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OM in the News: Honda Learns to Outsource

August 17, 2018

The Honda Civic production line at a factory in Wuhan, China

Honda’s decision to go shopping points to a radical culture change at one of Japan’s proudest companies, where founder Soichiro Honda in the 1960s said, “We refuse to depend on anyone else.” The struggle at the entrepreneurial success story cuts deep into Japan’s sense of itself as a global leader in technology, writes The Wall Street Journal (Aug.6, 2018). Honda once used staff technicians to design new technologies ranging from engines to the shape of the suspension arms. Today, Honda believes rapid shifts in technology mean it can no longer afford to keep pace working solely on its own.

Car makers around the world are under stress from the huge investments needed to develop new technologies used in electric vehicles and autonomous driving. To trim costs, most are leaning on megasuppliers such as Bosch, Continental AG and Denso, as well as smaller companies with cutting-edge technology such as Intel’s Israeli subsidiary Mobileye. For Honda, whose official name translates as Honda Technical Research Industry, the shift to outsourcing is forcing it to rethink its identity as a creator of unique auto technologies. Some of its most famous products include a navigation system that pre-dated civilian use of GPS, and the CVCC engine, which used less fuel and cut emissions. At the time of the engine’s unveiling in 1972, Honda’s head of research, trumpeted: “We at Honda did everything on our own.”

But in a demonstration for journalists last summer, Honda’s self-driving prototype rolled through a stop sign without halting. Honda said the vehicle was an early prototype and that its performance is now much improved as a result of collaboration with SenseTime. Honda’s eventual self-driving system will likely have only a fraction of its software written by Honda engineers. “We haven’t changed. What changed is that it is inefficient for Honda to do everything ourselves,” says a company exec.

Classroom discussion questions:

  1. What was the advantage of doing “everything on our own”?
  2. What are the advantages of outsourcing?
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