Corporate / Executive Remarks
NADA 2007 Keynote Address
Executive Vice President, Automobile Sales
American Honda Motor Co., Inc.
February 3, 2007
Good afternoon ladies and gentlemen. It is a heartfelt pleasure for me to be with you here in Las Vegas. You know I never thought that in the twilight of my career, I would have a chance to address the entire universe of automobile dealers in America.
So, it's a real privilege to be asked to share my thoughts and perspectives with you today. But, I'd like to begin by offering a salute to a good friend and your outgoing chairman, William Bradshaw. William is a great dealer, and owns two of our better stores. Like many of you, William has passed down a passion for this business to his children.
A few years ago I hired his daughter, Angie, as a trainee at American Honda. She had talent and I could see her potential. But then I brought in a nice looking guy, one of my best and brightest from our zone office in Texas. I should have known better because within a year both of them had taken off, with each other. They ended up in South Carolina working for William. Now I know why he calls his store "Breakaway" Honda. But congratulations, William, on a great year and thanks for your tremendous commitment and dedication to NADA and the auto industry.
While I'm at it, I'd like to welcome the incoming chairman of NADA. I know Dale Willey is going to be a terrific chairman. And as an old Kansas boy myself, I'm really happy to see a "Jayhawk" heading NADA for the coming year.
It has been a long time since I called Coffeyville, Kansas "home." But looking back makes me appreciate what a great industry we work in and what a great country we live in; that a young kid growing up in a little town on the border of Kansas and Oklahoma could work to achieve a leadership position within this industry, and with a global enterprise like Honda.
Growing up in a town of 12-thousand people had its limitations. Sometimes we had to find unique ways to get things done. For instance at Coffeyville High School they taught driver education and sex education in the same car, and sometimes at the same time.
I left Coffeyville at age 19, but fortunately I had taken that class. And maybe a few of you had the same experience. But growing up in a small town had its advantages, too. I think it's one of the reasons I have such a passion for this business.
I had my first car by the age of 13, and, by 14 I had my driver's license. You know, you could get away with things like that in the 1950s - out on the plains of Kansas. If you could see over the dash, the police kind of looked the other way. I also remember the pure joy of visiting our local car dealer. It was an experience we looked forward to, with excitement and anticipation. We couldn't wait to see what new cars Detroit would send our way each fall. More than that, dealers were pillars of the community: respected, admired and trusted.
Trust, now there's a word. If you think about it, it's the single most important word in our business. Trust is the essential ingredient in the relationship between each of you and your customers. Trust is the determining factor in the reputation of our products and brands, and it's central to my focus today. Trust is the foundation of the relationship between dealers and manufacturers. Unfortunately I don't think that's always the case today. Too often we're distracted by tactics, instead of focused on values.
We square off like opponents when we should join hands as partners. A partnership is defined as two or more people in the same business sharing its profits and risks. But in this industry, we share more than just profit and risk, don't we? We share the single most important element of our business: the customer.
So today, I want to spend a little time talking about trust and how we must work together to achieve it for the future of our industry and the benefit of our customers. I like to think that together we are the custodians of this great industry with the responsibility to advance it and improve it for future generations.
And we hold this responsibility at a very challenging time. Our industry continues to experience profound change. Change that is driven by fluctuating fuel prices, economic conditions, demand for new advanced technologies and by the increasing and varied expectations of a new breed of customer who are empowered by newer and faster methods of obtaining information.
In the face of these dynamic forces, trust is more important than ever. And to sustain a high level of trust, I'm convinced we can't approach it tactically. You can't earn trust through a sales program or an incentive campaign. It's a higher calling that requires something to believe in and something to keep everyone on the same page. Trust must be built upon shared values that will sustain a relationship through even the most difficult of times. And I really believe the process begins with understanding one another.
As manufacturers, we have to understand you and your business and your local market. And as dealers, you must understand the unique values of your manufacturer. I know that most of you have more than one brand in your portfolio. But you can't approach us all the same way. We have different histories and corporate cultures, believe in different things and place different priorities on the way we manage our business.
I have had the honor of working for several different automakers. But, in Honda, I found a company that believed in the same things that I do: where trust and respect are the foundation for teamwork and everyone is treated fairly, with an opportunity to fulfill their potential.
I know some of you might think Honda and other Japanese companies are a little too philosophical. But when a philosophy is shared by everyone and lived every day, it isn't just philosophy. It becomes a way of life. And that's the way it is with us. This philosophy of respect also serves as the foundation of our commitment to the customer.
I know the phrase "Customer Satisfaction" has become a buzzword in virtually every industry. And there can be no more important objective. But I bet you didn't know that the original J.D. Power & Associates Customer Satisfaction Index grew out of discussions with Honda management more than 25 years ago.
At Honda, the pathway to customer satisfaction and trust was passed down directly from our founder Soichiro Honda. It's an approach we call "The Three Joys." Here in Vegas, The Three Joys might sound like the name of the newest "Cirque de Soleil" show, or some club off the strip you went to last night. But for 50 years, The Three Joys of buying, selling, and creating mean our dealers really cannot be satisfied until our customers are fulfilled, and none of us at Honda can feel satisfaction until both our customers and dealers are happy. When you have a belief system like that and you follow it everyday, the inevitable result is trust.
They say trust takes years to build and only seconds to destroy. And Honda found that out the hard way. When I joined the company in 1993, trust was not only missing from our relationship with many dealers, it was in shambles. I don't need to recount it in any detail now, but a few top sales executives who preceded me at American Honda violated the company's trust, and the trust of our dealers.
Fortunately, it wasn't a case of a bad company, or the wrong set of core values. It was a case of a good business model gone wrong. But did we emerge from this crisis with the trust of all of our dealers? Understandably not. I don't like to live in the past, but as Winston Churchill once said, "The longer you look back, the farther you can look forward." So, by acknowledging past transgressions we work to ensure that they never happen again. Importantly, we recognized that we had to rebuild and restore relationships with our dealers.
There's something critical to understand about trust and how it is achieved in the world of business. People can trust a brand or its products based on the consistent achievement of dependability, quality, and reliability, and we work to accomplish that with our customers. But trust in a business relationship is not with a company or a brand. Trust is something that occurs between people. So we set out to rebuild relationships with our dealers and earn back trust through the shoe leather method.
We focused on listening and learning, and I went out to meet both my dealers and my people in the zone who worked with them on a daily basis. We approached this as an incredible opportunity to build positive relationships the right way. And that's exactly what we did.
Guiding me in this effort was a depth of experience gained in my years at Chrysler and Mazda. But I must say that the real teachers in my 45 years in this industry were the dealers I encountered along the way. And the biggest thing that I learned from all of you is simply to treat people with respect. Just like Honda's fundamental philosophy, it's common sense.
Whether it's an individual customer, an employee, or a dealer, you have to listen, and talk with them, not down at them. And if you're going to get anyone's cooperation you have to create teamwork based on mutual trust and respect and by understanding the other guy's situation.
Which makes me think back to my first job in the industry, in the 1960s. I was with GMAC and I was the "repo king" of Kansas City. Talk about getting close to the customer! I used to sit out on the street, waiting for customers who had defaulted on their loans to come home. As soon as their front door closed, I was firing up the engine and driving away. I can remember once when I "repo-ed" three cars and a truck in the same day to the same dealer. Not a pick-up truck. I'm talking about a big tractor trailer rig with a 15-speed transmission. Try that as a getaway car. I'll never forget it. When I met the dealer on his lot he was ready to kill me.
He said "Son, I can't sell 'em as fast as you're bringing 'em back." I thought I was doing a helluva job but I was driving the dealer crazy. But you learn from those situations.
One thing I learned is that smaller dealers are some of the best in the business because the dealer principal has to do it all. I really believe that today's automobile dealer is one of the last true entrepreneurs in America. You have a tremendous amount of money invested in this industry, and we respect that. You're the maverick, the person who has kept the business who hasn't bent to consolidators. That's important because it means there's no distance between dealer principal and customer.
For Honda, achieving trust with the customer is the key to our relationship with our dealers. While we want to achieve the highest levels of customer satisfaction, at the same time, we recognize that our dealers need to achieve a higher level of profitability. We want our dealers profitable and we work to help make that happen. We want them happy and prosperous and able to invest in their business in order to constantly stay on the leading edge of advances that improve customer care. That's part of the trusting relationship.
While we still have room to improve, we have made great progress in these efforts by working closely with our dealers on a number of initiatives including a strong leasing program, a certified used car program, a major effort focused on continuous improvement, and a regional marketing program. With the significant help of our dealers, each of these initiatives either broke new ground or set a new standard in the industry. These strategies have also helped carry us to record sales results for 10 straight years, more than double the 700-thousand cars we sold in 1993 the year I joined the company.
So, to our Honda and Acura dealers out there I congratulate you and thank you. I am indebted to your efforts in helping us achieve this record. Importantly, we accomplished all of this as a family with very limited growth in our dealer network. However, we've had some expansion. One area of focus was to develop the diversity of our dealer network reaching out to ethnic minority business owners because we want our family of dealers to reflect the families of America. We believe in that. I believe in that. But, by and large, we have succeeded through enhancing our existing dealer organization to ensure their success and profitability.
Most of the programs we've introduced were developed with the guidance and support of our dealers, especially our National Dealer Advisory Board. Were some of our dealers skeptical about certain programs? You bet! But sustaining trust enables us to understand each other's point of view and resolve any disagreements effectively through open and respectful communications. We also have organizations like NADA to help us. NADA plays an important role in informing and improving the working relationships between dealers and OEMs. Each year, the NADA dealer satisfaction index provides an opportunity for all dealers, large and small, to send a message to us manufacturers. And we take it to heart. Frankly, we don't make major changes without consulting our dealer advisory board and NADA.
When it comes to building and maintaining trust and respect, I know there are lots of good role models in this room. But one of the best I ever met passed away last Fall, a man most of you knew and respected, Dave Mungenast, Sr. Dave was an incredible and inspirational Honda and Acura dealer in St. Louis, Missouri, and the entire global family of Honda was saddened by this loss.
Dave was committed to NADA, but he was also an ardent supporter and former chairman of AIADA. I think we can learn from his example. Dave had the right idea that the efforts of NADA and AIADA go hand in hand and we can and should support both organizations. I hope you will.
We're in Las Vegas, and I know the old wisecrack is "trust everybody ... but always cut the cards." But the bottom line is this; the success of your business and my business and the key to the future of the auto industry is right here in this room. It's all of us. So, I want to leave you today with a challenge for all of us. We have to make a choice to work together and communicate openly not through lawyers or the media but through our own initiative.
Remember that in any relationship the essence of trust is not in its bind, but in its bond. And to achieve this bond between us we have to focus on core beliefs - beliefs that will sustain the relationship in both good times and bad. As individual companies and dealers, and through organizations like NADA, let's make relationships based on both teamwork and trust the absolute bedrock of our industry.
It reminds me of my football playing days back at Pittsburg State University. That's Pittsburg without an "h" - for those of you from back East. What you learn playing a team sport like football is that you have to depend on the other ten guys on the field. Without teamwork you can't be successful. You might start in the heat of summer as a group of peo