Building an Industry through Open Competition

The S360 exhibited at the 9th Tokyo Motor Show, 1962, attracted huge crowds.

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<< 7. Building Honda’s First Dedicated Auto Plant

MITI, in May 1961, came out with a basic administrative policy regarding the automotive industry (subsequently the Temporary Measures Bill for the Promotion of Specified Industries, or the so-called “Specified Industry Promotion Bill”). It was a policy intended to motivate structural reform among industries nationwide, so that preparation could proceed regarding the expected liberalization of trade. The new MITI policy identified three domestic industries that were relatively less competitive in the global market [automobiles (passenger cars), special steel and petrochemicals] and gave them the “specified” designation.

MITI was ready to propose the deregulation of automobile imports by the spring of 1963, and in order to increase the industry’s ability to compete on the global stage, Japan’s auto manufacturers were classified into three groups. This, it was believed, would ensure effective guidance according to the characteristics of each group. The first group would comprise passenger cars from two companies; the second would include special products such as luxury models and sportscars, including two or three companies; and the third would be Japanese micro-cars, or mini automobiles, with two or three companies. Moreover, the bill set rules concerning mergers and acquisitions within the industry, thus limiting the entry of new companies.

Soichiro Honda described a previous discussion with Shigeru Sahashi, then the undersecretary at MITI, in a 1983 television interview that was later excerpted in an NHK broadcast of February 5, 1995, entitled, “The Men Who Built the Post-War Economy”:

“I deluged him with complaints,” he said, “because I couldn’t understand it at all. To hell with the Specified Industry Promotion Law! I had the right to manufacture automobiles, and they couldn’t enforce a law that would allow only the existing manufacturers to build them while preventing us from doing the same. We were free to do exactly what we wanted. Besides, no one could say for certain that those in power would remain there forever. Look at history,” Mr. Honda continued. “Eventually, a new power would always arise. I shouted at him angrily, saying that if MITI wanted us to merge (form a joint venture with another company), then they should buy our shares and propose it at our shareholders” meeting. After all, we were a public company. The government couldn’t tell me what to do.”

Insisting that free competition would motivate the industry’s growth, Mr. Honda objected to the Japanese government’s measures, which were of course intended to foster the industry’s standing among the world’s car companies.

His objections, however, did not prevent MITI from submitting the bill to the Diet, and if it were to pass, the company would not be able to enter the business. It was a critical period for Honda.
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