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Stalls
Fans
of marketing and customer strategy will find many interesting stories of
success and failure in Micheline Maynard’s new
book, The End of Detroit. After a prompt dispatch in the early chapters of
how the big three went astray, Maynard delves into detail about what both
Japanese and German car companies have done right. Here’s an excerpt, from
the middle of Chapter 4, “From the Inside Out,” (pp. 96-101):
More than
any other vehicle, the Odyssey exemplifies a strategy that import auto
companies are using with great success to torment the companies from Detroit. By offering excellent
products, with innovative features and a top pedigree of durability,
reliability and quality, the imports are able to attract the most desirable
portion of customers in any single market, whether for cars, minivans, SUVs
or pickup trucks. "The story here really is one of the domestics losing
out because the imports are suddenly competing in areas that were the privy
of the domestics, and the imports are doing a wonderful job,
" said Ron Pinelli, an auto industry
analyst with Autodata, based in Woodcliff Lake, New Jersey.
Moreover, these customers become ambassadors for their
vehicles, posting enthusiastic missives about them on Internet message
boards, telling their friends, family and neighbors about their new
automobiles, and prompting them to go out and buy them. In short order, the
reputation of the vehicle is made, its profitability generally assured, and
Detroit is left, once again, to scramble after customers more attuned to the
aspects of a deal than the attributes of the vehicle that the companies are
trying to sell. When this strategy is used successfully, an import automobile
company can become a leader, selling 100,000 vehicles or so, enough to
establish it as a real competitor and sufficient to cover investment, but
scarce enough so that customers believe that they own something rare and
special.
Within only
a few months of its introduction in 1998, the Odyssey had leapfrogged
Chrysler's minivans to become the gold standard in family transportation.
Even now, five years after its creation, as Honda prepares to introduce its
next version of the Odyssey in 2004, the second-generation Odyssey remains
virtually sold out across the country, selling for close to sticker price.
"The Odyssey continues to be the best minivan sold in America," said the 2003
Edmunds.com guide to new cars and trucks. Simply remaining in such strong
demand, without incentives, is a remarkable achievement in the breathlessly
competitive U.S.
car market. And that would be expected if Honda had limited its production
and kept it deliberately scarce, or if the Odyssey were moderately priced to
begin with. But Odyssey starts above $24,000, much more than Chrysler's
cheapest minivans, and fully equipped versions can
cost as much as $31,000. Regardless, in 2002 Odyssey was the second-best-selling
minivan nameplate, behind the Chrysler vans and ahead of minivans from Ford,
GM and Toyota,
whose Sienna is considered to be the Odyssey's only
true rival for import customers. To meet the American customers' feverish
demand for it, Honda, which originally built the Odyssey on one assembly line
at its plant in Alliston,
Ontario, built a new factory in record time
in Lincoln, Alabama, so that it could expand its
supply of Odysseys. The Odyssey is not a niche product but a real volume
competitor, selling nearly 200,000 a year, all at a substantial profit and to
the enthusiasm of consumers across the country. "Get the Odyssey,"
declared Tom and Ray Magliozzi, hosts of "Car Talk" on National
Public Radio, when a caller one weekend asked which minivan to buy.
Tim Benner had no idea that the Odyssey would turn into
the juggernaut that it has become when he set out in 1994 to measure the
dimensions of his Orange County, California, garage. Benner, the father of a
young daughter, worked as an engineer at Honda R&D in Torrance and had been assigned by Honda on
a project that the company considered to be of critical importance: the
design for the second generation of its minivan. The first-generation Honda
Odyssey had merely been an adaptation of the minivan that Honda sold in Japan,
and the flaws were visible at a glance. "The first-generation Odyssey
was a home run in Japan.
It was not a home run in the States," said Erik Berkman,
an executive engineer at the R&D facility in Marysville who joined Benner
on the second-generation Odyssey project. In a country where a sliding side
door had become mandatory, so that children could hop in and out at will
without their parents having to unbuckle themselves and let the kids out, the
Odyssey arrived in the United
States with four conventional doors.
Moreover, the Odyssey was narrow, designed for Japan's crowded streets and small
parking places. It had a four-cylinder engine, the
same used on the Accord, and lacked the power and maneuverability that a
minivan needed to transport families on the highway. Interestingly, the
original Odyssey had a feature that would eventually become a Honda
trademark: a third row of seats that could be folded flat into the floor,
creating more storage space. That was a standard feature on Japanese vans,
known for their interior design and flexible use of space, which is at such a
premium throughout all aspects of Japanese life. But the fold-flat seat was
hardly noticed on the original vehicle, given all the other ways in which it
was inferior to other minivans on the American market. Honda was selling only
about 25,000 Odysseys a year when Venner was
assigned to work under the project's leader, a Japanese Honda engineer named Kunimichi Odagaki, on a vehicle
they called PJ—for "personal jet."
Odagala, now one of Honda's
highest-ranking development executives, arrived in the United States speaking only a
modest amount of English, but intrigued by the challenge of how the Odyssey
could be improved. "I wanted to create an all-new minivan," he
said. "I didn't want to eat into Chrysler. I wanted to expand the
minivan market." Modest and soft-spoken, with curly dark hair, Odagaki yields enormous power within Honda as what the
company calls an LPL, for "large project leader." Though he is virtually
unknown outside Honda, within the company he demands such respect that there
is talk he may ascend to one of the company's top jobs, perhaps even as chief
executive someday. The clout that Odagaki holds
makes it even more remarkable that he would spend so much time on the
project. In Detroit,
it's rare that a chief engineer would make it out of the office, unless for a
company conference, let alone spend months on the road researching whether
there was a market for a new vehicle. But it is a common practice at Honda,
and a reason why its chief engineers carry so much clout. "This is good
for the customer," Odagaki explained. "I
am always saying this to young engineers at Honda: 'Please do not follow the
competitors' cars. Customers' needs and demands are always changing. I want
to hear the voice of the customer.'" Adds Berkman:
"We don't have layers of protocol and so on. Engineers have to develop
their own data. Some people say, 1 don't want to get dirt under my
fingernails.' And we say, 'Didn't we explain that to you in the job
interview?'"
In more formal terms, Honda's practice is a Japanese term
that translates as "go to the spot." That is exactly what Odagaki did, traveling 25,000 miles over six months
across the American South and West. Honda's research had determined that the
primary market for the kind of minivan that it wanted to create lay in cities
and suburbs where new homes, new schools and new shopping malls had sprung up
during the past 15 years. Though it welcomed customers from everywhere, its
goal was to meet the needs of modem Middle America (or, in reality,
upper-middle-class America).
It felt the best place to find these people was in states like the Carolinas,
Georgia, Tennessee,
Kentucky and Ohio,
along with California—all
places where Odagaki and his engineering team
visited. "We wanted to see the situation of usage," said Odagaki, interviewed on a warm afternoon at Honda’s
research center in Wako, Japan.
The
difference between how minivans were used in Japan and their role with American
consumers became dear almost immediately. In Japan, he explained, minivans
were more like recreational vehicles, used primarily for long trips and for
holidays. His first lesson, Odagaki said, was that
"in America,
minivans are not used for camping" but for everyday commutes. The three
engineers—Odagaki from Japan, Berkman
from Ohio, and Benner from California—learned a lot of things that any mother
might have been able to tell them but seemed even more compelling because
they discovered them for themselves. One realization came late at night, when
the crew missed their highway exit and had to stop to look at a map. The only
way to turn on a light in the old Odyssey was to illuminate the entire
passenger compartment, which woke up the dozing engineers in the backseat,
much to their displeasure That taught Odagaki that
there should be a separate light for the driver, so that sleeping children
would not be disturbed.
Returning to California,
the engineers traveled to the elementary school in Benner's neighborhood to
watch parents unload their children in the morning and load them up after
school. (The research trip got them in trouble more than once. Sitting in the
minivan one day, taking pictures and filming with a video recorder, Odagaki and Benner were startled to find a policeman
rapping on their window, telling them in no uncertain terms to get moving.
"He thought we were going to kidnap the children," Odagaki said.) Their observations resulted in one of the
biggest disputes the engineers had with senior Japanese officials over the
minivan. When it introduced the original Odyssey, Honda hadn't seen a need to
indude sliding doors, even though they were a
feature of American minivans, and its lack of them was one of the original
Odyssey’s biggest flaws. But after spending time in America, Odagaki
became convinced that the Odyssey should have sliding doors on either side,
and that they should be easy to operate. The Japanese engineer saw that it
was difficult for both adults and children to yank open their minivan's
sliding doors and to shut them afterward. He watched in sympathy as one young
father, laden with a baby, tried to open a minivan door with his free hand to
let out his other children.
American
car lovers will hate this book, and fans of imports will have some increased
justification for their purchases. If you’re looking for a mildly interesting
business book that’s long on stories, The End of
Detroit, will be just right for you, especially
if you can put up with some really dull pages.
Steve
Hopkins, January 22, 2004
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