When Honda Motor in 1980 announced its then-radical decision to build cars in the U.S., the industry collectively said, "What?"
Volkswagen, alone among foreign car companies, was trying limited U.S. production, assembling Rabbit compacts at a Pennsylvania factory, and struggling to get it right.
While auto buyers now take for granted that many European- or Asian-brand vehicles are made in the heart of the U.S., 30 years ago, it was a stunning notion.
Japan's Honda was "the canary in the coal mine," says John Voorhorst, a consultant and retired executive of auto-parts supplier Denso. "There were a lot of skeptics" betting Honda's plant at Marysville, Ohio, wouldn't last.
In fact, that "transplant" factory, which built its first Accord in November 1982, burst a dam. Within a few years, Japan's major automakers all were here cranking out new vehicles.
At the New York International Auto Show, opening to the public Friday, Honda will display new versions of the Accord, and Nissan will unveil a redesigned Altima -- both made in the U.S. and among its best-selling cars. Toyota will show a successor for Avalon, its U.S.-made big sedan based on the U.S.-made Camry.
"Once (Honda) had the trial by fire and came through, clearly, it emboldened others. It was the opening of the floodgates," Voorhorst says. Foreign companies "saw that you could come here and not have to have a Volkswagen-esque experience."
In the three decades since, Japanese carmakers have opened more assembly and parts factories here, joined by Europeans and South Koreans.
The industrial immigrants haven't been welcomed by all.
A decade ago, about 51% of vehicle and parts manufacturing jobs were clustered in Michigan, Ohio and Indiana, traditional turf of the Detroit Three. Workers were mostly represented by the United Auto Workers.
Now, there are fewer than half as many total automaking jobs as a decade ago, and Michigan, Ohio and Indiana have just 44% of those left, according to data from the Center for Automotive Research. Many of the jobs now are in foreign-owned, non-union transplant facilities, mainly in the South.
About the time Honda opened its pioneering plant, General Motors, Ford Motor and Chrysler Group accounted for three-quarters of new vehicles sold in the U.S. That's about 47% now.
Foreign automakers with U.S. factories, in comparison, have about 48% of all new-vehicle sales here, according to industry tracker Autodata.
While the foreign-brand sales include both imported and U.S.-built vehicles, the robust market-share has encouraged the companies to build cars here.
Today, 10 foreign-based car companies operate 16 big assembly plants in the U.S. and others in Canada and Mexico, building for North America and for export. They also now make engines, transmissions and other key components in the U.S.
Despite that now-proven success, it would have been easy to bet against Honda 30 years ago:
- VW's converted Chrysler factory at Westmoreland County, Pa., was stumbling toward failure. It closed in 1988.)
- U.S. buyers' love affair with import brands hadn't bloomed.
- Whether U.S. workers could build foreign-designed cars to the same quality standards and could work for foreign bosses still were question marks. "There was suspicion about the quality of the American workforce" and its ability to perform under Japanese management techniques, recalls David Cole, chairman emeritus of the Center for Automotive Research at the University of Michigan.
Once the American-made Accords arrived at dealerships, for example, some shoppers looked at vehicle identification numbers, insisting on a VIN beginning with the "J" that meant the car was made in Japan.
"In those early days, some people wanted Japan-built Accords, but that lasted about two seconds," says Kurt Antonius, recently retired after 28 years running Honda's U.S. public relations office. He was at GM when Honda opened its plant.
He believes that bias against Ohio Accords was undercut when auto magazines "bought both and did comparisons. They were identical."
Cole says Honda's move into U.S. production also broke Japanese automakers' insular tendencies -- which he says was more significant overall than building cars here.
"Historically, the Japanese tend to be very inward-thinking. Coming here was a huge, huge step. It was a cultural chasm of immense dimension," Cole says. Honda "broke that barrier."
Next up, Nissan
Less than a year after Honda began making Accords at Marysville in June 1983, Nissan Motor opened a factory in Smyrna, Tenn. That plant now can build more than half-a-million vehicles a year and makes Altima sedans, Frontier pickups and Pathfinder SUVs.
In 1986, Toyota Motor began production at Georgetown, Ky., where it builds Camry and Avalon sedans. It can make 500,000 vehicles a year.
Toyota, Nissan and Honda have built more U.S. plants since then. Japan's Subaru and Mitsubishi have joined them. German luxury brands BMW and Mercedes-Benz also now have U.S. factories. South Korea's Hyundai and Kia have U.S. plants.
And now, again, so does VW.
Despite corporate anguish and embarrassment about the Westmoreland failure, last year, it opened a plant at Chattanooga, Tenn., that makes its redesigned Passat.
"The decision in the Volkswagen Group to build a factory in the U.S. was difficult, due to what happened at Westmoreland," said Christian Klingler, member of the VW Group board in charge of worldwide sales.
He and VW Group global CEO Martin Winterkorn discussed Westmoreland and Chattanooga during a visit to Detroit earlier this year. Klingler said it took years to get over the fear that U.S. workers "wouldn't be able to hold quality." Winterkorn said VW's mistake was trying to build an Americanized car at Westmoreland when "the American customer wanted a German" car.
Though Honda is a big player in the U.S., it's a relative pipsqueak globally compared with Toyota and Nissan.
What's the motivation?
Why, then, did Honda have the guts to build a U.S. factory?
There was then, as now, a big currency exchange risk in dollar-denominated markets. That threatened all foreign automakers. "It became clear that the only way you could isolate from the problem was to build where you sell," Cole notes.
But Honda moved first, he says, because it was scrappier, evolving from a motorcycle and small-engine maker into a full-fledged car company over the objections of its home government. It also had a toe in the water, building motorcycles in Marysville since 1979.
Says Cole, who's spent a career digging into what motivates Japanese and other car makers: "Honda sees itself as the dirty-fingernail motorcycle-mechanic kind of operation, more entrepreneurial than the others."
By James R. Healey