Remarks by Hiroyuki Yoshino

President and CEO, Honda Motor Co., Ltd.

North American International Auto Show – January 12, 2000

I remember very well my first trip to Detroit in 1969 – it was the year before Honda began selling cars in America. I was the first Honda R&D engineer assigned to the U.S. My job related to the 1970 Clean Air Act. For six months, I had to fly from Los Angeles to Detroit once a week to work on new environmental regulations with the major players of the U.S. auto industry.

Today, a little more than 30 years later, I am back in Detroit. I am still concerned about the environment. And, again, I am working with a leading player of the U.S. auto industry.

As you know, last month we announced an engine cross-supply agreement with General Motors. We first met with GM about nine months ago. At the time, we had an office in the Renaissance Center – now GM headquarters. So, at first, I thought they might be giving us an eviction notice. Instead, they had the idea of exploring opportunities for working together.

I have no news to add to the announcement we made last month. However, I will make several comments. First, being in Detroit confirms for me that it was a good decision to begin working with such an industry leader. Cooperation makes sense for Honda, it makes sense for GM, and, most importantly, it makes sense for our customers.

Second, there will be no change in our basic strategy for the future. Honda will continue to focus on achieving the speed, flexibility and efficiency of a small company, together with global reach and advanced technology. And I see no conflict between our independence and cooperation with GM. We will remain independent – but working with GM will help ensure that future Honda technology is focused in the right direction for society.

Looking at the challenges facing the auto industry, little has changed since my first trip to Detroit. Honda’s strategy – and our commitment – is still to balance the needs of our customers for fun and excitement, with the needs of society for less pollution and lower fuel consumption. And Honda’s strategy remains the same – as we now are focused on creating a new generation of power train technologies.

I call our strategy “Self-innovation.” This approach is based on Honda’s willingness to seek out our own challenges – beyond what regulations require us to do. But it also implies the need to pursue new dreams – setting our engineers free to develop new ideas.

Nowhere is Self-innovation more important than in the area of power trains. We build more than 10 million engines a year for our automobiles, motorcycles and power products. That makes us the largest engine maker in the world. The key to the success of this strategy is the further development of our own unique power trains.

Honda’s unique commitment to racing will continue to be an important part of this strategy. We build our own engines and support them from race to race with a team of our own engineers. Through this activity, we forge our own engine technology. And through the heat of competition, we forge the Honda engineers who create this technology.

Now, we are working on the alternative fuel power train technologies of the future – including advanced fuel cells. But if you honestly consider the challenges remaining for alternative fuel vehicles – including high production costs and the infrastructure needed to support them – it is obvious that fossil fuels will be the primary source of energy for the next few decades.

That is why we believe Self-innovation must begin with improvements to the existing technologies that our customers will use today, and in the near future. This is not just our commitment. It is also our advantage.

Over the past several years, Honda has made a commitment unique within the industry to introduce low emission engines on a national scale. Our strategy is not only to help the environment, but to do it in a way that satisfies our customers. Already we have sold more than one million low emission vehicles in America.

But we are not stopping there. We have made further improvements in internal combustion resulting in our Next Generation Engine series. This family of 2-liter, 4-cylinder engines is lighter and more compact. These engines will achieve a SULEV emissions level and a 10 to 20 percent boost in fuel efficiency – together with higher performance, including improved low-speed torque. The first new engines debut this fall in Japan. The engine series will be introduced in the U.S. in 2001. And we will replace our entire 4-cylinder engine lineup worldwide with these next-generation engines by 2005.

As we launch these engines, we will innovate our power train manufacturing system by increasing flexibility and efficiency. As a result, these engines will be easier to produce, lower in cost and will provide even greater value to our customers. This will strengthen our competitiveness. These engines will be built in Japan and the U.S. Thus, an engine from this series will be featured in the next generation 2003 Accord lineup.

Actually, the high performance, low emission Honda S2000 engine was the bridge to this Next Generation Engine series. In a similar way, the engine of the Honda Insight hybrid car serves as a bridge to next generation power trains.

As you know, the Insight is the first vehicle using a gas-electric hybrid power train to be sold in America. But first, we followed a path of Self-innovation in creating our own electric vehicle technology. By taking this original step, we were able to develop the Integrated Motor Assist hybrid power train, or IMA system. This is the fruit of the marriage of our internal combustion and EV technologies.

Significantly, Honda’s hybrid system is based on its appeal to the customer. It was designed to break new ground with the fuel efficiency of a small gasoline engine, while incorporating an electric motor for improved performance and, importantly, making it fun to drive.

Today, I am happy to say that Honda will expand the application of this IMA hybrid system to other mass-market models in the future. Further, we will combine the next-generation engines I just mentioned with the hybrid system.

Certainly, most of the talk in the auto industry these days is focused on fuel cell technology -- the ultimate clean and efficient power plant. As you see here today, Honda is aggressively developing new technologies in this area.

In addition to this FCX concept vehicle, we have built working prototype models based on both hydrogen and methanol. And while we have worked with others in our overall research, we are now developing fuel cell vehicles independently, including the fuel cell stack.

Just as with our development of unique EV technology several years ago, we believe that developing fuel cell technology in-house is an advantage. It will provide us with a better capability to advance fuel cell vehicles to the market in the future.

We also joined the California Fuel Cell Partnership – another example of our focus on industry cooperation. In this way, Honda will help support market acceptance and infrastructure feasibility. Fuel cell vehicles will probably begin mass-market penetration in a decade or so. Our target is to introduce a fuel cell vehicle to the market by 2003.

Through Self-innovation, we are challenging ourselves to make the power train of today and tomorrow cleaner and more efficient – in our automobiles, motorcycles and power products. In this way, we will continue to provide our customers with the fun and excitement they have enjoyed in the past, while creating a better future for the environment and society.

This will give new meaning to the words “Powered by Honda” – a phrase so important to our past that, I believe, will have even more power in the future.