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Establishing Belgium Honda (Part 4)

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The First Japanese Company to Establish a Factory in the EEC

A team of twelve was put together in May 1962 for the establishment of a new company, Belgium Honda Motor. All became members of the Special Planning Team. Iwamura, who had led the EEC research team, was assigned as manager of Belgium Honda in order to oversee regional production and sales. Okayasu was assigned to the factory manager's post, where he could provide general instructions regarding factory construction and production activities. Iwase was assigned the job of factory administration manager, in which he would facilitate production activities.

To obtain permission from the Japanese government to establish Belgium Honda, members of the Special Planning Team compiled an outline of Belgian corporate activities into a document entitled "Prospectus for the Establishment of a European Factory." Armed with files of materials, the members paid numerous visits day after day to the Ministry of International Trade and Industry, the Ministry of Finance and the Bank of Japan, repeatedly describing the situation to officials.

As with the establishment of American Honda three years earlier, in 1959, the Japanese Government would impose strict restrictions on the removal of foreign currency from the country, citing a lack of foreign currency.

It was apparent that approval would not be an easy thing. Although many Japanese corporations had already established overseas sales bases-American Honda being a noteworthy example-Belgium Honda was to be the very first establishment of a production base overseas. Moreover, such a production base required several times the amount of foreign currency that a sales base did.

The government officials were resolute in their answer. "We cannot give you approval for such a large amount of foreign currency," they said, "unless you have the potential to earn profits commensurate with the investment."

Negotiations pressed on, however, during which Honda was able to gain the government officials" understanding on its intent to launch a production operation in the EEC region. However, the focus of discussion had shifted to the actual amount of foreign currency that could be taken out of Japan. The officials wanted to keep that amount to a minimum, while Honda wanted to secure enough funds to establish a factory in Belgium without any unnecessary problems.

pho 04

Test-driving the new type of moped (C310) assembled at
Belgium Honda. This moped had a hard time winning local acceptance.

Therefore, even though it was not the full amount Honda had initially requested, approval was given for a total of 75 million Belgian francs. (This was an amount equal to about US$1.5 million at the exchange rate of that time, 20 percent of which was to be investment in kind).

The government officials were not particularly hopeful concerning the outcome of this, the first overseas production operation undertaken by a Japanese company. Even so, they set aside their skepticism and decided they would step back and see what happened.

Belgium Honda acquired a 90,000-square-meter lot for factory construction. This was roughly equal to 10,000 square meters, the size of Saitama Factory's Wako Plant. The factory itself would cover 5,000 square meters, encompassing facilities for welding, painting, assembly, and final inspection.

Moreover, three types of motorcycles would be produced: mopeds, constituting approximately 80 percent of the EEC's motorcycle market; and two Super Cub models, the C100 and C110. The monthly production capacity was to be 10,000 motorcycles, based on a single-shift system. Since mopeds were not then part of the Honda product line, they would be designed at the R&D Center in Japan. "Knockdown" production was planned with all parts to be obtained locally except for the engine and a few others to be imported from Japan.

Completed products were to be sold to the three Benelux nations through Belgium Honda, while European Honda would sell them to the remaining EEC nations.

"You might think that [the monthly production capacity of 10,000 units] was unreasonably small for a market that had yearly demand of more than 2 million motorcycles," Okayasu said. "But it was the first time [that Honda or any Japanese corporation had engaged in overseas production]. So we thought along the lines of rearing a small child and raising it to adulthood." We believed that we should strive to sell as many as we could so that after establishing a track record, we could enlarge the factory for enhanced production capacity."

More about this story in a few days!

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