The Power of Dreams

By Ben Thompson, Senior Editor

Business Management Senior Editor Ben Thompson caught up with Hiroshi Soda, EVP and Managing Director of the car giant’s North American operations, to find out why a green focus is part of Honda’s DNA.

“Society at large will judge Honda based on the way we conduct our business, not simply what we say about our activities”

Put simply, Honda wants to be the world’s cleanest, most efficient manufacturer. As targets go, it’s up there with the biggest and the best, but it’s certainly not an unrealistic goal for a company long-viewed as a paradigm of eco-responsibility. For example, it has promised to reduce CO2 emissions from its factories as well as its vehicles by five percent between 2005 and 2010 (on top of the five percent it achieved between 2000 and 2005); current projects include a focus on two alternative fuel technologies (the natural gas powered Civic GX and the hydrogen fuel cell FCX); and it has also taken a crack at solving a problem other automakers have left to the oil companies: creating an infrastructure for hydrogen. Make no mistake, Honda is serious about going green.

But this focus is nothing new. Indeed, the auto giant has long viewed it as a fundamental responsibility to advance its environmental technology, and has made significant progress with the design and manufacture of more environmentally friendly vehicles. “This perspective is part of our DNA,” concedes Hiroshi Soda, Executive Vice President of Honda North America. “The preservation of our natural environment is a core management responsibility and a critical component of our long-term viability as a mobility company.”

He cites the late 1960s as a great example of Honda’s long history of innovation when it comes to tackling eco-issues. As the Japanese firm prepared to enter the auto industry in the US, its engineers came across reports of the growing problem of air pollution. Adopting the slogan ‘Blue skies for our children’, they set out to create a cleaner burning engine and succeeded in creating the first engine to meet the new clean air requirements based solely on engine performance. “This helped make the first Honda Civic a big success,” explains Soda. “The issues have evolved over the past three decades and currently focus more on climate change, but the challenge is the same for Honda. We want to leave ‘blue skies for our children’. This means a commitment to use advanced technology to meet the needs of our customers, while limiting the impact of our products on the environment.”

The future of the automotive industry
Ultimately, Soda believes fuel cell vehicles hold the most potential as a zero emission vehicle, but is realistic enough to acknowledge that it will take many years before fuel cell technology hits the mass-market. As a result, Honda has stepped up its commitment to further develop new fuel-efficient internal combustion engine technologies, including gas-electric hybrid, diesel and natural gas powered vehicles.

“We see hybrid technology having the greatest and most meaningful impact on the market in small vehicles where there is a large gain in efficiency,” he says. “We will introduce a new, more affordable hybrid car, positioned below the Civic Hybrid, in 2009. At around the same time, we will introduce a clean diesel vehicle, able to meet US EPA Tier 2 Bin 5 emissions standards utilizing a new catalyst technology that does not require a tank of urea onboard. Because we believe diesel technology is better suited in terms of cost and efficiency to improving the fuel economy of larger vehicles, we are also working on development of a V6 diesel engine.”

In addition, the Honda Civic GX natural gas vehicle is now available to fleet customers in more than 40 states. This is the third generation of the Civic GX, which the US EPA called the cleanest internal combustion engine it had ever tested. In 2005, Honda began retail sales of the GX to California consumers and retail sales were expanded to 19 dealers in New York State in 2006.

In terms of fuel cells, Honda is the only automaker with a government-certified fuel cell vehicle and now has two individual customers in California. “This real-world experience helps us better understand the challenges we may face with mass-market introduction,” says Soda. “In 2008, we will begin limited marketing of our next-generation fuel cell vehicle in the US and Japan. It is powered by our originally developed V Flow fuel cell stack, which offers greater performance, range and efficiency. This more compact fuel cell stack also enabled us to create a stylish four-door sedan, which should enhance its customer appeal.”

Soda suggests several reasons why fuel cell vehicles remain many years away from mass-market introduction but concedes that the lack of a refueling infrastructure is one of the major factors. “Honda is developing technology to address this ‘chicken and the egg’ dilemma of the vehicle and the refueling infrastructure,” he says.

This includes two different methods of refueling systems that are currently undergoing tests. The Home Energy Station at Honda R&D America’s headquarters in Torrance, California – developed in partnership with Plug Power, Inc. – is a home refueling unit that provides hydrogen from natural gas for vehicle refueling, as well as heat for domestic hot water use and electricity for the home. Honda R&D is also operating an experimental solar cell powered hydrogen refueling station in Torrance, California. The station employs next-generation CIGS solar cells, developed by Honda Engineering Co. Ltd. “We consider these home-refueling systems to have high potential as the future infrastructure because both issues of sourcing and carrying hydrogen are addressed,” explains Soda.

A holistic approach to going green
But Honda’s commitment to the environment is not just about special green projects. “Our commitment impacts every aspect of our business operations,” says Soda. “For instance, we made a commitment to equip all of our on-road motorcycles worldwide with cleaner four-stroke engine technology, rather than the two-stroke engines still used by many competitors. We have also begun expanding application of the programmed fuel injection (PGMFI) to our motorcycles to enhance environmental performance on a global basis.” This commitment will have a major impact in developing nations, where motorcycles are used as a primary method of daily transportation. Similarly, Honda made the commitment that all of its power equipment products such as lawn mowers, outboard marine engines and general-purpose engines will use advanced four-stroke engine technology.

Honda’s commitment to the environment has also led to a number of interesting technologies, including a micro-combined heat and power (MCHP) cogeneration system expected to yield a 30 percent reduction in CO2 emissions compared with conventional heating appliances or grid-supplied electricity; a thin film solar cell developed independently by Honda that uses thin film made from a compound of copper, indium, gallium and selenium (CIGS) to reduce the CO2 generated during the production stage; and a new technology to produce ethanol from soft-biomass, a renewable resource of plant-derived material, which represents a large step forward for practical application of soft-biomass as a fuel source.

“Honda devotes among the highest percentage of its revenue on research and development within the auto industry – some 5.5 percent of our global revenue,” says Soda. “Investing in R&D is essential to Honda’s efforts to address environmental challenges because of our focus on creating original technology.”

In addition to these R&D efforts, Honda plants worldwide already meet the toughest international environmental management standard, ISO 14001, and the firm is working to drive green standards into its everyday production and business operations. Soda believes reducing the company’s carbon footprint and generating greater awareness of issues such as emissions reduction and energy efficiency will be key to Honda’s success going forward. “Honda’s ultimate goal is to produce the world’s cleanest, most efficient products from the world’s cleanest, most efficient factories,” he says. “We recognize that the manufacture of our products consumes various resources and energy and results in environmental releases. Our Green Factory initiative, launched in 1998, brings increased focus to our long-standing goal to maximize the efficient use of resources and minimize environmental releases in all aspects of our production operations.”

Toward this end, associates at each of Honda’s plants are empowered to find, assess and invest in ways to reduce environmental impact. “All manufacturing associates in North America are provided with environmental training that covers general environmental topics as well as each associate’s specific responsibilities,” he says. “In addition to reducing the environmental impact of manufacturing operations, the company works with suppliers to improve their environmental performance as well.”

Towards a greener future
So as more and more companies adopt green policies, how will best-in-class organizations use environmental credentials as a competitive advantage? Soda is clear on the route Honda will be taking. “Based on the 2010 Vision that guides Honda’s business activities on a global basis, our corporate goal is to become ‘a company that society wants to exist’. This reflects our understanding that our customers and society at large will judge Honda based on the way we conduct our business, not simply what we say about our activities. We have long-viewed environmental preservation as a core responsibility that is critical to our long-term viability as a mobility company. However, as consumers make environmental performance a key factor in their purchase decisions, it is natural that more companies will pay attention to the environment. Thus, the key to environmental protection truly lies with individual consumers and the decisions they make each day.

“The challenges facing companies in the business of providing people with mobility are never-ending, as they include both the performance of the products we make and the processes required to produce them,” he continues. “Our ability to advance new products that address these issues is often dependent on advances in other industries. For instance, clean diesel technology requires new cleaner diesel fuel. Making hybrid vehicles less costly and more attractive to customers requires advances in battery technology. The future of the fuel cell vehicle requires the establishment of an entire refueling infrastructure.

“So, the key issue for the future is the ability of the auto industry to collaborate with other industries, and with other sectors of society, to create a transportation system that can meet the needs of our customers for mobility, while also reducing the impact our vehicles and production facilities have on the environment.”

Fast fact
Honda directly employed nearly 27,000 Americans and had a US payroll of approximately $1.9 billion last year