competitive aspect of racing. Nothing gets our juices flowing more than not winning.

Our industry also has never been more competitive and we feel the challenge, but the reality is we've got tremendous momentum, with retail sales of core products like Civic, Accord, CR-V and Odyssey holding top spots in their segments.

However, if the perception is that we aren't winning in the marketplace, we aren't happy. We recognize the high expectations of our customers that is what we want. Those of us in product development take seriously the need to fulfill them at a high level every time out. And we're going to do something about it. We all know that second place is the first loser. So, we have some work to do.

Our direction is more focused than ever on creating products that are fun-to-drive and fun to use. That might sound like I'm describing a model like the NSX. But as I said earlier, my career at Honda R&D includes serving as Large Project Leader for three different models of the Accord including a Wagon and Coupe and a few Acura models, as well.

Every new product is a challenge but when you're talking about a volume sales leader there's an added bit of pressure.  A major global model like Accord or Civic is never an experiment. First of all, the starting point in the previous generation of that model is something that is already very good. The challenge is how to make it better and create even more new value for the customer.

So, we were pleased last month, when global top management agreed that Honda R&D Americas would lead development of the next full model change of the Honda Civic for the North American market.

As you know, we introduced an all-new 2012 Honda Civic last year.  And while it received some mixed reviews, our customers have made it the best-selling compact car in America this year. Still, our goal is not to be best-selling; our target is best. That is the expectation of our customers and our fans.  And we will continue to refine the current model this fall with both interior and exterior design changes to achieve that high target.

But I am pleased that a team of engineers in America will have a major responsibility for the development of the next generation Civic. We've got a pretty good track record with Civic, starting from the 1993 Civic Coupe. Some of you will recall that the 2006 Civic Coupe and Coupe Si we developed in Ohio helped Civic earn North America and Motor Trend Car of the Year honors.

Now, we will take on the larger challenge of leading development for the next generation Civic Sedan and Coupe for this market.

As I explained a moment ago regarding NSX development, it's a global team. And we will work together as a global R&D organization to develop the Civic lineup. With multiple body styles, multiple powertrains, production in 14 factories and sales in more than 160 countries there is plenty of work for everyone.

It's a tall order for any development team to be tasked with the responsibility to develop a global model like Civic. But I'm very confident in our team and committed to the goal of taking responsibility for high volume products in North America.

Next month, our largest volume model, the all-new 2013 Honda Accord comes to market. By the way, here is a look at that all-new production model we are releasing for the first time today.

This new Accord will excel in all areas. It will be very fun-to-drive and offer great fuel economy. It will have a comfortable cabin with a very quiet ride. With sophisticated styling and outstanding visibility and safety technologies, and the best quality and reliability in the business. In short, it's the right car to mark 30 years of building Accord in America.

Honda put plans in motion a long time ago based on our philosophy including our approach to build products close to the customer.  This is the next step in that plan. But we also continue to reflect on the words of Mr. Honda from many years ago: "Action without philosophy is a lethal weapon; Philosophy without action is worthless."

Our team will continue to take action with a relentless challenging spirit. And my role is to impart to them another maxim from Mr. Honda that I began learning three decades ago our job is to work for the customer, not the company. With each new development, the goal for our products and our operations will be to create new value for our customers and for America.

And as we approach the 30th anniversary of the start of Honda auto production in America I can think of no better way to celebrate. Thanks for your attention and I look forward to your questions.





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