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Honda Techno Fort and the Three Reality Principle

Interview - January 12, 2023

When it comes to automobile innovation, HTFT takes a leading role in its comprehensive development of areas such as design, testing, analysis, prototyping, IT system development and intellectual property management.

MASAHITO KANEKURO, PRESIDENT OF HONDA TECHNO FORT CO., LTD.
MASAHITO KANEKURO | PRESIDENT OF HONDA TECHNO FORT CO., LTD.

In recent years, Japan has seen the rise of regional competitors located in Korea, Taiwan and China. They replicated Japanese monozukuri, yet in Japan we still see that certain firms retain high mix, low volume leadership, niche leadership. What is Honda Techno Fort’s uniqueness, and how do you distinguish yourself from those regional competitors?

Since the inception of the company, we have worked together in terms of four-wheel development with Honda. Further, we have followed the philosophy, “respect for the individuals” and “the three joys” shared with Honda. In addition, Honda and Honda Techno Fort have shared value called “Three Reality Principle", which emphasizes “going to the actual place,” “knowing the actual situation” and “being realistic.”  We value this Principle for every monozukuri phase.

Since founded, our company have been focusing on monozukuri as core business. Recently in 2020, when we were in the covid-19 crisis, we started remote development where people were working on development at home as many suppliers do. To be honest with you, if you ask whether we have been fully satisfied with this remote development, my answer would be “not enough.” What's most important in terms of development at our company is not whether or not we can develop four-wheels remotely at home, but whether we can support our personnel to develop their abilities and skills to fit future roles and/or needs in five to ten years. That's the most important point, I think. Actually, I don't think we cannot support people to develop their necessary abilities with a fully remote working environment, even though the scheme or rules are perfect.

This idea also applies to our technical development including suspension development and others. As a nature, technical development works when many independent functional teams relate to each other. On the other hands when it comes to quality issues, including big recall issues, those kinds of quality related issues often come from the in-between place of teams where lack of information and/or loss of communications tends to occur. Basically, as I mentioned earlier, I think technical development has to be based on the “Three Reality Principle” so that members in each functional team can see, listen and feel what is happening in real time. The principle brings, I believe, not only information but also professional knowledge and abilities to our personnel. Therefore, while we work based on the Three Reality Principle, we are now trying to incorporate the advantages of remote development into it.

As a matter of fact, this is the basis of Honda group’s monozukuri. I think it would be best if we can really achieve a hybrid process of development which incorporates both the merits of the Three Reality Principle and remote development. To be honest with you, however, I don't think any company has been able to achieve 100% remote development for monozukuri yet.

I would also like to briefly touch on our infrastructure and development environment. For example, we have a facility at our headquarters where we conduct joint verification with HONDA for vehicles as a whole. In this joint verification, we verify vehicles and vehicle components. In fact, we not only verify the vehicle using layout drawings, but also by touching and verifying the actual vehicle and concluding the verification results. Here, too, the "Three-Point Principle" and especially "going to the site" is important.

 

You’ve got almost 2000 staff here in Tochigi, and one of the big criticisms, especially from international media, about the Japanese economy is the threat of the aging population. A recent article by Nikkei said that Japan needs 6.75 million workers to sustain economic development by 2040. How is your company reacting to these population changes?

Of course, we fully understand about the aging society in Japan and the reduction of the labor force in the labor market.

As you may already know, we have been dealing with a broad range of four-wheel development, including from styling or design data to development, prototype design, experiments, testing on CAD systems, IP management, and PR activities. We have been devoted to a lot of aspects in relation to vehicle development related to Honda. As a result, we have developed the ability to meet the needs of our customers who are eager to prepare human resources in this era of declining birthrates and an aging population. For example, a customer can outsource development of a specific vehicle from us, as a complete package, or a specific service and all the areas related to it. For customers, it would be helpful if we provide a packaged development or service rather than a single standalone vehicle part. That's something that we can be proud of. Therefore, I think that this is also a kind of business opportunity for us.

 

Combustion engine requires more than 30,000 components for the entire car while the next generation of vehicles - EVs for the CASE era - require half as many, therefore there are a lot fewer components to check and verify. As a development specialist, how are these changes in the automobile industry impacting your business, and how are you adapting your process?

With regard to the EV shift in the automobile industry, I think it has made more significant advancements than we had expected five years ago. With regard to CASE, we have seen the advancement or expansion of development around ADAS (Advanced Driving Assistant System) and IVI (In-Vehicle Infotainment) as well. Similarly, the environment around us has been significantly changing accordingly.

We have yearly business meeting with Honda to discuss what vehicles we need to develop in five years and what skills we should acquire. In this way, we strategically decide what and how many vehicle development or service we provide so that we can meet Honda’s strategic needs in several years after.

On the other hand, in recent years, customer needs have been also changing to new technologies relating to EVs and CASE. In order for us to actually respond to those kinds of quick changes, I think it's quite necessary for us to improve and enhance our technological capabilities.

In order for us to achieve this strategy, human resource is key. As one of the solutions, we have been seconding our personnel to Honda, and Honda has been seconding personnel to us to strengthen our technical skills. We have also optimized in-house staffing allocations according to the strategy we agreed.

 

One of the hallmarks of this switch to EVs and the next generation of cars, is the opening up of the keiretsu, or the hierarchical nature, of the automotive industry. You mentioned the need for more technical exchange between yourself and Honda, and what we're seeing is traditional companies like Toyota now have partnerships with those outside the keiretsu, like Toyota’s with Panasonic to develop the solid-state battery. In the future, are you expecting to look for such partners outside of the Honda Group as we switch to this new powertrain for vehicles?

The simple answer to your question would be “yes”. However, when I actually talk about the situation we are in right now, as I said earlier, our major business is the development of cars for Honda and as I said, every year we have been holding a business meeting to talk about future businesses or future projects together with Honda. We are not yet ready in terms of manpower also, to be able to seriously consider officially partnering with other companies outside Honda Group. Honda Techno Fort includes the name of the Honda, so I think our first priority is to devote our business and contributions to Honda. Maybe after 5 or 10 years from now and in the far distant future, we may be able to say that we could consider partnering with companies other than Honda. That’s a possibility, but right now we are not yet ready. The number one priority for us is the contribution we make, and the meeting of requests from Honda.

 

The changes occurring in the automotive industry are very complex. We have the move towards electric cars, but we're also seeing that the driving experience is changing from people driving to autonomous driving. On top of that, there's big changes when it comes to mobility practices. People perhaps in the future won't buy a car anymore, and it'll be mobility as a service – a car that you can rent and share among others. Due to all these changes, it's very difficult to hear a unified vision of what the industry will look like in 10 years. How do you envision the automotive industry itself in 10 years?

I think it's already been made public how it will look like 10 years from now and I agree with it. Actually, we have seen a significant shift from petroleum to EVs, and with regard to the speed of that shift, Japan is among the slowest. China and the US have advanced ahead of Japan.

In regard to four-wheel development, I believe that the business model will be further expanded from mainly selling vehicles to providing customers with a variety of services and values through products that integrate hardware and software.

Also, there is an organization called Honda R&D, which is dedicated to future technologies, already working on new technologies for their helicopter, rockets, next generation mobility, etc. that have been officially announced. We, Honda Techno Fort, have been partly participated in some new technology-related tasks. We are sorry, but details are confidential, and I can't give them here.



It's very well known that the patent structure in the automotive industry is all done in-house. It's completely secret, but we saw earlier this year that it was reported that Nissan, Honda and Toyota were, for the first time ever, going to have to pay a fee to telecommunications companies such as Nokia and NTT Docomo for the use of components in EVs that will connect to the Internet. This is an unprecedented step for the automotive industry as they've never had to pay patent fees outside of their network. What do you think about this change, and with this liberalization of patents?

I actually cannot talk about specifics because we haven't understood everything about what Honda has been doing in their business. However, personally speaking, because every company has already started doing something like that, for example to connect a vehicle to shop information or traffic information, I think it's quite natural.

I think, in order for the automotive industry to further develop and promote technological evolution, we believe that the liberalization of patents should be further promoted.

 

Japan’s industry has been outspokenly ambitious about both the setting and attaining of carbon neutral targets. While the aim of total carbon neutrality by 2050 remains the end goal, the manufacturing industry is continuing trial and error to meet the goal of a 46% reduction in CO2 emissions by 2030. What efforts is your firm taking to contribute to a more sustainable society?

I would like to quickly talk about CO2 emissions. As you already know, Japan stated clearly that it would achieve zero CO2 emissions by 2050. In 2018 we declared an environmentally related policy to aim for zero carbon, to be able to leave an enriched and beautiful Earth to the next generation of children. With regard to CO2 emissions at Techno Fort, we already completed all the changes to LED lights, and this September we changed a part of the rooftop of our company building to solar panels, and then we also started installing solar panels at the employee parking lot with its partial roof structure. We will be continuously increasing the installation of solar panels as we have done so far, up to 2030. By doing so, we expect that we can reduce CO2 by 46% compared to peak periods.

 

Since 2014 you've expanded to Thailand, and we also know that you have an office in Ohio in the states. Firstly, could you tell us the purpose of having those two locations for your business model, and looking towards the future, do you foresee any new international bases that you will need to grow to keep in step with Honda, or even with partners outside the Honda Group?

Firstly, I will talk about our business in Thailand. There is a Honda’s driving test site called the proving ground in Thailand. We have operated the site since 2017. As we have been operated similar proving grounds in Japan for a long time, we decided to  expand business to Thailand and have some staff there so that we can use our experience and knowledge there.

Secondly, let me introduce our business in North America. We have an office there for vehicle development. Basically, we have several people there. While they are in charge of development of some parts on site,  they are in charge of receiving the request from Honda America as a contact person to transfer the request to the Japan office. In short, we have many people working for U.S. businesses as well.

Particularly with regard to the U.S. business, so far, we have been mainly working on designing multiple car parts. Not only car parts alone, however, we are also trying to develop multiple parts as a package, so that we can build and maintain a win-win relationship with Honda America. Although this is still one of our targets now, we will discuss with the US team so that it will be realized in near future.

 

Let's say we come back to interview you again on the last day of your presidency. What would you like to tell us about your goals and dreams for the company by that time, and what would you like to have achieved by then?

I could talk a lot about it, but I think the keyword I would say is “the future.” Until now, I have been trying to do a lot of things as the president about what kind of a relationship we should have between Honda and Honda Techno Fort.

As I mentioned, every year we have a business meeting to talk about our future strategy together with Honda. However, I don’t think it is a kind of insurance for us. Once we lack our technological capability, we would not be able to satisfy customer needs, even though we are part of the Honda group. That's the kind of determination I have as president of the organization right now.

I would like to say with strong confidence that we continuously have had the development capability meeting the requests of Honda and strengthen the win-win relation with Honda for another 5, 10, and 20 years in future. In order to be able to do that, I would refine and polish up our development capability.

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