The R&D Center Goes Independent / 1960

Seeking to be an R&D Center that Empowers Corporate Development

The R&D Center Goes Independent / 1960

The R&D Center that Never Was

A special meeting was held in Tokyo early in 1962 to promote the establishment of Soseikai, an incorporated foundation. According to the minutes of that meeting, Chairman Fukuzo Kawahara (and former executive vice-president of Mitsubishi Bank, then-director of Mitsubishi Metal Corp.) proposed that Takeo Fujisawa (then the senior managing director) explain the purpose of establishing Soseikai.

Photo

Copies of the prospectus for establishing Soseikai and the minutes of the Soseikai promotersê meeting (Photograph courtesy by Tasku Date)

Fujisawa began with the following statement:

"There are two objectives in the establishment of this new foundation. The first is to contribute to cultural development through research and associated projects in natural science, cultural, and social science, and in particular, technical promotion. The second is to provide half of the shares in the Honda R&D as a basic asset for the establishment of an incorporated foundation, thereby completing the original mission of an R&D Center that can in turn contribute to society."

The Honda R&D Center was separated from Honda Motor in July 1960 to be a fully independent entity. Fifty percent of its shares belonged to Honda Motor, and the balance was split evenly between Soichiro Honda and Takeo Fujisawa. The plan was to establish Soseikai, based on the latter shares held by Honda and Fujisawa.

Fujisawa spent a great deal of time explaining the second Soseikai objective. He stressed that unless the R&D Center’s independence was secured and the dignity of research maintained, they would be hard pressed to expect significant results. This meant that the Research Division was to remain independent from the structure shared with other divisions handling various tasks such as manufacturing, sales, and accounting. Fujisawa argued that by using 50 percent of the shares held by Messrs. Honda and Fujisawa as a basic asset for the incorporation of a foundation that could be permanently maintained, a force would be created to counterbalance the gigantic influence of major shareholder Honda Motor. Research centers could therefore expand significantly, Fujisawa said, if such equally strong forces were allowed to bring their independence into full play without interfering with or pressuring one another.

Fujisawa added that such R&D’s independence is ideal for manufacturing companies. He said that in time the public would come to appreciate their worth, and that similar R&D centers would spring up everywhere.

Kawahara, upon listening to Fujisawa’s explanation, voiced his respect for Fujisawa’s passion and vision for the establishment of Soseikai. However, he expressed a certain concern regarding the fact that Fujisawa placed such an emphasis on his second goal. He feared that it might invite inaccurate speculation that the aim of establishing the new foundation would really be to enhance the mutual prosperity of Honda Motor and Honda R&D, and that the first goal would be of secondary importance.

After the debate, the prospectus for the establishment of Soseikai and the candidacies for director and trustees of the foundation were deliberated. With Kawahara representing the establishment of Soseikai, an application was to be filed with the Ministry of Education for permission to establish a foundation.

Tasku Date, then the director of Honda R&D and a nominee for the Soseikai directorship, looks back on that time:

"That was when I first was able to understand the full picture of Mr. Fujisawa’s highly respectable idea regarding research centers," he recalled. "Since about the beginning of 1955, Mr. Fujisawa had given a great deal of thought to the way an R&D center should be organized. In July 1960, he made the R&D Center an independent corporation, and Soseikai was to be the finishing touch to his concept of a research center. He was willing to give Soseikai 50 percent of the center’s shares. He had tried to create a unique, powerful R&D center - one unlike anything found in other companies - by putting the directors and employee representatives in charge of Sosekai’s management.

"It was not to be, however. Soseikai simply failed to materialize."

With the establishment of American Honda and a string of decisive wins in the Tourist Trophy (TT) races, 1962 opened with Honda ranked as the world’s top motorcycle maker both in name and reality. Moreover, the company was gaining a foothold in the automotive industry. At about that time, the company was preparing to issue ADRs (American Depository Receipts) in New York to procure funding on a worldwide basis. It was the underwriter Goldman Sachs that warned Honda that a plan to convert Honda R&D’s share percentages to 50 percent ownership by Honda Motor and 50 percent by Soseikai might invite suspicion in the minds of ADR investors, and thus precipitate difficulties.

"A R&D center should rightfully be a subsidiary of Honda Motor," Date remembered. "It was simply unfathomable, and inexcusable, that the research center could exist outside the control of the parent company. As a condition for issuing ADRs, the plan for Soseikai was completely denied."

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