Honda And Alabama: A Thriving Partnership

Sunday, April 3, 2011 - 10:16

Editor: Please tell us about your background and your current role at Honda Manufacturing of Alabama, LLC (Honda).

Royston: I am an Alabama native and began my career in 1991 as a healthcare lawyer for a hospital called DCH Healthcare Authority in Tuscaloosa, Alabama. In 2003, I moved to Morgantown, West Virginia and served as assistant general counsel at West Virginia University Hospital (WVUH). By 2007, I was homesick, so I moved back to Alabama and began work at Honda. I serve primarily as a corporate operations attorney, focusing on commercial contracts and transactions, claims, employee benefits and tax issues. Our legal department consists of three attorneys, including a colleague who handles traditional labor and employment matters and our general counsel.

Editor: How did you become involved with the Alabama Chapter of the Association of Corporate Counsel (ACC)?

Royston: The former vice president and general counsel of WVUH was a member of the ACC, and I worked with him in Morgantown. I had always been a member of American Health Lawyers and got involved in some ACC educational programs during my tenure at WVUH. I was impressed with its high-quality educational programs on a national level, so I always kept an eye on the ACC. When I returned to Alabama and joined Honda, I learned that the Honda attorneys were also members of ACC, so I joined the ACC and got involved in the Alabama chapter, serving first on the board of directors, then as vice president last year and now as this year's president.

Editor: What legal issues of greatest concern to the ACC's Alabama chapter?

Royston: Though our ACC chapter is small, it is fairly diverse. Alabama's corporate landscape comprises manufacturing, pharmaceuticals, hospitals, electric utilities, retail and real estate development; thus, there is no distinct subset of legal issues that speaks for the entire Alabama chapter. Anecdotally, during my years in healthcare, Alabama developed a reputation as a tort hell, which has changed a lot in the last ten years. The litigation environment certainly could have been identified as a legal issue of great concern; however, by many accounts and my own experience, it has improved greatly.

Editor: Is it true that this positive development in litigation has led to greater interest in doing business in Alabama and contributed to some of the diversity you mentioned?

Royston: I think so. Alabama has made big efforts not only to recruit new business but also to make positive changes in the law and in the business environment, which benefits the business climate for both new and existing businesses. For example, in the automobile industry alone, Honda located here ten years ago, and both Mercedes-Benz and Hyundai call Alabama home. Also, ThyssenKrupp is now here in Mobile, and other big-name businesses did the research and determined that Alabama is a good business location.

Editor: What specific actions im-proved the state's reputation, thereby generating interest in doing business in Alabama?

Royston: Alabama supported migration from traditional corporate models to newer structures like LLCs, changing tax structures to attract new businesses and to allow for investment. Further, the state has some of the best worker training programs in the country. The state's broader efforts to attract business were serious and proved successful.

Editor: Please discuss some prominent regulatory issues, such as FCPA compliance - the focus of a recent ACC Alabama Chapter CLE event - that are of great concern to Honda and the Alabama business community.

Royston: The ACC Alabama Chapter's primary purpose is to offer collaborative, educational opportunities on topics of specific interest to our diverse membership. If you want to know about business and legal concerns in Alabama, just look at the educational programs listed on our website by visiting http://www.acc.com/chapters/ alab/index.cfm?eventID=all.

FCPA is an area of concern for a significant number of our members, not only in itself but also as it reflects broader concerns over the current regulatory and enforcement environment. In-house counsel must have resources to stay current and to analyze regulations or statutes so that they can give clients very clear compliance advice. With respect to FCPA, I understand that some counsel have problems due to a lack of clear guidance, which poses serious challenges to any company seeking to comply with the law.

The ACC has been very helpful in providing legal resources and a robust set of materials to help our Alabama members address those challenges. Our presentations are geared to address practical issues in practical terms. We offered FCPA last November, and we will host six great educational opportunities in 2011, one on the subject of litigation, covering the history of Alabama's tort hell - where we've come from, so to speak.

Editor: Tell us about Honda's facility in Lincoln, Alabama.

Royston: It's a great facility. I came from a healthcare environment, so my idea of a manufacturing facility involved images from the 1920s steel mills - a dirty, gritty environment. Honda's plant couldn't be more different. The actual facility in Lincoln, Alabama encompasses two assembly lines, a stamping facility and an engine facility, constituting a $1.5 billion investment. Our annual production capacity is just over 300,000 vehicles plus the v6 engines that power the vehicles we make. Unlike a typical assembly plant - where all the parts are brought in - we are very vertically integrated. We make many parts on site. Giant rolls of steel come in on one end of the building, and then we blank it (i.e., cut it to size), stamp it into the form of the car, weld it, paint it, assemble all the component parts and marry up one of our own engines. Each day, about 1,300 new Honda Odysseys, Pilots or Ridgelines roll off the end of the line. We have more than 4,000 associates working in a facility that spans over 3.5 million square feet - the equivalent of 17 Super Walmarts. It's very impressive.

Editor: Please tell us about the Honda culture.

Royston: Honda's logo, The Power of Dreams , evokes mobility and personal freedom, which are central to the company's mission. Honda is primarily an engine company that wraps around this fundamental component many different forms of transportation - cars, motorcycles, trucks and, more recently, jets. Our extensive research on robotics, you may remember ASIMO, facilitates the profound understanding required to design and supply vehicles of the highest quality that are reasonably priced and, most of all, satisfying to own and drive.

We define "value" in very broad terms. Ours may not be the least expensive products outright, but their longevity drives down total cost of ownership. As borne out by independent research, Honda and Acura products routinely top the list for consumer satisfaction. Our philosophy to avoid fleet sales - selling vehicles to large rental companies at discounted prices - enables Honda to protect the value of its products and protect the investment in those products made by our customers. We resist the temptation to garner short-term profits and, instead, adopt long-term strategies for the benefit of our customers and our reputation.

Editor: Would you say that Honda's value goal - this synergy of quality, price and market strategy - ties in with the ACC's Value Challenge?

Royston: The ACC's Value Challenge is an excellent program. Honda locations throughout the U.S. participate by evaluating our outside counsels and submitting the results for the ACC value index. In turn, this index serves as a resource when we need to engage outside counsel we've never used before. Honda's approach with respect to outside contractors and vendors - and legal is no different - prefers stable, long-term relationships over per-deal collaborations. Inherent in this philosophy is our expectation of value in all business relationships.

Editor: Please discuss Honda's impact on job creation and economic recovery in Alabama.

Royston: A 2006 study from the Economic Development Partnership of Alabama (EDPA) reflected that Honda provided three percent of Alabama's GDP. Our capital investment of $1.5 billion in facilities generates jobs for 4,000 direct associates, collectively earning an annual payroll of $250 million. Now, add the more than 4,000 jobs at our tier-one and tier-two suppliers - more than 35 of which relocated to Alabama primarily to support Honda's operation - and the economic advantages really start to accumulate.

Our broader economic impact reaches into the communities themselves. Honda chose Alabama based on the usual business analysis of available natural resources, an excellent transportation network and an eager and available work force. A significant additional factor was that the community wanted us to come.

Finally, economic factors from another direction also drove our decision to locate in Alabama. For our main product lines - SUVs, vans and light trucks - the majority are sold in the Southeast region, from North Carolina to Texas, Tennessee, Kentucky and down to Florida. Though our facility is the sole source for these products across North America and worldwide, Honda located its factory here to be close to its largest customer base. Thus, the economic benefits work in both directions.

Editor: How was Honda able to thrive during the economic downturn?

Royston: For more than 35 years in North America, Honda's business model has proved successful because it encompasses respect for the individual, open, direct communication and great manufacturing flexibility. Honda's ability to quickly respond to customer demand allowed us to shift production to build what the market needed. Because of our investment in manufacturing flexibility, if necessary, we could build any Honda product here in Alabama. Part of Honda's DNA involves being prepared for these challenges; it's just the way we do business.

Editor: The business and legal communities are regularly concerned with outreach and diversity. Please describe some specific initiatives in which you are involved.

Royston: Honda recognizes that the U.S. is not homogenous. Therefore, diversity and inclusion initiatives naturally worked their way into our regular business plan - along with safety, quality, cost and delivery. Specifically, our diversity initiatives break out into two major categories, supply base and human resources. We actively seek to engage women- and minority-owned businesses to be suppliers, and we recruit our associate workforce with the goal of attracting and retaining diverse people, ensuring that everyone is successful.Within our own legal department, we always look for outside law firms that promote diversity, both within their own firms and throughout the community at large. Similarly, Honda supports diversity initiatives within its own operations while also reaching out to the community by engaging with like-minded suppliers and professional service providers. Though we recognize and comply with applicable laws, our Diversity and Inclusion Program is really internally motivated.

Editor: Please offer some final thoughts tying together Honda's diversity and business philosophies with the overall corporate culture.

Royston: The Honda philosophy actually is taught - as a course - to all associates, regardless of their role in the organization. Its foundation is based on respect for the individual. Mr. Honda's original ideas embraced three fundamental joys: buying, selling and creating. The idea of valuing individual contributions and creativity translates well to our diverse U.S. community. These principles apply across the board, from associates who are out on the line assembling vehicles to engineers who design fundamental manufacturing processes. Therefore, all these factors - diversity, business philosophy and corporate culture - coalesce in the very simple idea of valuing the individual.

Please email the interviewee at robert_royston@hma.honda.com with questions about this interview.