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14 August 1984

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JPRS-JAR-84- 013

14 August 1984

JAPAN REPORT

CONTENTS

POLITICAL AND SOCIOLOGICAL

Security Preparations for Korean President's Visit

(KYODO, 29 Jul 84, 2 Aug 84)

Large Security Network

Police Undergo Special Training

Administrative Reform Council Urges Thrift

(KYODO, 25 Jul 84)

ECONOMIC

Personnel, Development of Toyo Kogyo Described

(ZAIKAI TENBO, Mar 84) 5

Finance Ministry Urges Cuts in Budget Requests

(KYODO, 20 Jul 84) 65

Japanese Securities Houses Show Interest in PRC

(KYODO, 22 Jul 84) 67

Keidanren Proposes New Communications Service

(KYODO, 25 Jul 84) 69

Economic Survey Predicts Exports Growth

(KYODO, 25 Jul 84) 70

Briefs

Toyota Servicing in PRC 71

PRC Technical Knowledge Transfer 71

Yen Internationalization Panel 71

Yen Speculation 72

MITI Rehabilitates Cement Industry 72

Yamazaki Machinery Britain Plant 72

Budget Request Guideline Welcomed 73

MITI Information, Technology Advances 73

-a - [III - ASIA - 111]
POLITICAL AND SOCIOLOGICAL

SECURITY PREPARATIONS FOR KOREAN PRESIDENT'S VISIT

Large Security Network

0W290959 Tokyo KYODO in English 0733 GMT 29 Jul 84

[Text] Tokyo, 29 Jul (KYODO)—The Japanese are putting up the largest security screen ever for the protection of South Korean President Chon Tu-hwan

during his visit to Japan this September.

The security net for Chon, government sources say, will surpass the already

formidable scale put around U.S. President Ronald Reagan during his Japan

trip last November or for the Tokyo economic summit in 1979.

Japanese security authorities have been concerned on how to ensure the safety

of the South Korean president who narrowly escaped a terrorist bomb when he

traveled to Burma last year.

Burma has officially blamed North Korea for the bomb attack and Japan's

security authorities are tightening up the security net to avoid any terrorist attack on Chon here.

As part of the security net, the government has decided to tighten control of

North Koreans coming to Japan and step up patrols of the Japanese coast to

prevent North Korean agents from slipping into the country.

Starting August 1, the government will strengthen immigration control on all

North Koreans—officials and civilians—traveling to Japan, official sources

said..

According to Japan's immigration data, 455 North Koreans came to Japan last

year. However, reflecting the government's tightening control of North Korean

visitors, the figure fell to just 67 in the first half of this year.

Japan's existing policy already bans the entry of North Korean government

officials "as a matter of principle," and this policy is expected to be enforced more thoroughly prior to Chon's trip.

In addition, patrols of the Japanese coast—especially on the Japan Sea side—

will be intensified against North Korean smugglers, officials said.
At the National Police Agency, a special committee in charge of securityarrangements for the Chon visit has already gone into full gear to map the

last details to ensure nothing will be amiss during Chon's three-day stay in

Japan.

The metropolitan police department is expected to mobilize more than 20,000

policemen every day during Chon's visit, in addition to reinforcement from

other prefectural police forces.

Security has been the paramount concern among South Korean authorities as

Chon's trip to Japan will be his first outside the country since his Burma

visit.

Japanese security authorities said the government will do everything within

its power to ensure the safety of the South Korean president.

Police Undergo Special Training

OW020257 Tokyo KYODO in English 0120 GMT 2 Aug 84

[Text] Tokyo, 2 Aug (KYODO)—Nearly 3,000 Tokyo Metropolitan policemen Thursday conducted mock battles against "terrorists" in a special training for a

state visit to Japan in September of South Korean President Chon Tu-hwan.

At the training field in Edogawa Ward, some of the policemen acted as the

radical elements attempting to break through the lines of policemen to attack Chon with smoke bottles and staves in hands.

Tokyo Metropolitan Police Department will mobilize more men to guard the

South Korean president than those involved in the Tokyo summit of the seven

industrial powers in 1979 and state visit to Japan of U.S. President Ronald

Reagan in 1983.

Thursday's training also included the use of bullet-proof cars and police

dogs to arrest terrorists hiding in simulated buildings.

CSO: 4100/206
POLITICAL AND SOCIOLOGICAL

ADMINISTRATIVE REFORM COUNCIL URGES THRIFT

OW251031 Tokyo KYODO in English 1016 GMT 25 Jul 84

[Text] Tokyo, 25 Jul (KYODO)—The ad hoc administrative reform promotion

council Wednesday asked the government in a report for a severe curb on

expenditures in the fiscal 1985 budget.

Toshiwo Doko, chairman of the council, handed in the council's final report

to Prime Minister Yasuhiro Nakasone at his official residence here.

The report called for efforts to curb expenditures on both centraland local

governments to streamline their administrative and fiscal structures.

The government will adopt the report as its administrative and financial reform policy and thereby decide next week austere standards on budgetary

appropriation demands by governmental ministries and agencies in the fiscal

1985 budget.

The report was compiled on the basis of reports filed by two council subcommittees on promotion of local administrative reform and administrative and

fiscal reform for fiscal 1985.

The report warned easing of an austere budget policy would frustrate the ongoing administrative and fiscal reform to result in rapid expansion in the

national burden.

On concrete measures for control of expenditures, the report proposed to

set severe standards on budgetary appropriation demands by ministries and

agencies in the fiscal 1985 budget.

The report urged ministries and agencies to prioritize their policies for

budgetary appropriations for fiscal 1985.

It proposed the government sharply curtail issues of government bonds in

fiscal 1985 to get the government out of its dependence on those bonds by

fiscal 1990.
It also said expenditures on public works should be severely curbed in the

fiscal 1985 budget despite mounting calls by the ruling Liberal-Democratic

Party for increased public works expenditures.

On wage hikes for national public service workers recommended by the national

personnel authority, the report said the wage hikes should be "appropriately"

decided, somewhat toning down from a subcommittee report calling for a curb

on them.

The report also proposed to freeze increases of police and firefighting personnel for the time being, while continuing to curb increases in public school

personnel for financial reasons.

As future tasks for promotion of administrative reform, the report called for

drastic reform in management of the deficit-ridden Japanese national railways

as well as the cabinet's overall coordinating ability for administrative reform.

After handing in the report to Nakasone, Doko told reporters that he expects

the government and the Diet to make utmost efforts to enforce the proposals

in the report.

Nakasone, meeting reporters, said he would endeavor to enforce administrative

reform with high regard to the council report.

CSO: 4100/210
ECONOMIC

PERSONNEL, DEVELOPMENT OF TOYO KOGYO DESCRIBED

Tokyo ZAIKAI TENBO in Japanese Mar 84 pp 61-97

[Text] Toyo Kogyo experienced 10 trying years as a result of

business crisis, but with the aid of the Sumitomo Group it experienced a business recovery that may be termed a "miracle."

It will change its name to "Matsuda" this May and initiate a

new strategy for progress. Against this background, all aspects of the future of Matsuda are analyzed.

Toyo Kogyo to Undergo New Birth in Both Name and Reality

Toyo Kogyo will make a fresh start this May in both name and reality.

Toyo Kogyo had its inception in 1920 when its founder, Jujiro Matsuda, started

Toyo Coke Industry, which changed its name to Toyo Kogyo in 1927, and for

roughly the next half-century this company functioned as a large industry

representing Hiroshima. It will, however, undergo a change in name on May 1

to Matsuda (the English version is Mazda Motor Corporation).

Toyo Kogyo had named the three-wheel truck it first produced in 1931 the Matsuda

"Model DA," and in the initial post-war period, it advanced to become a comprehensive automobile manufacturer producing a small four-wheel truck and a small

passenger vehicle. Its automobiles were all sold under the brand name of

Matsuda. Now this brand name will become the name of the company in May.

The circumstances leading to the first use of the Matsuda brand for the "50th

anniversary of Toyo Kogyo" are recorded in the following manner.

Among the names that came up for consideration were the "Sumira" and "Tenshi"

but the final result was that the name Matsuda was decided on because it was

associated with the surname of Jujiro Matsuda, who was company president at

that time. This name also incorporated the concept of the god of light Aura

Matsuda, whose holy words illuminated the new born small-automobile world.

The circumstances leading to this situation are interesting.

At that time nicknames such as Dartvwere given to cars. Toyo Kogyo decided to

put a nickname on its new three-wheel truck. The first name that cropped up
was "Toyo," but a poll of the company resulted in the selection of "Tenshi."

When this name was brought before the board of directors, there was the strong

opposition because "Tenshi" was a homonym associated with death. This was a

ridiculous name to put on a car. Such being the case, "wouldn't the president's

surname Matsuda be more fitting?" it was suggested, and agreement was reached.

In this manner it was decided to register the president's name, whereupon the

government office objected, stating that "a person's name cannot be used as a

trade name." Such being the case, the god of light Matsuda was pointed out,

and it proved to be an admirably suited choice that led to the selection of

Matsuda, according to a secret story. Just the naming process is an indication

of just how much Toyo Kogyo got its start as a "Matsuda family industry." To

be sure, Toyo Kogyo was headed by founder Jujiro Matsuda followed by his first

son, Tsuneji Matsuda, who in turn was succeeded by his first son, Kohei

Matsuda, as a third-generation president, and this company had a Matsuda at

its top post for about half a century.

Now the first oil shock of 1973 resulted in the rotary engine car, on which

this company, falling prey to the fuel problem, had gambled its fate. Its

primary market in the United States saw a large inventory pileup, the books

in October 1955 showed 17.3 billion yen in the red and Sumitomo Bank, which

was its prime bank, took it over, making it a "bank-managed company."

The third-generation president, Kohei Matsuda, who usually made himself heard,

saw his hold on the business taken over and there was a shift in December 1977

as a president, Shigeki Yamasaki, who was not a member of the founding family,

took over. This is where the "Matsuda family business" was punctuated with a

period. Oddly enough, this occurred 50 years after the change in name to Toyo

Kogyo.

Reconstruction has been under way since then and has centered on the efforts

of president Yamasaki with the aid of officers dispatched by the Sumitomo Bank.

During this period the branch buildings in Osaka and Tokyo were sold, a sales

force of 5,000 was transferred and the American sales company was sold in some

retreat measures while, on the other hand, the development of new cars such as

Familia, RX-7 and Capella was pushed in addition to which a financial agreement with Ford was completed in some forward-looking moves.

The books for the period ending October 1983 showed total sales of 1,364.229

billion yen (15.6 percent over the preceding period), an ordinary profit of

45.25 billion yen (a 4.4 percent increase) and a net profit of 25.643 billion

yen (a 4.10 percent increase).

Toyo Kogyo was resurrected. At the same time, it changed its name to Matsuda,

and its Tokyo branch will shift to Hibiya this August. This year .represents

a new start for Toyo Kogyo.

The Sumitomo Occupation Forces Which Dispersed the One-man Rule of Khoei

Toyo Kogyo had been called the "Matsuda family industry" at its home ground of

Hiroshima. Now why did the third-generation president in the person of Kohei
Matsuda, who had controlled the business, have to relinquish his post? Let

us go over this path once more. There are a number of complications involving financial capital and industrial capital, and the manner in which the situation was worked out has revealed a number of lessons that can be learned.

It was in October 1974 when the precarious business situation of Toyo Kogyo

surfaced. Sumitomo Bank along with Sumitomo Shintaku Bank not only sent

Shinbei Hanaoka (presently senior managing director) and Kazuo Nakamura

(presently managing director in gold bullion) to serve as directors but also

dispatched key cadre personnel.

In addition, a local product of the financial world in the person of Nissho

president Shigeo Nagano and consultant Koji Asai of the Sumitomo Bank were

assigned to top consultant posts to lay the foundation for the change. At the

same time, a new second financial section for the sole purpose of handling

Toyo Kogyo affairs was created within the Sumitomo Bank and director Sotoo

Tatsumi (at that time assistant manager) took charge. Over them was assistant

manager Ichiro Isoda (at that time, the incumbent president), and an allinclusive support system was set up.

Furthermore, director Tsutomu Murai (at that time incumbent manager of Ashai

Brewing) was appointed assistant manager with voting rights in 1976. Also,

Kenmei Hasegawa, who was overall manager of the Asian area for Itochu Shoji,

was scouted as director in charge of sales. Assigned to serve under him was

Shinsei Ohara (incumbent director of Tpyo Kogyo), who had been the Urada

branch manager.

While assistant manager Murai with his voting rights constrained the one-man

rule of president Matsuda, he showed his face at the various financial circles

of Hiroshima in an effort to sweep away the Sumitomo Bank allergy. To be sure,

at that time Sumitomo Bank was regarded as an "occupation force," and it was

regarded by the local group with "expectations and guarded feelings."

On the actual business front important sections such as accounting, transportation and cost control, which set the basic prices and which have been called

the core sections of manufacturing, were filled by Sumitomo people, and they

steadily took control of the overall operations of T«»yo Kogyo.

The cost control section was directly controlled by a three-man group consisting of director Shigeki Yamasaki (at that time incumbent manager), director Kobuyoshi Yumitsu in charge of accounting and director Tatsumi of the

Sumitomo Bank. In this manner, there was a gradual filling of the outer moat.

In the meantime, the feeling against the "occupation forces" that was the allergic response within Toyo Kogyo to the presence of the Sumitomo Bank gradually weakened as 1, 2 and then 3 years went by. This was the result of the old

people in key positions who supported the Matsuda one-man system being urged to

retire while the personnel policy, which was designed to promote the will to

work among workers at the lower levels, began to show its efects. In fact,

there were some statements from the top brass of the company labeling president
Matsuda's personnel policy "unfair," and this new trend in personnel movement

instilled within the workers a will to work.

Be that as it may, at that time Toyo Kogyo had voting rights vested in the one

person of pcesident Matsuda. In addition, the other officials were completely

controlled by Kohei's strong personality. In other words, the tea-serving

officials were important in that they were allowed to stay close.

Tatsuhiro Takashita, who headed the labor union at that time, even pointed out

that "the decline of Toyo Kogyo into the red to end up in the tragedy of a

takeover by personnel dispatched by the bank is but the result of the spirit

of the important officials who forever backed president Matsuda."

Takashita even put out the following bitter statements in the UNION LETTER.

(1) "I hear that at the present time, the only ones who have anything to say

to the president are Sumitomo and the union. How do the official cadre which

surrounds the president feel about this?" (2) "They are all thinking of their

own security and they lack any feel to improve the fate of Toyo Kogyo."

(3) "Let us get into a wild tussle with the president." In this manner he

berated the officials.

As Sumitomo's awareness revolution began to permeate the company, there were

some top brass of the company who began to agree with the Sumitomo occupation

forces. A decisive event even where Sumitomo was concerned was the arrival on

the scene of Ichiro Maeda to the post of director in January 1977 from his post

as head of the manager's ^presently executive director) office.

Maeda came from the Bank of Hiroshima and was scouted from Beibi Bank by

former president Tsuneji to come to Toyo Kogyo. He was sometimes called

Kohei's pocket knife and was a faithful follower of Izumo Matsuda. He had

formerly served as sole attendant to Tsuneji during the initial stage of the

development of the rotary engine at Toyo Kogyo. This was why the Sumitomo

Bank side, when it heard that Maeda had been assigned the important post of

head of the manager's office, felt that some weird event had taken place, but

Sumitomo Bank also realized that Maeda could not be handled unconditionally.

Maeda had the experience of standing alongside president Kohei in the financial

assistance negotiations with Ford, and with his knowledge of the course of the

negotiations with Ford, it may be said that it was difficult for Sumitomo to

cast aside this awareness and information. This was because where Sumitomo,

which had taken over the actual business end, was concerned, what it sought

most to find out from its outside position was what had taken place with Ford.

Be that as it may, Sumitomo covered all pathways as it placed director Hiromu

Mineoka, who was dispatched from Sumitomo, to ride herd over Maeda while it

also placed an assistant in the manager's office to serve under Maeda in the

person of a middle-level staff member. In this way, it enveloped the manager's

office by a sandwich and laid down a detailed foundation for its activities.

Sumitomo was confident of what would happen. To be sure, Sumitomo had decided that the tenure of President Matsuda was not necessary. That is to say,
president Matsuda was wholeheartedly for reconstruction whereas Sumitomo placed

balanced curtailment as its first order in reinforcing the company; as far as

Sumitomo was concerned, the presence of Matsuda was actually a nuisance.

As a result, the heads of Sumitomo went to see Shigeo Nagano, who seemed to be

the logical successor to Matsuda, and proposed the "scuttling of Matsuda." In

order to depose Matsuda, Sumitomo was steadily filling in the outer moats

while firming up the interior. As soon as retirement was decided, they elevated a president with no voting rights and pushed him aside as a "symbolic

presence."

After he ascended to his presidential post in 1970, Matsuda retreated 7 years

later as the symbol of Toyo Kogyo. Oddly enough, it was 50 years after the

change in name to Toyo Kogyo. At the same time, it was the seventh memorial

for father Tsuneji.

The "Tragedy" of Kohei Matsuda and His Concentration on Work

Let us take a quick look at Kohei Matsuda as he followed the line up Toyo

Kogyo.

Kohei was born in 1922 in Horshlma as the only son of Tsuneji. He attended

a local religious middle school, went through the Army Accounting School and

then to the law school of Keio University. Because of the war he returned

halfway through his studies to Hiroshima and became a director of a dealer for

Toyo Kogyo called Matsuda. He returned to Tokyo once more after the war and

graduated in 1947. That is to say, he was a student director of Hiroshima

Matsuda until his graduation.

Eventually he rose to the post of manager of Hiroshima Matsuda in 1956, and for

the next 2 years he left his wife and child behind while he went to work at the

American machine tool manufacturer, the Cincinnati Milling Machine Company, to

learn the business1 While it may have been called study, he worked with the

blue-collar workers and learned the basics on the site and had beaten into

him the true meaning of production. As a result of this period of study, he

acquired top-class ability among managers in the Japanese automotive field

where language was concerned. That is to say, in working among the laborers

he became able to understand even broken English, and such managers were

certainly Bare in Japan. When he returned to Hiroshima, he became manager of

Matsuda Auto Hiroshima at the age of 36.

Father Tsuneji in 1960 made the decision to develop the rotary engine and,

while setting up the full-fledged development of a comprehensive automobile

manufacturer, also assigned his eldest son Kohei to defeat the surrounding

opposition by promoting him to the position of a vice president of Toyo Kogyo.

Since then Kohei became beyond all doubt a true Toyo Kogyo disciple.

With regard to this promotion of Kohei to vice president, Tsuneji in the

course of his functions entered the statement "the notes of a foolish parent."
"The second generation or the president's son is a subject of various rumors

regardless of the size of a company. I had thoroughly thought the situation

over before I asked that my son be made vice president. If that were not possible, I asked that he remain where he was. This was because there were two

senior directors and three executive directors below me. To place my son

into this situation, there will be scrutiny throughout the company about who

will head the company for the next generation. This could create factions,

and the company would be split. This was what I feared the most."

This notation may be considered honest. The feeling of a parent for his child

is certainly evident. No matter what reason was given, it was evident that he

wanted to yield the post of the next president to his son.

This personnel manipulation remained a sore point in Toyo Kogyo, and the support of the top officials of the secretary class who had been there since

founder Shigejiro was not obtained; the Matsuda family, contrary to its company's one-man nature, was actually isolated within Toyo Kogyo.

For example, there was the rivalry with director Tokinosuke Murao, who was

the husband of Tsuneji's step-sister. This confrontation was one which father

Shigejiro worried about, and there was a time when Tsuneji was sent outside.

That was in 1947. At one time Tsuneji left Toyo Kogyo and started a ball-point

pen company. At that time, Tsuneji and Murao were of divergent opinions as to

what was to be expected. Shigejiro was very disturbed by this sibling rivalry.

This was because for Toyo Kogyo to restore itself after the war, the company

had to work as one. This was why Shigejiro cut off Tsuneji.

As a different stage was entered, Tsuneji feared director (at that time)

Satoshi Kawamura, who was a capable man, and so transferred him to become head

of Hiroshim Shoko Kaigisho. A major reason in this instance was that Tsuneji

felt that Kawamura could become an effective opposition to Kohei when Kohei

became the next president. That is to say, even if the secretaries after

Shigejiro had to be removed, it was imperative that Kohei be installed as vice

president. This may have been the underlying cause for the collapse of Toyo

Kogyo.

In any event, once Kohei became vice president, he became a complete company

man. The first activity he entered into was a big project in which he as RE

[rotary engine] leader flew to visit the NSU Company of West Germany. He

diligently poured himself into research when he as group leader of the technological research group went to NSU. One of the group's members was

Kenichi Yamamoto (presently a director), showing the youthful nature of this

research group.

In the meantime, Kohei was encountering a series of defects with the RE. The

fact that a managerial-level man such as Kohei had such a detailed knowledge

of technology may date back to this period. Be that as it may, Kohei's diligence in his efforts was also reflected in his side interests. He played with

cameras including an 8 mm movie camera as he roamed the city streets to gather

data for locating sales outlets. When a new sales outlet was to be established,

he had collected with film the conditions of the surroundings even when they

were in a foreign country.

10
He also took his family on drives to test new automobiles. This dedication

to work perhaps was an effort to justify his selection as vice president and

live up to fatherly expectations and be accepted by the rest of the company.

In this respect he always led his forces into battle.

This stance of leading the forces did not change when he became president.

During the agreement negotiations with Ford, he was personally involved in the

export discussions and the establishment of sales outlets and was even involved

in personnel assignments for these sales outlets.

This was the point which the aforementioned union head Takashita objected to

when he made the statements: (1) Do not concern yourself with small items.

Use the people in charge of the different posts effectively. You are successively wrecking the people under you. (2) Take a position that you will listen

to unpleasant news. Become a man who can suppress his anger. These complaints

were aired through the union newspaper.

Kohei, who was unable to trust the people under him, may be considered a tragic

manager. Could this have been the result of the executive class at the time,

of one man, Tsuneji, getting a glimpse of the overlapping structure. This

attitude—that he had to do everything himself—was seen by the other executives as a case of "the president having no faith in our work," and there was

a mutual buildup of distrust.

Even during a period of business crisis, Kohei said, "I sometimes get up at

3 in the morning. I then lie awake till dawn wondering how to handle certain

automobile designs and lines." Murai, who was there, said, "I too arise at

3 a.m. But I do not think about design but of just how to bring about the

recovery of Toyo Kogyo from the entire business end," and he urged a change in

the president's intentions.

Matsuda was adhering too closely to a "Matsuda-family Toyo Kogyo" and had lost

sight of the general situation. It may be that there was the tragedy of Toyo

Kogyo.

Transition from a One-man to a Group-leadership System

The start of the new regime of president Shigeki Yamasaki in December 1977 was

also the start of a wide-ranging personnel revolution. During the half-year

interval from December to the middle of June, there were 1,122 shifts of office

workers above the managerial level in the nonproduction areas. What this means

is that of the total of 28,500 workers at Toyo Kogyo, a deduction of the actual

number of workers from this total means that almost all of the people above the

managerial class in the business-related area were exposed to the baptism of

a shift in job in one form or the other. This was such a tremendous revolution

that it was a rare member of the "department and section head" class who remained. This is undoubtedly the perfect proof that the placement of Toyo Kogyo

under the bank management was responsible for creating the maximum changes.

Furthermore, these personnel shifts extended even to the top class, and there

were replacements of division heads of seven industrial headquarters including

the automobile manufacturing headquarters.

11
This major personnel turnover had the agreement of the "board of directors."

This "board of directors" represented a departure from the former one-man rule

of Matsuda and became the topmost direction-determining organ of this newborn

Toyo Kogyo. This was why the wholeheartedness in human nature that sought in

one sweep to remove the people aligned to Matsuda resulted from a "conference"

in the first step of reconstruction.

This was because there was a tendency during the one-man regime of Kohei toward casual personnel placements, and there were undertones within the company

that "personnel handling by Kohei is unfair." Naturally, these casual personnel assignments were more apt to result in the selection of yes-men receptive

to the president's ideas. As a result, there was a chronic indulgence in Toyo

Kogyo*s business affairs as diagnosed by the temporary directors.

The shift at the director level, at which director Moriyuki Watanabe, who had

spent all his life in research and development, was made head of the Tokyo

branch, represented a very drastic move. At the same time, assistant manager

Masaharu Kawano, who had been in the service end all the time, was shifted to

a local public relations job as his main line. Since then, Watanabe has served

as head of the construction preparation office of the Bofu plant and was elevated to senior director In 1982. At present, he is in charge of the cost control department and heads the quality assurance department. Kawano retired

during the same year.

During 1982 Kenichi Yamamoto, who had been head of the rotary research department, was also elevated to senior director status in addition to Watanabe and

is in charge of the new technology department and the research and development

headquarters. In addition, Akira Fujii, who had served as chief of the Bofu

plant, was also promoted to senior director and became chief of the secret

document room, general affairs and the labor headquarters. At the same time,

Takushi Mitsunari, who had languished in Kohei's time, was promoted to senior

director in 1983 and now heads the tertiary work sites, the research and development headquarters and the product inspection office.

Gradual reinforcement of the business end is being attained under this Yamasaki

system. In 1980 Shoji Iwazawa, who had been vice president of Sumitomo Bank,

rose to president with representation rights. President Kohei was relegated

to a role of director and consultant. He is presently owner of the Hiroshima

Carps and is very active in the baseball business. It may be said that the

Matsuda tint has been swept away from Toyo Kogyo. It has departed from the

situation where it will forever have a descendant of the founder as symbolic

head.

This series of personnel turnovers was determined by the direction of the board

of directors anchored by president Yamasaki. Let us now describe this board of

directors, which is the top decision-making organ of the newly reborn Toyo

Kogyo.

As a basic rule, the board of directors convenes on Wednesdays, but it can meet

as often as necessary. Because of this, any director from managing director

and above will go at 4:00 p.m. every day up to the directors' conference room

12
on the second floor. The directors' conferences are held in the large meeting

room, and a chair and table are placed at every site. This assembly of all

directors resembles the board of directors meeting of Honda Giken.

The officials from managing director on up actively carry on studies, at times

exchange information on production and sales and are embroiled in a functional

system in which they are always present at the board of directors' meetings.

The president's office serves as the meeting room for the board of directors.

The president's office serves as the general staff directly responsible to the

board of directors. For example, when the situation requires, a team may be

formed to draw up long-term business plans, budget computations, a general

control plan for the settlement of accounts or assessments of business plans.

In addition to this function as an inquiry organ for the board of directors,

there are semimonthly meetings presided over by section chiefs, liaisons

between different sections and interchanges of views which come under the defensive scope of the president's office. The most important of these is still

the work related to the board of directors. Preliminary discussion of problems deliberated on at the board of directors' meeting and the company-wide

dissemination of items decided on at this meeting are the main items here.

Quite naturally, the president's office handles a part of the opening and closing of these board of directors' meetings. Sanction requests and decision

statements which require approval of someone above the directors' level are

sometimes drawn up. This function is not limited to the person in charge but

can be assigned to anyone. At times, the drafter of the statement may be invited to explain the situation to the board of directors.

President Yamasaki said, "I make a decision on everything after consultation.

It is important to tap the brains of all the members. That is why the board

of directors must ride over everything." This is the transition from the socalled one-man system of president Matsuda's regime to a group-directed system.

Sumitomo Bank said that "it was very fortunate to have a man such as Yamasaki

around, for he is a warm and sincere person who makes a truly strong president,"

as they heaped praises on this man.

It can be truly said that Toyo Kogyo was reborn by the business revolution of

the type directed by Sumitomo Bank.

Crucial Moment for the Yamasaki System Entering the Finishing Stage

No matter what else is said, the one epoch that stands out in the Yamasaki system reign is the financial agreement that was made with Ford.

It was in 1970 when Toyo Kogyo initiated trade relations with Ford. The capital

cooperative negotiations, which continued for 3 years starting in 1969, was reduced to a blank sheet by then president Kohei Matsuda's statement, "I was

afraid of a Ford takeover," but the supply of the small-model truck "Proceed"

maintained the relationship.

13
The conditions for cooperation laid down by Ford at that time were fairly

severe to Toyo Kogyo and included the proposal that (1) the capital advanced

by Ford Company for the first 10 years will have 20 percent assigned to a third

party and 10 percent by way of the market. (2) The 10 percent obtained in the

market will be frozen for 10 years after which time this freeze will be lifted

although no voting rights will be exercised, and the voting right ratio will

be set at 30 percent.

In any event, Kohei felt that these conditions laid down by Ford were "aimed

at taking us over," and he kicked off negotiations and reduced the negotiations

to a blank sheet by his strong action. At this time the Ford side, realizing

that father Tsuneji had died, decided simply to end its ties at the trade

level.

Later the Ford Company sent a second-generation Ford as emissary to Japan. This

group visited the Ujina plant of Toyo Kogyo in Hiroshima at the invitation of

new president Yamasaki. At this time the second-generation Ford seemed to have

come to Japan just to face president Yamasaki and assess3"just what kind of man

he was."

In addition, this second-generation Ford held two sessions with the heads of

Sumitomo Bank before visiting Yamasaki. This was because Toyo Kogyo was in a

financial crisis and was being led by Sumitomo Bank on a path of reconstruction.

At this time, Sumitomo Bank had just made Kyonosuke Ibu its president and

Ichiro Isoda its manager. The meetings were held with Atsuzo Horita, who had

been serving as negotiation partner and as honorary president, and once again

there was a character assessment by head to head confrontation.

It may be that this junior Ford felt the need to face directly the top representatives from a powerful bank with whom he had to deal in these capital cooperative negotiations.

The second-generation Ford met twice with the top men of Sumitomo Bank. The

first time was at the Tokyo main office of Sumitomo Bank and the second time

was at the Ryoteikaku in Kyoto.

Those present at this meeting were, in addition to the junior Ford, six vice

presidents under Peterson. The Sumitomo side was represented by Horita, Ibu,

Isoda, Iwazawa and Tatsumi, and they were augmented by the top Toyo Kogyo

people.

What the Ford side strongly stressed throughout this conference was whether

Sumitomo Bank would completely back up any capital arrangement with Toyo Kogyo.

At this time Isoda said, "Ford seems to question whether Sumitomo truly plans

to sponsor Toyo Kogyo. They sought to establish this to the point of tediousness. This was why I assured them that we would guarantee our support."

It may be said that at this point the Ford side had decided to enter into this

cooperative arrangement. At this point, however, the talks ceased with a

trade agreement that the small-model truck, which Ford had requested be

14
consigned for production and export to four countries, and talks with Toyo

Kogyo about supplying Ford with the important car part, the transaxle were

completed.

Then in January 1979 specific negotiations were started. The course of these

negotiations went smoothly because the Ford side displayed unexpected flexibility in its attitude, and both Sumitomo Bank and Toyo Kogyo were able to

conduct their talks in good order.

This is where it seems that Ford was having problems with its being late in

the area of compact cars. On the other side, Toyo Kogyo had its reconstruction program well under way but it was faced with the coming battle of the

eighties over compact cars, and the curtain was about to rise on the fierce

competition in the compact car areas by the four giant car manufacturers—GM,

Ford, Toyota and Nissan. It was believed that Toyo Kogyo's strength was not

adequate to compete in such a field.

This is where Sumitomo Bank said that "if you go through with your capital

cooperation agreement at this time, you will somehow survive. We do not consider handing over all business rights, and Ford is not asking that much," as

it revealed its survival strategy.

President Yamasaki said, "Ford has been talking about cooperation for a long

time, and this company has picked up its strength while we have resolved to

maintain control over our business, so we have decided to go ahead."

As a result, Toyo Kogyo on January 1979 became a member of the Ford group with

Ford putting in 24 percent plus capital outlay. This was a situation where

Ford was having difficulty turning over its capital but it rescued a dormant

Japanese company in the form of a joint union of Ford and Toyo Kogyo in an

anomalous step that succeeded.

Ford then tried to approach Toyota with the concept of a joint company on American soil and started negotiations, but this attempt ended without conditions

being established and so Toyota ended up with a joint-company establishment

with GM.

As a result of such events, and even deeper bond developed between Ford and Toyo

Kogyo. The supply of the Familia car in 1980 was initiated in Asia and the

Pacific basin, and a diesel engine was added to this supply list in 1982.

Supply of the Capella was started in January last year. The sales of these

Ford-related products accounted for 10 percent of Toyo Kogyo's total sales.

This was equivalent to about 130 billion yen.

The name of Familia was changed to Razor for the domestic market and supply was

started to Autorama, which is Ford's sales network in Japan by which means

the mass production effect is being raised in the record that is being piled

up.

The Yamasaki system has started its 7th year, Director Teruo Wakabayashi, who

had been dispatched by Sumitomo Shoji, retired in January this year and returned

15
to his old nest at Sumitomo Sh'oji. The new man selected for this director's

post is Yukizo Iwata, head of the plans office. A new Ford representative

will replace Richard A. Preis.

The Yamasaki system is now entering its 7th year, and it may be said that the

time has come for the final finishing stage. Rumors are already floating about

of a post-Yamasaki regime involving director Moriyuki Watanabe. President

Yamasaski, however, is still healthy and full of energy. Speculation on the

post-Yamasaki member brings up the names of Watanabe, director Kenichi Yamamoto

and director Akira Rujii along with executive director Hirotaka Iida.

Executive director Michimasa Ohara as the man in charge of sales has been flying to all parts of the country in desperate efforts to share up. Since at

least the presidential post is held by a Sumitomo member, Ohara may even rise

up to assistant manager.

It may be that the retirement of president Iwazawa may portend the postYamasaki days. He completed his term of office in January, but a transfer at

this top level was left alone. It is expected that at least there will be a

new president for Toyo Kogyo in 2 years. President Yamasaki probably feels

that with this change in company name and a new start, the next 2 years will

be a polishing-up period.

This is why in the next 2 years, he will be expected to put all his efforts in

hurling his finest ball. It will be watched with interest from here on who

will ascend to the president's post 2 years hence.

In any event, Toyo Kogyo certainly has divested itself from a "Matsuda family

industry" and is greeting a new era. The question of whether with this new

name it will secure its hold on third place in the auto industry will depend

on the efforts of its work force.

16
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o

1. History of Changes of Of- 23. 1903

ficials at Toyo Kogyo (From 24. 1092

1952) No 1 25. 1898

2. Name 26. 1901

3. Tsuneji Matsuda 27. 1907

4. Tokinosuke Murao 28. 1894

5. Satoshi Kawamura 29. 1896

6. Kuniharu Ogoshi 30. 1883

7. Tokuzo Nakamura 31. 1908

8. Seizo Takemori 32. 1907

9. Toichi Tanaka 33. 1908

10. Tyo Toshima 34. 1910

11. Bunji Nishikawa 35. 1912

12. Sada Uebana 36. 1906

13. Seijiro Miyazaki 37. 1909

14. Kazuto Aburai 38. 1910

15. Mineo Masada 39. 1887

16. Sada Yoshikawa 40. School completed

17. Sokei Kusumoto 41. Osaka Metropolitan University,

18. Yoshio Kawano 1915

19. Yoshitake Yamamoto 42. Hiroshima Higher Technical

20. Ichiro Shirai School, 1927

21. Year of birth 43. Waseda University (profes22. 1893 sional), 1925

17
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44.

45.

46.

47.

48.

49.

50.

51.

52.

Yokohama Higher Technical

School, 1924

Chuo University (professional), 1923

Hiroshima Higher Technical

School, 1929

Hiroshima Higher Commercial,

1911

Middle school, 1873

Matsuyama Higher Commercial,

1930

Hiroshima Higher Technical

School, 1929

Nagoya Higher Commercial,

1930

Hiroshima Prefectural Commercial, 1928

53. Hiroshima Prefectural Commercial, 1930,

54. Kobe Higher Technical School,

1928

55. Kyushu University (law), 1933

56. Waseda University (business),

1933

57. Year of entry into company

58. 1927

59. 1937

60. 1934

61. 1940

62. 1931

63. 1929

64. 1950

65. 1950

66. 1950

18
Key conti nued:

67. 1956 83.

68. 1938

69. 1937 84.

70. 1928

71. 1930 85.

72. 1936

73. 1938

74. 1940 86.

75. 1959

76. Director 1938, executive director 1940, senior director

1944, retired 1947, senior 87.

director 1950, president 1951 88.

77. Director 1939, executive di- 89.

rector 1944 90.

78. Director 1938, executive di- 91.

rector 1949 92.

79. Self-employed Ogoshi Kigu 93.

Seisakusho 1935, also direc- 94.

tor 1940 95.

80. Director 1944 96.

81. Director 1950 97.

82. President of Sanyo Mokuzai 98.

Bofu 1930, director 1950 99.

Director of Chosen Savings

Bank 1941, auditor 1950

President of Nishikawa Gomu

Kogyo 1949, auditor 1950

Joined Mitsubishi Shoji 1930,

director of Nippon Cellulose

1947

President of Chugoku Shuzo

1938, director of Radio Chugoku 1952, director of Hiroshima Gas 1954

President

Manager

Assistant manager

Senior managing director

Executive managing director

Director

Present status

Auditor

Present status

(Deceased)

(President of Hiroshima TV)

Consultant

Manager of Hiroshima TV

19
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1.

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6.

7.

8.

9.

10.

11.

12.

13.

14.

15.

16.

17.

History of Changes of Officials at Toyo Kogyo (From

1952) No 2

Name

Shintaro Sudo

Kohei Matsuda

Susumu Kuroda

Toshio Sasaki

Masaaki Sugino

[illegible] Ikeda

Ryo Morimoto

Asei Tsutsui

Yoshiro Kaizuka

Shigeki Yamasaki

Tadashi Iwahashi

Tadao Shinohara

Mitsuo Kinoshita

Mashaharu Kawano

Mitsuo Ishida

18. [illegible] Kakuda

a. Bungo Yamaguchi

b. Nobuo Shigemi

c. Year of birth

19. 1904

20. 1922

21. 1911

22. 1911

23. 1906

24. 1908

25. 1893

26. 1907

27. 1915

28. 1914

29. 1911

30. 1910

31. 1917

32. 1916

33. 1915

20
61

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34. 1913 47.

35. 1913

36. 1912 48.

37. School completed

38. Keio University, 1930 49.

39. Keio university (law),

1947 50.

40. Keio University (econ- 51.

omics), 1935 52.

41. Hiroshima City Commercial,

1928 53.

42. Hiroshima Higher Technical

School, 1929 54.

43. Senshin Middle School, 1940

44. Waseda University (law),

1933

55.

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School, 1931 57.

46. Yamaguchi Higher Commercial, 58.

1937 59.

Hiroshima Higher Technical

School, 1938

Meiji University (business),

1937

Hiroshima Higher Technical

School, 1931

Tokyo University (law), 1941

Tokyo University (law), 1940

Hiroshima Higher Technical

School, 1936

Tokyo University (engineering), 1939

Tokyo University (economics),

1936

Tokyo University (engineering),

1934

Year of entry into company

1932

1961

1943

21
Key continued:

60. 1937 86. Director-consultant

61. 1941 87. Auditor

62. 1939 88. Present status

63. 1964 89. (Head of board of directors

64. 1932 Matsuda Gakuen)

65. 1937 90. Director-consultant (owner

66. 1938 of the Hiroshima Carps)

67. 1938 91. (Manager of Matsuda Kyosan)

68. 1939 92. Director (president of

69. 1941 Hiroshima Sogin)

70. 1940 93. Professor at Kinki Univer71. 1942 sity

72. 1939 94. Consultant, Kinki Univer73. 1966 sity)

74. 1965 95. Manager of Matsuda Ynso

75. Director 1943 ( 26) 96. President

76. Manager of Hiroshima Matsuda 97. (Auditor of the Hiroshima

1956, manager of Matsuda Auto Carps)

Hiroshima 1959 98. (Director of Fuji Kikai

77. Manager of Hiroshima Sogin Kogyo)

1951, president of the same 99. Manager of Matsuda Auto

bank 1970 Kwansai

78. Manager of Hiroshima Gas 100. (President of Matsuda Auto

1963, president of the same Kwansai)

company 1971 101. Manager of Toyo Baibai

79. Department head of Heavy Kinyu

Industry Bureau, Ministry of 102. (Deceased)

International Trade and Indus- 103. Manager of Matsuda Seiki

try 1950, councillor to minis- 104. (Manager of Toyo Kikyo)

ter of same ministry 1961 105. (Consultant to Hiroshima

80. President Gas)

81. Manager

82. Assistant manager

83. Senior managing director

84. Executive managing director

85. Director

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83

Key:

1. History of Changes of Of- 19. Tsutomu Murai

ficials at Toyo Kogyo (From 20. Nobuaki Hasegawa

1952) No 3 21. Year of birth

2. Name 22. 1915

3, Kazumi Roppyakuda 23. 1919

4. Kiyoshi Matsuno 24. 1922

5. Yasuhisa Minagawa 25. 1922

6. Moriyuki Watanabe 26. 1922

7. Kenichi Yamamoto 27. 1915

8. Tadashi Matsumura 28. 1926

9. Akira Rujii 29. 1918

10. Yoshiaki Kobayashi 30. 1923

11. Akiyasu Takeshita 31. 1928

12. Shinpei Hanaoka 32. 1930

13. Kazuo Nakamura 33. 1921

14. Teishi Mitsunari 34. 1923

15. Hajime Nakashima 35. 1925

16. Kamohide Ito 36. 1925

17. Nobuyoshi Yumitsu 37. 1908

18. Isao Ito 38. 1918

23
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106 (ÜBäffittfi)

39. 1921

40. School completed

41. Hiroshima Commercial, 1933

42. Kyoto University (economics), 1943

44. Keio University (engineering), 1946

45. Tokyo University (engineering), 1945

46. Tokyo University (engineering), 1944

47. Hiroshima Higher Technical

School, 1937

48. Kyushu University (engineering), 1950

49. Takamatsu Higher Commercial, 1939

50. Osaka University of

Science, 1948

51. Osaka University (law), 1952

52. Tokyo University (law), 1953

53. Tokyo University (engineering),

1954

54. Tokyo University (economics),

1948

55. Tokyo University (economics),

1949

56. Yamaguchi Economic College,

1949

57. Tokyo University (law), 1934

58. Tokyo University of Commerce,

1942

59. Osaka External University, 1941

60. Year of entry into company

61. 1934

62. 1948

63. 1947

64. 1946

65. 1946

66. 1939

24
Key continued:

67. 1950 87.

68. 1941 88.

69. 1948 89.

70. 1974 90.

71. 1974 91.

72. 1945 92.

73. 1948 93.

74. 1949

75. 1949 94.

76. 1974

77. 1976 95.

78. 1976 96.

79. Joined Sumitomo Bank in 1952, 97.

managex of Yukumoto branch 98.

1974 99.

80. Joined Sumitomo Bank in 1953, 100.

main inspector of Yukumoto 101.

branch 1974

81. Managex of Hiroshima Bank 102.

1968

82. Joined Sumitomo Bank in 1942, 103.

executive director 1973

83. Joined Itochu Shoji in 1941, 104.

overall Asian manager 1974

84. President 105.

85. Managex 106.

86. Assistant manager

Senior managing director

Executive managing director

Present status

Director-consultant

Auditor

Present status

(Vice president Matsuda

Kyosan)

(President of Nishi Nippon

Kogyo)

Senior managing director

Senior managing director

Manager of Matsuda Sangyo

(President of Matsuda Sangyo)

Director of Sumitomo Bank

(Director of Sumitomo Bank)

Head examiner of department

sent by Sumitomo

(Managing director of Sumitomo

Kozai)

(Manager of Matsuda Buhin

(saka Baibai)

Senior managing director of

Sumitomo Bank

(Manager of Hiroshima Bank)

(Manager of Ashai Brewing)

25
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Key:

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

13.

14.

15.

History of Changes of Officials at Toyo Kogyo (From

1952) No 4

Name

Toshiro Kobayashi

Hirotaka IIda

Sadamu Nakatao

Hiromu Mineoka

Kiyoshi Shishimata

Teruo Wakabayashi

Hide Yamashita

Noboru Hasuda

Ichiro Maeda

Shigeo Omori

Kyozo Ishikawa

Hiroshi Masaoka

Kazuhiko Hoshiya

16. Atsushi Arayoshi

17. Susumasa Ohara

18. Masataka Matsul

19. Hiroshi Endo

20. Morioyori Kinoshita

21. Year of birth

22. 1921

23. 1923

24. 1925

25. 1931

26. 1931

27. 1923

28. 1922

29. 1925

30. 1924

31. 1926

32. 1924

26
^#ä ^^85 BftiA86 Butt« 8 7

wmm88 cm89 90 91 92

• 4! . 42 • 43 • 44 • 45 • 46 • 47 • 48 • 49 • 50 • 51 • 52 • 53 • 54 • 55 • 56 • 57 • 58 • 59 JSS3 £

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88 « m : O : O, , „ ..

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103 (3£#ji£5£ä*#:&)

Key continued:

33. 1925 48. Tokyo University (economics),

34. 1923 1950

35. 1933 49. Kobe Economic University,

36. 1934 1952

37. 1934 50. Hiroshima Technical College,

38. 1924 1947

39. 1924 51. Tokyo Commercian University,

40. School completed 1948

41. Ryojun Technical University, 1944

52. Hiroshima Technical College,

1947

42. Hiroshima Higher Technical 53. Tokyo University (law), 1947

School, 1944 54. Tokyo University (law), 1956

43. Tokyo University (law), 1948 55. Kobe University (business

44. Tokyo University (law), 1955 administration), 1957

45. Tokyo University (law), 1955 56. Tokyo University (engineer46. Osaka University (engineer- ing) , 1947

ing), 1946 57. Tokyo University (engineer47. Tokyo Commercial University, ing), 1948

1949 58. Tokyo Univ«srsity (law), 1948

27
Key continued:

59. Year of entry into company 83.

60. 1946

61. 1946

62. 1948 84.

63. 1976

64. 1976 85.

65. 1978 86.

66. 1978 87.

67. 1950 88.

68. 1956 89.

69. 1947 90.

70. 1948 91.

71. 1947 92.

72. 1979 93.

73. 1979 94.

74. 1976

75. 1948 95.

76. 1948

77. 1948 96.

78. Joined Sumitomo Bank in 1955, 97.

manager of Yukumoto branch

1976 98.

79. Joined Sumitomo Shintaku in

1955, councillor to Yukumoto 99.

branch 1976 100.

80. Joined Sumitomo Shoji in

1946, director 1974 101.

81. Joined Sumitomo Shoji in 102.

1949, senior managing director 1977 103.

82. Joined (Shokosho) 1947, head

of Nagoya International Trade

and Industry Bureau 1969, director of Medium and Small Industry

Group 1975

Joined Sumitomo Shintaku in

1956, head of overall plans

department 1977

Joined Sumitomo Bank in 1957,

head of Urada branch 1974

President

Manager

Assistant manager

Senior managing director

Executive managing director

Director

Director-consultant

Auditor

Present status

(Professor at Hiroshima Technical University)

(Assistant manager at Matsuda

Kyosan)

Director of Sumitomo Bank

(Executive managing director

of Sumitomo Bank)

(Director of Sumitomo

Shintaku)

Manager of Sumitomo Shoji USA

(Assistant manager at Sumitomo

Shoji)

(Assistant manager of Autorama)

(Manager of Matsuda Buhin

Baibai Hiroshima)

(Senior managing director of

Toyo Baibai Kinyu)

28
3

4

6

7

8

9

10

11

12

13

14

15

16

17

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19

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Key:

1. History of Changes of Of- 17. Kazushi Sakanoshita

ficials at Toyo Kogyo (From 18. Akira Matsui

1952) No 5 19. Inzo Sakata

2. Name 20. Hideshi Jinno

3. Takashi Kuroda 21. Year of birth

4. Koji Matsumura 22. 1926

5. Hiroshi Yamamichi 23. 1926

6. Shoji Iwazawa 24. 1924

7. Gordon B. Riggs 25. 1913

8. Sadao Okino 26. 1913

9. Tetsuzo Komatsu 27. 1932

10. Tadasu Shindo 28. 1928

11. Makoto Miyaji 29. 1932

12. Tideo Kitajima 30. 1932

13. Kansaku Yamane 31. 1933

14. Edson B. Williams 32. 1905

15. William L. Dicks 33. 1923

16. Kii Kobayashi 34. 1926

29
oe 37 8B B^ 91 PI -.5 r>^

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SÄ*&& 91

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95

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O

ffiitSffi 91

O

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O

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amm (H$@|JtälMijaÄl"

u. •- )

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:oncj

35.

Lnued:

1932 47. Hiroshima Technical College,

36. 1925 1948

37. 1926 48. Yamaguchi University:(engi38. 1935 neering), 1954

39. 1927 49. Tokyo University (law), 1955

40. School completed 50. Keio University (economics),

41. Kyushu university (engi- 1955

neering), 1951 51. Kobe Higher Commercial, 1927

42. Kyushu University (engi- 52. Minnesota University, 1950

neering), 1948 53. Accounting School of Austral43. Kobe Economic university, ia, 1947

1948 54. Harvard University, 1950

44. Tokyo Commercial Univer- 55. Hiroshima University (science),

sity, 1938 1950

45. Harvard Business School, 56. Tokyo University (engineer1957 ing), 1950

46. Tokyo University (econ- 57. Kobe University (economics),

omics), 1956 1957

30
Key contJtimed:

58. Ube Technical College, 1948 83.

59. Year of entry into company 84.

60. 1951

61. 1948 85.

62. 1948

63. 1980

64. 1980 86.

65. 1980 87.

66. 1948 88.

67. 1959 89.

68. 1955 90.

69. 1955 91.

70. 1980 92.

71. 1980 93.

72. 1980 94.

73. 1980 95.

74. 1950

75. 1950 96.

76. 1981 97.

77. 1952 98.

78. Joined Sumitomo Bank in

1938, assistant manager 99.

1975 100.

79. Executive director in 101.

charge of Ford (Japan Toyo

Kogyo) 1979 102.

80. Joined Sumitomo Bank in 1956,

manager of Yukumoto Branch 103.

1979

81. Manager of Chugoku Denryoku

1970, president 1981

82. Manager

1979

of Ford Asia Pacific

Manager of Ford (Japan) 1979

Head of Keio University

Business School 1979

Joined Sumitomo Bank in 1957,

councillor of the Yukumoto

branch 1980

President

Manager

Assistant manager

Senior managing director

Executive managing director

Director

Director-consultant

Auditor

Present status

(Executive managing director

of Matsuda Sangyo)

Permanent councillor

(Director of Sumitomo Bank)

Director (president of Chugoku

Denryoku)

(Assistant manager of Ford)

(Manager of Ford Australia)

Director (professor at Keio

university)

(President of Nishikawa

Kasei)

(Assistant manager of Nippon

Hensokuku)

31
innnjLmmfv&Ljko&M(vBm7*vm£:®Ln) N0.6

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Key:

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

13.

14.

15.

16.

17.

History of Changes in Officials at Toyo Kogyo (From

1952) No 6

Name

Keishi Asano

Akira Toriyama

Shoso Torita

Zensaburo Sumino

Teruo Mitsuoka

Michitoku Yamanouchi

Shohachiro Takahashi

Tadashi Ito

John T. Eby

Tadao Ota

Yoshihiro Wada

Eiichi Kawasaki

Hiromu Ikeda

Sumio Mochizuki

Masashi Goto

18. Michihiro Ozawa

19. Sir Bryan Ingles

20. Richard A. Preis

21. Kozo Iwata

22. Year of birth

23. 1934

24. 1931

25. 1928

26. 1928

27. 1929

28. 1933

29. 1933

30. 1922

31. 1938

32. 1922

33. 1931

34. 1934

35. 1929

36. 1932

32
89

IflttS

90

I»« EE3£^ I te*»« I

91 92 93 9_A_ 9£

ES

- 41 • 42 • 43 • 44 • 45 • 46 • 47 • 48 • 49 • 50 • 51 • 52 • 53 • 54 • 55« 56 57 • 58 • 59 96 &

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®«S?S(ft*v7rttfi)9 ?

Uli» $£Ssä7S

JX

Ji- gs

93

JX *»fi(fe£iSj¥ttgy^

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iSS i.01

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CTv rfi ?5 91

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93

JX

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93

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Key continued:

37. 1931 50.

38. 1932 51.

39. 1924 52.

40. 1934

41. 1931 53.

42. School completed 54.

43. Kyoto University (law), 1957 55.

44. Kyoto university (economics),

1954 56.

45. Hiroshima Technical College,

1947 57.

46. Hiroshima Technical College, 58.

1948

47. Hiroshima university (econ- 59.

omics), 1954

48. Osaka University (engineer- 60.

ing), 1955

49. Kyushu University (engi- 61.

neering), 1956

Tokyo University (law), 1949

Ohio State University, 1962

Osaka University (engineering), 1951

Ichibashi University, 1955

Tokyo University (law), 1957

Hiroshima Technical College,

1948

Tokyo University (engineering), 1955

Waseda University (law), 1955

Tokyo University of Education, 1955

Michigan University Graduate

School, 1950

George Washington University,

1960

Yamaguchi University (engineering), 1954

33
Key contimied:

62. Year of entry into company 82. Joined Sumitomo Bank in 1957,

63. 1981 investigator 1980

64. 1954 83. Joined Sumitomo Shojl in 1949,

65. 1947 assistant manager 1981

66. 1960 84. Manager of Ford (Japan) 1981

67. 1954 85. Joined Sumitomo Bank in 1955,

68. 1955 director 1982

69. 1956 86. Joined Sumitomo Shintaku in

70. 1982 1957, councillor of the Yuku71. 1982 moto branch 1982

72. 1951 87. Manager of Ford Asia Pacific

73. 1983 1982

74. 1983 88. President

75. 1948 89. Manager

76. 1955 90. Assistant manager

77. 1955 91. Senior managing director

78. 1955 92. Executive managing director

79. 1983 93. Director

80. 1984 94. Director-consultant

81. 1954 95. Auditor

96. Present status

a. Manger of North American

Mazda

97. Director (manager of North

American Mazda)

98. Permanent investigator

99. Director (manager of Sumitomo

Shoji)

100. Director (manager of Ford Japan)

101. Investigator

102. Director (manager of Ford Asia

Pacific)

34
The Complex Pattern of the Post-Yamasaki Stage With Its Involvement of Sumitomo

Personnel

Top Placements Will Take Place at the Stockholders' Meeting Next January

"Toyo Kogyo will never be 'Sumitomo Motors.' This is why it is important at

all costs to select the proper man for the manager's post."

Manager Ichiro Isoda of Sumitomo Bank, when he set out on the reconstruction of

the financially ailing Toyo Kogyo 7 years ago, stated that "this bank will

serve to the fullest as a bank," as he stated his basic stand. It was in this

situation that manager Shigeki Yamasakl was selected from the ranks of the

senior managing directors to take over from the one-man management of Kohei

Matsuda, who was also of the third generation of the Matsuda clan in this post.

This happened in December 1977.

Since that time, this company has come forth with a series of hit cars which it

shipped out to the world, including the Cosmos, Rutier, Campella, RX-7 and

Familia, and in no time had gotten back on the track Co reconstruction. The

October 1983 period sales showed an increase of 15.6 percent over the previous

period to 1.3642 trillion yen and an ordinary profit increase of 4.4 percent to

45.2 billion yen and greatly widened the gap between it and its rival Mitsubishi Auto. During the same period, the number of units produced, increased

11.7 percent to 1.34 million cars and assured itself the number three position

among the domestic car producers next to Toyota and Nissan.

During this period it had entered into a capital cooperation agreement with the

second largest automobile manufacturer in the world, the Ford Company of the

United States, and this company was supported by the two pillars of Ford and

Sumitomo Bank while it completed construction of the most modern passenger car

manufacturing plant at Bofu in Yamaguchi Prefecture to resolve a long-standing

problem of displaying spectacular activity. Furthermore, it plans this year

to realize its goal of producing passenger cars on site at the so-called

"royal grounds of the automobile," the United States, and scheduled a change

in name to "Matsuda" as a brand recognizable worldwide in May and overall was

looking to a year of truly great achievements.

On the other hand, this Yamasaki system which at one glance seems to be moving

forward with all sails filled was not without its problem. It was the unspoken but evident problem of the successor. What was definite here was that

the successor will have to be, just as manager Yamasaki himself was, entwined

with Toyo Kogyo proper. On the other hand, all the outstanding talent which

according to rumors had a chance at this post had their "strong and weak

points," or in other words, the present situation is that all of the prospective candidates are in a dead heat for this managerial seat.

In another direction, what about the balance of power between manager Yamasaki

and Sumitomo with regard to the power to select the successor? It would be

the basic rule that manager Yamasaki would have the power to select his successor, but it is inevitable that the money source will make its logic heard.

At the present time, when Toyo Kogyo's business has increased sharply, Sumitomo

will not have excessive demands with regard to the selection of the top people.

35
Certainly, if Sumitomo were to raise its conditions, then the man selected

would have to be more acceptable to Sumitomo.

Now it was in early August of last year that rumors about the possible successor to manager Yamasaki began circulating. At the end of June last year executive managing director Atsuo Yakata of Mitsubishi Motor and assistant manager

Toshio Fukazawa of Hino Motors were promoted to managers, followed by the

elevation of senior managing director Teishi Kume to the post of manager at

Honda Giken in September in a series of personnel changes that were announced.

In a similar manner, this year saw the decision made by the board of directors

of Isuzu Motors at the annual stockholders' meeting in January vote for the

passing of the manager's baton from incumbent Toshio Okamoto to assistant

manager Kazuo Tobiyama, and this series of personnel changes suddenly focused

attention on the situation at Toyo Kogyo.

Certainly if one were limited to an objective view of the stateof affairs,

nothing would seem amiss had manager Yamasaki retired at any time. His record

as an administrator was one that was very hard to equal, and there seemed to

be no reason to fault him for "yielding to his successor" while the going was

good. He will be 70 years old in April. On the other hand, the judgment of

caretaker Sumitomo Bank was 180 degrees out of phase.

President Isoda of Sumitomo Bank said last fall with regard to the personnel

problem at the top level of Toyo Kogyo, "Why does he have to retire now? I see

no reason why Yamasaki should retire now. If he has to retire because of age,

there are any number of other companies with administrators in the same position," as he revealed his disapproval of any thought of retirement as he

emphasized his thoughts to the eagerly awaiting members of the mass communication media. It was with this one statement that the tenure of manager Yamasaki

was retained.

Certainly there seems to be no reason why manager Yamasaki should retire at this

time. It was Yamasaki, who had restructured the cooperative parts company which

had gone downhill as the result of distrust created by the Matsuda system, and

the relationships with the dealers through trusting relationships and the degree of trust of the company members in him are proof of his great humanness

and his prowess as an administrator. On the other hand, even though it was

decided that manager Yamasaki will remain, there are many doubts whether he

will stay for the full 2-year term. No matter how much president Isoda

claims that Yamasaki is not too old, it is clear that the age of 70 years

is one of the set dates for the retirement of managers, and the top company

members of Toyo Kogyo themselves are sensitive to this impending change at the

top. There is general agreement that this event will take place at the January

1985 stockholders general meeting.

The "Situation at Home" of Sumitomo Bank Has Subtle Effects

Now just why will the term be half-extended? Why will the term be extended just

one more year until replacement? The reasons here are extremely complex. One

is the selection of the succeeding administrator while another is the situation

at Sumitomo Bank, which oversess Toyo Kogyo.

36
First of all, the successor problem Is faced with the question of why, when a

company is undergoing a restructuring that may even be called a miracle, it

would take such a risk as changing its top man. The reasoning is certainly

full of common sense. It would be more prudent to select the successor first.

To this end, there should be a margin of about a year. This may be the

[questionable feeling] of people connected with the situation.

The other problem is the internal situation at Sumitomo which is the result

of the dispatching of so many people to Toyo Kogyo. The particular personnel

problem involves president Shoji Iwazawa, who 4 years ago went from an assistant manager at Sumitomo Bank to president of Toyoko. There is also the question of what to do with Sotoo Tatsumi, who was an assistant manager at Sumitomo

Bank, went to Toyoko and served in the capital cooperation negotiations with

Ford.

President Iwazawa was of the same period as president Isoda of Sumitomo Bank

and was also an assistant manager at the same time, and when Isoda was promoted to manager, there was the intricacy of placing Iwazawa as president of

Toyoko. As a result, when manager Yamasaki retires, the retirement of Iwazawa

will stop him from balancing with Isoda.

This was a point of which Isoda also was aware and about which he said, "When

Yamasaki retires, what will Iwazawa do? Don't feel sorry for Iwazawa." To be

sure, this statement was made by Isoda last fall when he was top man. In less

than a month after he had made this statement Isoda suddenly announced his retirement at the end of November and immediately took over the post as president.

This personnel change, which hit like an electric shock, prompted president

Iwazawa to say, "His retirement seems somewhat premature," as he revealed his

sentiments. This was a good example of how the personnel affairs at the top

level of Sumitomo subtly affected the top personnel makeup at Toyoko in the

nuance that was transmitted.

This subtlety has also made some waves with the treatment of assistant manager

Tatsumi, who has been playing the role of the man behind the scenes at Toyoko.

Tatsumi had been a formidable rival to Yasushi Komatsu, who took over when

Isoda resigned his post. This is why it may be in order that just as in the

precedent set by Isoda and Iwazawa, assistant manager Tatsumi eventually will

transfer to some related company. At the present time, the promising sites

for Tatsumi are Toyoko and Sumitomo Realty. In the case of Sumitomo Realty,

the post of president to succeed manager Taro Ando is expected to become vacant.

On the other hand, Tatsumi served as the pipeline between Toyoko and Ford, and

he is a difficult man to be replaced by others and does not seem ready to transfer his services to a company other than Toyoko.

Nevertheless, it is a major problem about just what post in Toyoko to assign

Tatsumi that has to be resolved. Just as president Iwazawa had been, Tatsumi

held the number two post of a Sumitomo man where importance was concerned and,

as such, could not be considered for any other post but manager or president

at Toyoko.

37
First of all, the possibility of Tatsumi being promoted to manager seems very

good based on the statement by President Isoda of the iron-clad rule that "the

position of manager is proper," which dims his chances for the presidency. It

is difficult to select from the remaining candidates because of the subtle

manipulations of president Iwazawa. This situation also applies to manager

Yamasaki's position. Manager Yamasaki has such a good record that once he

retires from his manager's post, he will doubtless ascend to the presidency.

Assuming that he retires from the manager's position to be a consultant, the

company people will consider this too trivial while the cooperative parts

manufacturers and car dealers may refuse to accept delivery. As a result,

Tatsumi will find both the president and manager posts "occupied," and as

long as no new post such as vice president is created, his promotion seems

cloudy. It must be considered that these complex personnel entanglements must

have been the reason that personnel changes at the top were envisioned in the

October 1983 accounting. This was the reason it was claimed that some time was

needed to resolve this personnel situation at the top.

Competition Between Sumitomo Bank and Manager Yamasaki Regarding Ford

Before delving more into this problem of the specific successor, there is need

to touch once more on the position of manager Yamasaki as an administrator.

This is because the lines of thought of both Yamasaki and Sumitomo Bank will

greatly control the selection of the successor.

Manager Yamasaki at one glance seems to be a brilliant person, and he has a

body that can undertake strenuous bouts of soccer and golf. He has great selfcontrol and loves "quiet." His strong heart is reflected in his stubbornness,

and this seems to be a point that rankles Sumitomo. Sumitomo should not be unhappy in view of his marvelous record, yet why is it concerned over this stubbornness? The answer here lies in the friction between the two arising from

unseen events during the contacts with Ford.

The basic stance of Sumitomo is a stronger cooperative agreement between Toyoko

and Ford, a stance which reflects a really strong feeling on its part. Sumitomo

says that Ford came to the aid of Toyoko in its hour of need. Despite this aid,

Toyoko is rather cool to Ford, claims Sumitomo.

Now the attitude of manager Yamasaki and the proper Toyoko people under him

differs from that of Sumitomo. Put conclusively, "if we follow the example of

the situation between Mitsubishi and Chrysler and say that things are going

well now and we go in deeper, there is where the danger lies." It is the

majority feeling that Matsuda still has not sufficient strength to be able to

aid Ford.

Manager Yamasaki has walked through the work site and knows It well. At the

same time, he has a good picture of the Ford layout. This is where there is a

considerable difference between him and the bank with regard to their judgment of the quality of the Ford labor force and its plant.

At the present time, the portion of Toyoko's sales attributable to Ford sources

totals about 10 percent. Sumitomo would like to see this portion increased to

38
at least 25 percent, and this difference in their views toward Ford between

these two parties is the underlying cause for concern on the Sumitomo side

toward Yamasaki.

On the other hand, there is a school of thought that considers the Yamasaki

regime to be over. The following reasons can be offered for this view.

"To be sure, manager Yamasaki has piled up an enviable record designed to bring

harmony to the Matsuda group. While reconstruction was under way, it was fine

to stick to the true aspects of the rules. On the other hand, now that the

company has been rebuilt, there is some question about its basic adherence to

those same rules."

"When there has been a state of disorder, a man such as Yamasaki, who sees

that everyone pulls together is more fitted to the job than one who tries to

pull everyone along. But there is always the greedy element which, once the

world (the company) becomes well settled, seeks to grab the leadership."

Regardless of whether the thoughts of the Sumitomo side include the above, it

is definite that there is a fierce tug of war between manager Yamasaki and the

Sumitomo side regarding the successor problem and how to handle Ford.

Four Senior Managing Directors Are Leading Candidates as Successor.

We now come to the successor question, and the list of candidates has been

whittled down to four senior managing directors at the present time. Given in

order of rank, they include Kenichi Yamamoto, who is in charge of new technology development and research and development headquarters; Moriyuki Watanabe in

charge of the cost control and quality assurance departments; Hajime Nakashima,

head of the overseas business headquarters; and Akira Fujii, head of the secret

documents room, general business section and labor administration headquarters.

Yamamoto was in charge of the development of the famous "rotary engine."

Watanabe, who was in charge of the reciprocating engine, is a worthy adversary,

and these two have diligently applied themselves mutually. There is a division

within the company; between those pulling for Yamamoto's rotary engine and those

pulling for the reciprocating engine. Yamamoto is extremely situation-wise and

single-minded, and he is spirited and lacks pliability once he has taken a

stand. On the other hand, he is an enthusiastic Hiroshima Carps fan, and this

Romanesque feature has earned him some strong fans within the company.

On the other hand, he is certainly well versed, technologically speaking, but

there are two schools of thought within the company regarding his administrative capacility. Sumitomo, which seeks a balance between the two, has the experience last year, when this fierce character was a direct confrontation with

Sumitomo, of his being in the perilous situation of being relieved of his position as senior managing director. What saved him was his regard of Yamasaki

as almost the "founder of a religious sect." In other words, Yamamoto was a

"symbol" in the eyes of the technologists at Toyoko, and Sumitomo was wary about

the reverberations that would follow any attempt to cut away this symbol.

39
The presence of anxiety in spite of a healthy state was not hidden. Yamamoto

said, "There is spiritual strength but no physical strength."

Watanabe, who is seriously being considered as the next manager, is a contrast

to Yamamoto in his superior adaptability and accommodating nature. He, with

Yamamoto, comprise the two pillars of the company's technology development area

and they are in charge of all the engines excepting the rotary engine, roadability and body; they are in charge of a very broad area.

Where Yamamoto is a person who will shake up an organization, Watanabe is a

type who lets the work be concentrated in himself. He decides everything by

himself, and he has the tendency to express his disapproval even when work

proceeds smoothly in the absence of the man in charge. "Quite apart from medium and small businesses, there is some question as to his ability to administer

a large business" is a statement that has been made.

Watanabe once served as assistant chief of the research and development headquarters as an aide to manager Matsuda during the days of manager Kohei Matsuda.

Since manager Matsuda was not a technologist, Watanabe was the actual head of

this section. The fact that he was so favored by manager Matsuda backfired on

him when his evaluation was dropped with the installation of the new system in

the experience he went through. He was able to spring back on the strength of

his resources and was able to elevate himself into contention for the next manager's position. He is a year behind Yamamoto and is 62 years old, leaving no

problem where age is concerned.

On the other hand, Yamamoto similarly has some problems where health is concerned. He underwent surgery as a child which left him with one lung, and it

may be said that his health status may be the key to his elevation to manager.

Nakashima, who graduated with a law degree from Kyoto University in March 1948,

directly entered the services of Toyoko and is the only one among the four

candidates who comes from an administrative background. He first handled sales

in Japan and shifted to the important post of department head for exports during his tenure as department head. He was fortunate in being in charge of the

export department when exports were going well. The man who succeeded Nakashima

as head of exports is Noboru Shimayama, who is a director and manager of Matsuda USA. Because exports account for 70 percent of this company's total business, the importance of Nakashima, who headed exports, looms greater.

Nakashima is a shrewd man. His explanations to manage Yamasaki on daily affairs were extremely well reasoned and orderly, leaving no room for discredit.

There is this reliance on Yamasaki on Nakashima's ability, but he also gives

the impression of being a cool person about whom one "does not know what he

may be thinking." His evaluation by Sumitomo is an unknown entity, and he has

not been the subject of many rumors within the plant. It may be reasonable to

evaluate him as a so-called "man whose image does not gush out."

The last candidate, Fujii, was born on 21 January 1926 and has just turned 58.

He is thus the youngest among these four. He completed Kyushu University with

a degree in engineering and entered the employment of this company where he has

40
been in charge of the industrial machinery main company, purchasing headquarters

and research and development headquarters and presently heads the secret documents room, general administrative department and labor department. If he

should take over domestic sales, the "sovereign school" will be finished.

He is a candidate who fulfills the three conditions required for ascension to

manager, which are (1) youth, (2) a proven record, and (3) highly regarded

by Yamasaki as being reliable. He has had special ties with Yamasaki during

his sales days after which manager Yamasaki pulled up the company to its

present position. In seeking a weak point, there are some who point out a

lack of management strength due to his youth.

Every candidate has his "strong and weak points," and this is the source of

problems for Yamasaki and the Sumitomo heads. If one dares to make a solo

decision, along with some bias, and select a member from this quartet, the

choice will be Watanabe with Nakashima as the alternate. Whatever the reasons

may be, at least the chances of Yamamoto and Fujii to rise to the manager position seem slim.

Here we repeat the evaluations for the remaining members Watanabe and Nakashima.

We see that Watanabe has undergone a period of cold storage with the new system.

Just how far these fetters will affect his future will be the focal point.

Nakashima, on the other hand, has the major handicap of having come out of a

business background. In any event, there is no mistake in assuming that these

two will be engaged in a furious contest up to a target date of October of this

year and this race presently is in a dead heat.

Does Senior Managing Director Ohara From Sumitomo Have a Chance?

Looking now at the next generation of candidates for manager, there is one person of a different breed who looms as a powerful candidate. This is senior

managing director Michimasa Ohara. He graduated from the Faculty of Economics

of Kobe university in March 1957, served as chief at the Urada branch of

Sumitomo Bank and was appointed a director of Toyoko in January 1979. He is a

young man of 49 years. Counting from the time of his status as consultant to

Toyoko, this will be his 8th year.

He was in charge of comprehensive domestic sales before he transferred to Toyoko,

and he is an indispensible man to this company. He has a strong point in the

large number of mass communications fans supporting him, and he has no post

awaiting him at Sumitomo should he choose to return there.

He has good business sense, and he enjoys great trust from the 114 dealers

throughout the country. "Autorama," which is Ford's channel to sales in Japan

set up in October 2 years ago, owes much of its presence to Ohara's efforts,

and this record is enhancing his stance that much more. When he was an executive managing director, he himself changed the name of the head of the domestic

sales headquarters to head of the business headquarters. By disengaging this

headquarters from the "domestic" lable, he made possible the inclusion of exports. This is an episode that reveals the degree of self-confidence of Ohara.

41
There are reasons for the statement that Ohara is eyeing the "next to next

manager" position. It was in the fall of 1982, 6 years since Ohara had

transferred to Toyoko as consultant. Ohara inquired through channels of

manager Isoda of Ohara's possibility of returning to Sumitomo whereupon Isoda

slammed the door shut. Ever since this incident, Ohara was resolved to end his

days at Toyoko.

In fact, it seems that the Toyoko environment seems to please Ohara more than

the Sumitomo environment. He will be but an average director should he return

to Sumitomo, and that will leave a large void for the past 8 years.

In addition, as long as he remains at Toyoko, he can wield his command over

the dealers in the manner he desires. Even Yamasaki is not as well versed in

the dealer situation as he is. In this situation Ohara is setting up a "one

country, one region" business district within Japan, and there should be no

work as interesting as this.

Furthermore, this came right after the period of the bad relationship between

manufacturer and dealers that was the result of the Matsuda system. This

present favorable situation was achieved as the result of reasonable judgments

in taking reasonable actions.

Even the candidate status of Ohara, blessed with such magnificent qualifications,

is not without its shortcomings. The first is the problem of the "unwritten

law" which stands in the way of "placing a Sumitomo product in the post of

manager." This is a problem that can be automatically erased if Ohara*s future

activities place him in contact with the proper people so that he can dispel

such a feeling.

The second problem area that has been pointed out is just how the complex:

thoughts embraced by workers of Toyoko proper of the same age as Ohara can be

parried by him. To be sure, there is no feeling of opposition on the part of

these young people. On the other hand, people in his age group are still at

the level of section heads at best. There is the constant danger that the difficulties in personnel relationships that arise from this gap may, if things go

wrong, cut short his career. With the shift in the Tokyo branch office in July

of this year and the associated move of the business headquarters to Tokyo,

the role of Ohara as champion among the next generation of candidates will be

enhanced, and regardless whether this is good or bad, it seems beyond doubt

that Ohara will in the near future become the "eye of the typhoon" among the

top personnel of Toyoko.

Direction in Self-reliance of Toyo Kogyo Rescued From "Hell"

Plan Big Turnaround With All Front Aid of the Sumitomo Group to Healthy Fiscal

Administration

"The poor fuel consumption" of the rotary car was the problem in the United

States which resulted in a business crisis for Toyo Kogyo in events which happened 10 years ago near the end of 1974. The company was on the verge of collapse at one time, but the manufacturer, dealers, the main bank in the form of

42
Sumitomo Bank and the Sumitomo Group acted as one to bring about the reconstruction now evident. In the fiscal period ending last October, this company

registered its history of highly favorable financial data to embellish the new

born "Matsuda" with a flowery start in May of this year. Matsuda's reconstruction is now complete.

The address presented by senior managing director Kazukiho Hoshino, who manages

the Tokyo branch of Toyo Kogyo, to the Keidanren Mechanical Club at the

Keidanren Hall in Ote-machi in Tokyo on 21 December last year was extremely

enlightening. No matter which way one looked at it, it was one which was

filled with positive thoughts. This was as it should have been. The announcement of the figures for the period ending October 1983, which represented the

8th consecutive increase in profits since the 110th period which covered from

November 1975 to December 1976, was to be presented, and the anticipation was

such that Hoshino was in very high spirits.

"We were faced with some fierce industrial environments, but we were fortunate

to find our sales, business and profits after taxes all exceeded the preceding

period levels, thus assuring us of an increased profit. This enabled this

company to assure itself of 6 continuous years of increased profits since

October 1976.

The actual figures showed total sales of 1.3642 trillion yen (a 15.6 percent

increase over preceding period), normal profit 45.2 billion yen (a 4.4 percent

increase) and profits for the period 25.6 billion yen (a 1.0 percent increase),

which are magnificent in view of the low state of the economy and the restriction in the shipment of whole automobiles to the United States.

The healthy status of Toyo Kogyo stands out even in comparisons with the various other auto companies where the 1983 figures are concerned. Toyota rang

up a sales total of 4.8927 billion yen for the period ending in June 1983

and a normal profit of 398.6 billion yen, but it was in a different class.

In addition, Honda Giken Kogyo reported for February 1983 that it continued to

maintain an increase in profits while Nissan Motors and Mitsubishi Motor Industry reported decreased profits. It was in such a fierce environment that

Toyo Kogyo chalked up its highest sales and profits in history.

It is difficult to believe that this is the same company which suffered a decrease in profits to one-third that of the preceding period for the period ending October 1974 while the following year it showed business profits of 17.3

billion yen and profits after taxes of 1.7 billion. Both red figures causing

it to fall into the status of a red ink company which was in nearly a state of

death when its chief banking firm Sumitomo Bank, along with Sumitomo Shintaku

and Sumitomo Shoji, applied levers to help it along. It has been said that

"industry is drama," but such a marvelous recovery is very rare.

Sumitomo Bank Inserted Main Lever for Reconstruction

Toyo Kogyo is presently riding an explosive wave, but it was in the October

1975 period when its financial crisis surfaced. This was the result of a 17.3

43
billion yen loss. The underlying factor responsible for this tremendous loss

surfaced in the spring of 1974 right after the first oil shock. The Environmental Protection Agency (EPA) of the United States stated that "the rotary

automobile guzzl&s gasoline" as the result of its survey, which wiped out sales

of the rotary automobile and piled up a mountain of cars in storage.

The rotary shock which started off in the United States Immediately skipped back

to Japan and the rival auto manufacturers began their attacks on the rotary car.

At that time, this company's passenger cars—Rutier, Capella and Savannah—all

were fitted with rotary engines, and this destruction of the "rotary myth"

resulted in an increased inventory and increased interest payments, which all

reverberated back to the manufacturer's kitchen.

The first man Sumitomo dispatched to start reconstruction was Shinpei Hanaoka

as head of the business administration department (he is presently senior

managing director at Sumitomo Bank). Hanaoka took over as an executive managing director and checked the American market closely as head of the export headquarters while he sold the Tokyo branch and the Osaka branch to raise 25.7

billion yen. At the same time, he also sold transactable securities to raise

vitally needed capital quickly and put all his efforts in preventing a collapse.

Hanaoka was succeeded in January 1976 by Tsutomu Murai (presently president of

Asahl Brewing), who had been an executive managing director at Sumitomo Bank,

to take over the spot as assistant maanger while Tsutomu Mineoka (presently

executive managing director at Sumitomo Bank) was dispatched in October of the

same year to head the international control division as an executive managing

director. Murai attacked the situation from his important and lofty post while

Mineoka used his razor-sharp brain to apply the complete treatment to the nearly dead Toyo Kogyo. The combined efforts of Murai and Mineoka and the excesspersonnel countermeasure directed at the AM system from 1974 began to show a

little effect, and a business profit of 5.6 billion yen was recorded for the

October 1976 period followed by 8.2 billion yen for the October 1977 period,

15.0 billion yen for the October 1978 period, 31.2 billion yen for the October

1979 period and 38.8 billion yen for the October 1980 period, showing how this

company had turned its business back into black figures once more.

With this recovery in business, dividends were raised to 10 percent from the

October 1980 period, up from the 8 percent it used to be, and then to 11 percent in October 1982.

Shigeki Yamasaki, Meritorious Worker for Reconstruction

Many people were involved in the reconstruction process of Toyo Kogyo including

several from Sumitomo-related sources, but the top meritorious worker in this

direction was still manager Shigeki Yamasaki. He took over from the one-man

regime of Kohei Matsuda, and there were some efforts on the aprt of manager

Isoda of Sumitomo Bank when Yamasaki came into office in December 1977. He is

a technologist by naturee and drew little attention to himself until he became

senior managing director, but once he became manager, he put the difficult

internal and external affairs in one piece and put the reconstruction program

which followed on the right track. At the first anniversary of the Yamasaki

system in October 1978, sales totaled 816.3 billion yen (a 9.2 percent increase),

44
business profits 15.0 billion yen (an 83.2 percent increase) and period profits

2.6 billion yen (a 32.2 percent increase), and he first brought business profits over the 10 billion yen level.

Meriting even greater attention was the debt, which at its peak had gone up to

360 billion yen but had been lowered to less than 300 billion yen. Mineoka,

who was in charge of accounting at this time, said, "We have somehow come to

qualify for a 50-point rating where fiscal quality is concerned. This is still

largely based on sales. We are aiming to lower this to 250 billion yen within

a year and then to less than 200 billion yen."

Yamasaki has the marvelous quality of saying, "There is no magic to doing business. One must follow the basic faithfully." He always puts forth the teamwork he learned in soccer as a prerequisite while insisting in keeping one's

cool at the time. It is customary to want to boast about good business, but

Yamasaki strives for lower costs and the production of quality products within

the plant while he puts forth all effort to establish trusting relationships

with the dealers with statements such as "there will be no production without

sales." As pointed out by Mineoka, he pays his debts regularly where the business end is concerned.

With the highest profit picture in history shown for October 1983, long- and

short-term debts totaling 30 billion yen had been repaid, and the balance was

reduced to less than 200 billion yen. Plans are to reduce the debt another 30

billion yen this October 1984. There is no doubt that this company's debt

will be reduced to less than one-third of its peak by the end of this period.

This debt retirement is also gradually improving the self-generated capital

ratio, which increased to 25.8 percent from the previous 23.7 percent at the

end of the October 1983 period, an improvement of about two points. Deposits

and negotiable securities are also being accumulated by the year, and the total

value had exceeded the previous total of 219.7 billion yen by 25 billion yen to

244.6 billion yen for the October 1983 period.

With regard to the use of this capital accumulation, "we do not know just what

is to be done," said Yamashita, but it probably will be used to finance the

planned construction of a plant in the United States. The company has already

conformed to movements such as "local contact" bills and has conducted feasibility studies (industrializing surveys), and the surveys are reaching their final

stages. Although any joint venture with Ford is not completely out of the

picture, present plans call only for this company's solo venture in the United

States, and the planned plant of a scale of 200,000 cars per year will be

thought to require at least 150-200 billion yen in capital outlays. Toyo

Kogyo is displaying a cautious attitude in view of the large investment, and

it is probably planning this internal accumulation to be ready for this day

of reckoning.

There seems to be a blueprint of the American plant engraved in Yamasaki's

mind by some means.

45
The domestic Matsuda camp is afire. This is because the determined assault

with the chief savior "Familia" has succeeded in beefing up the domestic share

of this company. This was roughly 10 yeass from the rotary engine shock. The

dealer aid plan conducted with the full force of AM and SE loans utilized this

hit product in the form of Familia aeted as a lever to blossom out. The

domestic sales competition is becoming even more violent, but the Matsuda

camp is aiming for its targeted monthly sales of 40,000 as its spirits are

rising.

Last November a poster was placed on the billboards of Hiroshima Toyo Kogyo,

its Tokyo branch, its Osaka branch and all of its dealers. This was similar

to the so-called "wall newspaper" intended for in-plant display, and the company people who saw this poster all came forth with the statement, "Oh, have

they finally done so?" in involuntary manner. There were in large letters

"We are number one for the fifth time this year" (We are number one in domestic

car sales as of October 1983) under which was a photograph of a scampering

Familia along side of which was the line "Will Corolla come this far? City

popularity in sharp drop. Familia is out and out stronger." This poster was

the result of the need to let its people know that in January of the preceding year, April, May, August and finally October Familia had outdistanced its

rivals Corolla, Sunny and City to assure itself the top position in domestic

sales. This display was followed by "in October Familia won top position in

sales among all the passenger cars. This is the fifth tine this year. Even

in the months when it was not the leader, it was always in the best three

categories. The rivals Corolla and City, which have been running close, are

no longer problems. Familia, which bears the popularity and proven record of

the real thing, is the vehicle with the best sales approach and driveability"

is a type of statement intended to shake the workers of rivals Toyota, Nissan

and Honda. The fact that in the midst of this fierce sales competition, this

company was able to take top place in 5 of the 12 months with its Familia

certainly gives the Matsuda workers grounds for exhilaration.

"Rainbow Curve" Sales Strength

Now it was in June 1980 that the "main savior" of Matsuda in the form of the

Familia rang the bell to introduce the catch phrase "second-generation hatchback." Manager Yamasaki addressed the reporters' conference for the announcement of this new car with the statement "the new Familia represents the FF

[front engine and four-wheel drive] mode which was developed as the forerunner

in the compact car competition, of the eighties and is a self-developed hatchback

style." At the same time, he added, "We will take this introduction of the

Familia as the opportunity to achieve monthly sales of 40,000 cars, and to

this end we will raise our domestic goal to 9,500 cars per month and the exports to 13,000 per month for a total of 22,500 cars per month." Certainly,

just as Yamasaki said, Familia was developed after an exhaustive study of the

Civic, Charade and Starlet type domestic cars for the masses as well as the

West German Volkswagen's Golf, and the motto "we will surpass Golf" was adopted

for the development of this sensible and clean-styling vehicle which greatly

surpassed the old Familia. On the other hand, the majority of the reporters

present said, "There is no doubt this is a fine vehicle, but it will probably

not be around for long," in their rather cool assessment. This was because

Matsuda was number three in Japan next to Toyota and Nissan, and its main

46
weakness was its weak domestic sales strength. There have been many cases

when new cars have appeared but which in the course of a few months rapidly

disappeared from the scene. People in the industry pointed at this weak

Matsuda sales organization and made statements such as "sales like a monetary

gust" and "Matsuda1s rainbow type sales curve." These statements arose from

the situation that Matsuda's dealers were prone to "sell whatever cars were

easier to sell."

This was why, when this new Familia riding on the excess popularity of the old

Familia was able to attain its targeted goal this year of 9,500 car sales per

month and even surpass it at an average 13.7 percent at 10,800 cars and gain an

explosive increase in popularity, the rivallmanufacturers Toyota and Nissan

said, "Just wait. There will be a great thud when sales drop with the new

year': later they ate crow. As 1981 began, Familia1s popularity showed no

decline and even expanded. Sales of Familia for 1981 totaled 166,284 cars

and kept its third position behind Toyota's Corolla and Nissan's Bluebird among

passenger cars. It surpassed Nissan's Sunny in the mass transportation area

and took over second spot behind Toyota's Corolla. The fact that Familia had

been awarded the first Car of the Year title first bestowed along about the

end of 1980 may have had some effect on its sales, but its completeness and

clean styling took over the eyes of women drivers to whom not much attention

had been directed until then. This year Familia has taken over top spot for

the first 8 months in the Tokyo market, which is the largest market in Japan

and which used to be the almost exclusive domain of the Corolla and Sunny, a

feat the Matsuda sales force can well be proud of.

Now the highlight of Familia is probably its top ranking in August 1982 in the

sales of passenger cars. This was when it surpassed both Corolla and Sunny,

both of which are mighty adversaries in sales throughout the country.

Where Familia sales totaled 12,381 cars, Corolla sold 11,086 and Sunny 7,463,

and the margin over second-place Corolla was but 1,300 cars. On the other

hand, this was the first time that a car from a company other than Toyota or

Nissan had taken first place in sales, and it was only natural that the

spirits within this company welled up. Riding on this popularity, Familia

marked up sales of 17,220 cars for the month of October of the same year, leaving a gap of 600 cars between it and Corolla and giving it top rank in sales

once more. With these events, it was only natural that rivals Toyota and

Nissan began to regard Matsuda in a new light, and Matsuda was revitalized

and Familia1s popularity was not to be questioned while the sales outlets were

vibrant with vitality. The rivals could only say, "We can no longer say

'rainbow curve,"' and, in fact, had to consider Matsuda a menace.

As 1983 began, there seemed to be no decline in Familia's popularity. As if

to crush the advent of the model change of the "Corolla" in June of that year,

it topped the sales figures in January, in March (11,275 cars) and again in

April for the fourth time (13,263 cars) and for the fifth time in May (13,450

cars) to take over top spot in succession.

47
Corolla, which had undergone a model change to introduce FF, entered the market

in June, but Familia took first place again for the sixth time (13,263 cars)

and gained in October for the seventh time (15,990 cars).

It was 3 and 1/2 years since this new car was introduced. During this time,

Familia underwent not even what might be called a minor change. It is customary that the new car image sometimes gradually fades as quickly as after 1

year and minor changes are made at least after 2 years to bring about a change

in image, and for Familia to go through such a long period with not even a

minor change and still retain its popularity must be termed something close

to a miracle.

Unified Manufacturer-dealer Strategy

While it is true that they were blessed with a superlative product like

Familia, there was the establishment of a unified manufacturer-dealer relationship of trust through appropriate guidance of the sales outlets and the development of sales strategy under the guidance of senior managing director

Masamichi Ohara, who headed the domestic sales division, that enabled this company to maintain this bestseller position.

It was in October 1976 when Ohara was transferred from his post as head of the

Urada branch of Sumitomo Bank to become a division head attached to the automobile sales division. In 1965 Toyo Kogyo's share of domestic sales was 15.9

percent, which placed it a whisker behind second-place Nissan at 20.8 percent

and seemed capable of taking over second place, but in the next few years it

saw its share go down. In 1970 it saw its third-place position in total number

of small cars taken over by Mitsubishi Motor, its share plummeted to 7.7 percent in 1976 and it was exceeded by Mitsubishi even in areas other than light

cars to a fourth rank.

The rotary cars on which this company had staked its fortune were evaluated

as "gas guzzlers" in the United States directly after the first oil shock near

the end of 1973, resulting in an inventory pileup in that country which also

resulted in the unpopularity of Matsuda products even in Japan as a result of

which the company was pounged into a deep financial crisis. This was the

result of former Manager Kohei Matsuda being more concerned with the production front than with the sales front, which prompted him to say that "our

cars are superior in performance to any other cars. The lack of sales reflects weakness on the part of the dealers," thus downgrading the sales

outlets and creating a gap of distrust between the manufacturer and the sales

outlets and resulting in a period of discordant tones.

Success of the SE Plan

Toyo Kogyo was faced in the fall of 1974 by an ultimatum to choose between

Processing 10,000 workers or transferring excess personnel to dealers" by its

principal bank Sumitomo and began execution of its "AM transfer system"

starting in January 1975 to shift excess personnel to various dealers in an

effort to sweep out the dealers' inventories. This system was able to effect

essentially a complete sweep of the inventories with the overall support of the

Sumitomo group and was able to disengage itself from its top-level crisis,

48
but it was still quite removed from the establishment of a relationship of

trust with the vital dealers.

Sleepless nights continued for Ohara. "The sales outlets are suffering reduced sales, and the hiring of new salesmen is being suspended. While it may be

said that the worst possible outcome of the AM system cannot be avoided, Matsuda

will undergo no development at this rate. How can I build up some sales

strength?"

The enthusiastic sales plan which Ohara devised and introduced following the

end of the AM transfer system in the summer of 1977 was the SE (sales expansion)

plan. This plan was intended to be one phase of the so-called reinforcement

of the domestic sales strength by dispatching company personnel to the first

line of sales to add extra momentum to the sales strength that had been built

up by the AM plan and thereby keep the expanded sales strength at its new

level. The number to be assigned was 5,000 (of which 500 were service people),

and those over 50 years of age or who had less than 3 years of company service

were exempted. This SE transfer plan, which was aimed to take 2-3 years to

complete starting in October 1977, was proposed at the capital and labor meeting held in September 1977. After lengthy discussions, it was decided to initiate the plan in December of that year and complete the transfers in 2

years, which was accepted by the union. That is to say, where the AM system

was of an emergency rescue status, the SE transfer system was an all-out plan

for sales expansion which presented the company workers with a rose-colored

view of the future.

Ohara did not just drive the mental front. At the same time, he came forth

with a basic plan that there would be no production without sales and in which

he put into execution a program of visiting top sales outlets with the promise

of improving relationships of trust with the outlets, carried out model changes

over a period of 2 years on the Familia, Rutier, Savannah, RX-7 and Capella

passenger cars and the Bongo and Titan commercial cars to reinforce the product

and set out to increase the number of sales outlets from 130 to 1,500 in the

course of 3 years. At the same time, he put the SE transfer system in its

proper place as a transient method for reinforcing the strength of the sales

outlets and set up a recruiting department within the main plant to assure a

source of salesmen and reinforce business guidance while also engaging in activities for their use.

This series of measures as completed in 1980, and a start was made toward an

expanded sales policy aimed at pulling up the sales throughout the country to

40,000 per month.

This daring expanded sales policy of Ohara was backed up by the sales of the

"Familia AP" that appeared in January 1977, the "new-type Titan" introduced in

May of the same year, the new-type "Rutier" which appeared in October of the

same year and the "Savannah RX-7" which appeared in March 1978, and these new

introductions all chalked up impressive sales records.

49
The share in the domestic market (versus light cars) which had dropped to

7.1 percent in 1975 began to recover in the order of 7.3 percent in 1976,

7.7 percent in 1977, 7.6 percent in 1978 and 8.3 percent in 1979.

Momentum was added to this recovery with the introduction of the new model

Familia in October 1980, and the explosive increase in sales upped this

company's share of the market to 8.4 percent in 1980, to 8.6 percent in 1981

and to 8.7 percent in 1982.

All Dealers in the Black

The plan which followed the AM and PE transfer plans was the "4P Plan," which

was put into effect between May 1980 and April 1982 and which was followed by

the "QI. Plan" up to May 1984.

The "4P Plan" was made of the first letter of the terms prosperity, progress,

profit and proper sales and was developed with the purpose of reinforcing the

sales strength of the AM and SE transfer systems and restructuring the unified manufacturer-dealer sales setup in the country with the promise of complete

elf-reliance on the part of the dealers. Specifically, this plan involved the

use of the hit model Familia as the lever to reinforce business quality, complete the use car sales system, increase proper salesmanship training for

12,000 salesmen, up the quality level of the 1,600 sales outlets and establish

DQC activity, which is a measure of dealer quality. In addition, the "QI Plan"

took up the slogan that all quality is given first priority and had the following targets: (1) assurance of forward-moving competitive strength, (2) assurance of profitable dealer business and (3) reinforcement in training on different car models. The item from this list which Ohara stresses the most is the

assurance of profits to the dealers. "Unless the dealers are making a profit,

there will be no reinvesting activity, and we will not be able to set up the

strong sales network capable of selling 40,000 cars per month" was the gist of

his thoughts. The greater number of automobile sales outlets were said to be

operating in the red as the result of the fierce competition, but with this

"QI Plan" and the increased sales attributable to the popularity of the Familia

and Capella, Ohara has been able to state with a smile that "close to 90 percent of our dealers are operating in the black" but to state also that "it is

important that all dealers make a profit."

This company seems about to realize its sales reinforcement through the "4P

Plan" and the "QI Plan" according to schedule, and it will initiate a new 2-

year plan in May of this year.

This new plan is intended to assure the establishment of the hoped-for 40,000-

car sales per month network and adopt a policy whereby all dealers can operate

at a profit by placing emphasis on the efficiency of all the dealers' work

force, seeking to achieve a better balance in sales of different models to disengage itself from the high reliance on sales of the Familia and setting up

Matsuda as the truly third member of the top class of car manufacturers next to

Toyota and Nissan.

50
This company will change its name to "Matsuda" in May of this year. This is a

move to incorporate the brand "Matsuda" which has long been regarded with affection by customers as the name of the company aiming for a spectacular leap.

The start of this new 2-year plan will coincide with the change in the name

of the company. The total force of all the Matsudas will be concentrated just

as the word Implies. There is no doubt that the Matsuda whirlwind will be

operating in the market this year.

Increase in Share of the East Japan Market Is the Key to Reinforced Sales

Matsuda*s business is going even better than expected, and this year it plans

to increase its share in the east Japan market. This company's share of the

entire domestic market is 8.8 percent (versus light cars); this is but a step

away from the hoped-for "10 percent," and the crus to the realization of this

goal is an increased share in sales in east Japan (according to senior managing

director Ohara).

Looking at the country according to blocks, sales are 14.4 percent on the home

grounds of Chugoku and Shikoku and the share in west Japan markets such as

Kinki and Kyushu is above the average domestic share. In contrast, its share

of the east Japan market, which includes Hokkaido, Tohoku, Kwanto and Chubu,

is but 6-7 percent. The emphasis here will be in increasing the share in

Tokyo and the main metropolitan areas. The present demand for new cars is

about 4 million per year, and Tokyo accounts for about 10 percent of this total

or about 400,000 new cars, making it the so-called "10 percent market." In

contrast, Akita Prefecture accounts for 40,000 cars per year, which is but 1

percent. In other words, an increase in sales of 1 percent in the Tokyo

market will equal the total sales for all of Akita Prefecture thereby giving

great significance to an increased share of the Tokyo market. Both Toyota

and Nissan have long been striving to increase their shares of the Tokyo

market, and their development of sales strategies to this end is for this

reason. To be sure, Osaka and Aichi also represent large markets, and an increased share of the Osaka market is the most pressing subject for Matsuda.

It may be said that Matsuda's share of Tokyo and the capital region has been on

an upward trend with the hit made by Familia, but the lack of an overall

strategy cannot be denied. During the shift to a new branch company in Tokyo

this summer, the business division is to be hisfted from Hiroshima to Tokyo.

When we consider the leadership throughout the country and its effect, we want

a share in line with the situation" (director Ohara), and it is only natural

that those concerned are afire. The Matsuda network in the Tokyo area at the

present time includes the 7-company dealer system of Tokyo Matsuda, Kwanto

Matsuda, Matsuda Auto Tokyo, Matsuda Auto South Tokyo, Matsuda Auto West Tokyo,

Matsuda Motor Tokyo and Matsuda Familia, and only Kwanto Matsuda and Matsuda

Auto Tokyo are in the L rank with sales of at least 1,000 cars per month.

There are 2 dealers of the M rank, which is associated with sales of about 600

cars per month, and the rest are S-rank stores with a smaller sales performance. This is why an overall reinforcement is planned to bring all of these

stores up to the L rank.

51
"The Matsuda Era Has Arrived"

The change in name of the company in May will be the occasion for a series of

sweeping changes, but the situation seems to be that this may be the year for

some test training. This is because the Familia, which has thus far, as its

name implies, continued to be the center of attention and continues to be

highly regarded, is beginning to show some signs of needing a helping hand.

The next-generation model has already been developed, but there is the situation in which it is very difficult to introduce a new model when the old

one is doing so well. There are speculations that this new Familia will

appear in June, possibly in September or even at the end of the year, but the

people in the know at the company say that "we have no intention of making

a model change at the present time. First of all, one look at the sales status

of the Familia is sufficient to convince us that there is no need for a model

change now," as they vehemently deny any such possibility. It is the general

feeling within the industry that there is all-out fear of casting water on a

rising tide.

The domestic sales of this company for the first half of the fiscal year as

of April 1984 (November 1983-April 1984) totaled 205,000 cars, which was the

same as for the preceding year. This company states, "Familia and Capella will

be the base that will pull Rutier and Cosmo along so that we surely can match

last year's sales," but this company's data for the period ending October 1983

showed domestic sales to total 402,765 (a 2.5 percent increase over the preceding year), showing an increase in overall volume. However, sales of the mainstay Familia dropped 4.5 percent from the previous year to 181,173 units, indicating that sales of Familia are showing signs of fatigue. If this company

is to achieve sales of 200,000 cars for the coming period according to plan,

Capella and the other models will have to pull more weight in the light of the

situation with Familia, but the intensifying competition in the domestic

market, particularly Toyota's attack and Nissan's sharp retaliation, indicates that this company must be ready for some bitter fights.

Improving the sales efficiency of each salesman will have to be achieved in

order to ride out this battle.

The domestic sales staff of Matsuda at the present time total 12,000 people.

It has assured itself of a sales force next to Toyota and Nissan where numbers

are concerned, but the sales per man are but three cars per month compared to

Toyota's four cars per month, indicating a substantial gap. By increasing this

sales rate to 4 per month and bringing up the efficiency to the level of Toyota,

the sought-for 40,000 cars per month sales ought to be attained. Increasing

sales from three to four is not such an easy undertaking, but director Ohara

has his hopes. This is because of the sales force of 12,000, half, or 6,000

men, have sales experience of 1-3 years through plans such as the "4P Plan"

and are still at the freshman level. It is said that 4-5 years are required

to develop a full-fledged salesman, and these salesmen will be expected to

contribute positively to the sales force from here on.

"The Matsuda era has finally arrived. Please bear with us, we will perform."

These were the confident words of director Ohara.

52
Sales, Profits and Dividends of Toyo Kogyo

Key:

(?)

(10)

(11)

(12)

(1?)

(lli)

(15)

(16)

0-) ä * as ^ OT-t^ C]

(?*U &

itoi&< llffö ^BT

110^(BSW50^11fl~51^10H) 5,882*B' 56C?P] 11(f) 8

%

11138 (Hg*n51#llJ! ~52#10B) 6,283 82 11 8

112Ä9(BSfP52#n« ~53*R0m 6,863 150 26 8

113t^(BHW53^1lH~54#10H) 8,352 312 73 9

114^(BSf054^11 ß ~55#10fl) 10,311 388 157 10

115ffi(BBW55^11^~56^10H) 11,311 409 199 10

116^(Bef056^1lH~57^10^) 11,797 433 254 11

117ÄJ(BBft57#nJ!~58*10Ji) 13,642 452 256 13

1. Accounting period 11.

2. Total sales

3. Profit 12.

4. Business profit

5. Period profit 13.

6. Dividend rate

7. 110th period (November 1975-

October 1976)

14.

8. 100 million yen 15.

9. Yen

10. 111th period (November 1976-

October 1977)

16.

112th period (November 1977-

October 1978)

113th period (November 1978-

October 1979)

114th period (November 1979-

October 1980)

115th period (November 1980-

October 1981)

116th period (November 1981-

October 1982)

117th period (November 1982-

October 1983)

Domestic Car Sales by Brand Names (Best 10) (Survey by Jibairen)

(7)

(8)

(9)

(10)

(11)

(12)

(13)

(1U)

(15)

(16)

Key:

(1)* *.

.a; i/—h~&) .(3

{2} mma%- (5)BS*057jl (6)HS*n56#

)lii sfl-OSO )m MUM* )fi& £(U)&

t> D - 5CS350 l 207,020 i 233,477 1 251,138

V — -(B m 2 184,780 2 200,335 4 160,172

7?5u 7>amr> 3 173,499 3 191,850 3 166,278

3 D :Kh350 4 138,340 5 136,066 10 93,687

>%-7\-K(B M) 5 133,209 4 153,274 2 183,896

» U - ^(h350 6 116,488 6 121,891 6 109,126

X7'jy5>-^3S) 7 115,777 — 90,762 9 96,176

? - O II(h35?) 8 110,677 9 105,051 5 116,922

Q 5 O. >(K39) 9 103,706 10 99,281 8 106,806

Xä-C^-OCB m 10 100,454 8 107,381 7 108,775

1. Name of car (maker's

name)

2. 1983

3. Rank

4. Number of cars

5. 1982

6. 1981 12.

7. Corolla (Toyota) 13.

8. Sunny (Nissan) 14.

9. Familia (Toyota) 15.

10. Corona (Toyota) 16.

11. Bluebird (Nissan)

Karina (Toyota)

Sprinter (Toyota)

Mark II (Toyota)

Crown (Toyota)

Skyline (Nissan)

53
The Day When International Industry Toyo Kogyo Menaces Toyota and Nissan

Great Leap Forward by Toyo Kogyo Which Crumbled the Big Two Myth

The ups and downs of the automobile industry are violent. The myth of the American Big Three has crumbled, and now the Japanese Big Two myth seems about to

suffer a similar fate. The New Year report on the said companies said that

among the 10 major news items of 1983 "the domestic share of Toyota versus

Nissan had widened considerably," symbolizing this trend. On the other hand,

third-place Toyo Kogyo came forth with the remarkable record of eight continuous periods of increased profits indicative of its good record, and it will ride

the crest of this momentum to advance into setting up a passenger car plant in

the United States.

This is the Toyo Kogyo which was once about to be crushed and which now is

undergoing a spectacular advance which might be termed a miracle and is fiercely competing for the second spot in the industry. What is the prime driving

force behind its success? Here we look into its overseas strategy which is responsible for more than 70 percent of its business.

Even Toyota and Nissan with a total sales of more than 5 trillion and 3 trillion

yen, respectively, claim that the risks are too great for setting up plants in

the United States and as yet have not ventured out. This decision on the part

of Toyo Kogyo, which is still ridden with debt despite its good business record,

applied a major shock to the rest of the industry. This is even more shocking

in view of the situation that Toyo Kogyo plans to take a go at it by itself

rather than in a cooperative venture with its partner Ford.

Does Toyo Kogyo have this kind of spare experience? Before we try to answer

such a question, we will look into some of its most recent activities.

The sales for the last period ending in October (November 1982-October 1983)

totaled 1.3642 trillion yen and business profits exceeded 45 billion yen.

There was a total of 1,341,800 cars sold (an 11.7 percent increase over preceding periods).

Of this total, exports (including CKD [complete knockdown] and KD [knockdown]

sets) numbered 934,900 cars, which made up 70 percent of the total production.

That is to say, Toyo Kogyo over the past 10 years has even surpassed Honda

Giken, which is known to be an international industry and has itself become an

industry dependent on foreign business.

How did this happen? The answer is straightforward. This company has an

overseas strategy that can be put down on a single sheet of paper (see attached

sheet). This chart has a compilation of the world's market situation. For example, the total would demand for cars is presently about 38,5 million cars,

which are then divided up into the 6 blocks of North America, Western Europe,

Japan, Eastern Europe, Central and South America and other areas. The demand

constitutive ratio and the production constitutive ratio for each of the

regions are then persued In setting up the sales strategy.

54
Let us look, first of all, at Japan. This company has a production rate which

is roughly twice the domestic demand (5,120,000 cars in 1983), and there is no

recourse but to depend on exports. It may be said that Toyo Kogyo's strategy

is based on this basic concept as it puts forth an all-out effort into export.

We now look at the foreign markets. As seen in the chart, North America

despite its production still has considerable excess demand. Western Europe

clearly is in a state of excessive production while eastern Asia and Central

and South America still have room left for production. The remaining area,

which covers the Middle and Near East including the Communist countries and

Southeast Asia and makes up the third market, only takes in a supply that is

about one-ninth of the demand.

Toyo Kogyo's strategy is characterized by structuring it in line with the demand balance in the various parts of the world. In order to avoid friction

with the countries in question, it has adopted a basic policy not to go

forcefully into leading countries and countries with an excessive supply.

In this manner, this strategic map shows that those regions with a lack of

supplies, are North America and the developing countries while the third

market which is still developing is considered to be a future market and is

set aside on Toyo Kogyo's strategic map as the "defensive block."

In order to minimize risks, the mode of entry is to export dismantled cars

from Japan and assemble and produce the finished car in the country in question by a so-called complete knockdown (CKD) mode or a KD mode, which is also

a strategic trick.

The countries where Toyo Kogyo presently has this on-site assembly system in

operations include Korea, Australia, South Africa, New Zealand, Malaysia, Taiwan and the Philippines for a total of 16 countries; most of these countries

are hammering out domestic automobile production policies as the jewel of

their industrialization promotion policy, and Toyo Kogyo is in complete compliance with such policies.

In keeping up with this policy, the export of KD sets for the period ending

last October increased 211.9 percent over the preceding period to 172,620

sets, showing a very large expansion which was large enough to enable this

company to surpass Toyota and take second place to Nissan.

CKD production naturally ties in with locating the industry on site. The

roles of parts supply and availability of labor are welcomed by the site of

the location, and the effect on on-site capital expenditure is also large.

CKD production is classified into roughly three levels depending on the local

industrial level and the demands of the domestic production policies.

The first stage is the level in which CKD parts exported from Japan are essentially assembled as is at plants in the country in question (a fraction of

the parts may be obtained locally). The second stage is to put up a parts

plant or advance capital and technology to an agent in the country to set up

a parts plant and establish a series of self-operating companies to supply

55
needed parts. It is also possible that automobiles and parts produced in such

a country may even be exported to Japan and other markets.

To be sure, Toyo Kogyo has carefully considered the merits of the systems, and

some of its all-out efforts in these regions are very eye-catching. The development of the remaining market in the world (the other regions) in a step

by step process will be the strategy from here on, and there already have been

spot orders from countries such as Poland, Austria, Saudi Arabia and Nigeria

and even trade talks, and it is said that these all will eventually be tied in

with on-site production.

In this manner, the improvement in the record of Toyo Kogyo1s overseas strategy

is the result of its avoidance of the risk involved with setting up on-site

production in leading countries and putting all its efforts into CKD production.

This practice may be said to be in accordance with the guideline set down by

manager Shigeki Yamasaki to "follow basics faithfully," but there is over all

this the thought of knowing your opponent and knowing yourself, and one will

survive a hundred battles and be able to transmit something to one's grandchildren. This was a lesson Toyo learned just before its production collapse

in the midst of its crisis, and it may be thought that the secret to the success of this company lies in this lesson.

Backstage to the unexpected Decision to Advance Alone into the United States

We now come to the major subject of the entry into the United States, and this

seemingly bold adventurous decision is a calculated risk where Toyoko is

concerned. The strategic chart referred to before showed that the North

American block still has room for on-site production added to which the export

of cars to the United States is under a restrictive limit even through the next

year. The judgment seems to have been made that with the Japanese ban on the

free export of American agricultural products, this limit on automobile imports

may continue for some time.

Next year's import quota into the United States will include an increase of

170,000 cars to a total of 1.850 million cars, but Toyoko's American export

framework is allowed but 159,282 cars. On the other hand, the popularity of

the Familia and Capella in the United States is increasing, and this lack of a

saleable product is continuing.

The American strategy has this background, and the on-site survey which has already been under way for a year will be the basis for a rapid firming up of the

basic plans for this entry.

According to this plan, the final plan will be to set up a new plant just by

this company and go at it alone although the possibilities of a joint venture

with Ford, which has in the past been a capital cooperative partner, or even

the use of some idle Ford plant had been considered.

The reason here was that if the ties with Ford were reinforced, then the company will have to have the blessing of the UAW (American auto workers union),

56
and one of the aims is to use labor that is free of UAW connections. As a result, a likely site candidate is Columbia in the State of Tennessee close to

where Honda Giken started on-site production and which is an area relatively

free of UAW influence.

At the same time, the mode of entry will be the knockdown mode with which this

company has experience in 16 countries (KD means on-site assembly) as a start

in order to minimize risks, production will be centered on the small passenger

car "Familia" and the scale will be of the order of 5,000 cars per month. A

total of 70 billion yen is expected to be invested, which is roughly half of

what is normally required, but this is quite a hefty undertaking where Toyo

Kogyo is concerned.

As a result, the date of this entry (start of operations early in the 1985

decade) will depend on whether this capital can be assured, but it seems that

this company has managed in some way to attain this goal.

That is to say, Toyo Kogyo has a policy of retaining about 1.5 percent of its

annual sales to provide at-hand fluidity (such as deposits) in order to maintain its business health. Now the books for the period just ended in October

showed great improvements in the profit structure and fiscal quality, and it

was possible to retire 30 billion yen of long- and short-term debts. As a

result, what had once totaled 300 billion yen in long- and short-term debts

had been reduced to 195 billion yen by October of last year while the at-hand

cash flow was increased to 244 billion yen, which was an increase to 18 percent of the sales total, leaving a considerable margin in capital strength.

There is already production in the United States by Honda Giken (passenger cars)

and Nissan (trucks), and Toyota is pushing final negotiations with GM, but

Toyo Kogyo's decision will make it the third company involved in passenger car

production next to Honda Giken and Toyota.

International Industry Toyo Kogyo Which Treads Its Lone Pathway

As discussed above, the overseas strategy of Toyo Kogyo involves the use of its

CKD and KD base to gain footholds in the third market and the United States, and

all of these efforts are this company's individual undertakings. The question

then arises about a joint strategy with Ford, and there is nothing that is evident.

Ford entered into a capital agreement in 1979 (Ford put up 25 percent of the

capital), and manager Yamasaki at that time said that "our business has shrunk

down to 1 million cars a year t^hile we are saddled with 200 billion yen in debts

so that we have no assurance of being able to compete in the world's auto market

competition of the eighties. This agreement with Ford was a must choice in

order for this company to survive in the eighties," in voicing considerable expectations in this agreement.

The actual situation, however, is one in which relationships between these two

companies are strictly business, and mutual supplementation seems to be the central theme.

57
Toyo Kogyo takes the following stand: "If one depends on a partner, he will

come under the control of the partner, and even though we have a capital agreement, we will follow our individual course where business is concerned." Back

of this situation is surely the problem of the Arab boycott against Ford, but

business front exchanges are active despite that situation.

In the past Toyo Kogyo had been only supplying small trucks, but in the course

of the past year the situation has changed to supplying Ford's overseas bases

with 10,000 Proceeds (North America, Central and South America and Australia),

2,000 Titans and 11,000 Bongos along with passenger cars including 68,000

Familias and 36,000 Campellas. There was also a supply of automatic-type

transaxles (MTX), transmissions for commercial vehicles and diesel engines.

Toyo Kogyo's sales to Ford exceeded 100 billion yen, and 10 percent of its

total sales were Ford-directed.

Ford has placed the "Razor," which is a modification of the Familia as its

number three world car next to its Fiesta and Erica, and is conducting KD

production in 7 countries and is selling this car in 35 countries outside of

the United States and Europe. The supply responsibility has been left to Toyo

Kogyo, and Ford's business stagnation is continually strengthening Toyo Kogyo's

position.

In another direction, exports of complete cars totaled 760,000 units, which was

a 4.4 percent increase over the previous year, and passenger cars accounted for

the greater part with 600,000 cars. Where a model was concerned, Capella was

most popular with 243,000 cars and increased to roughly twice the preceding

year's level and stood alongside the hit car Familia at 249,000 cars to comprise the 2 pillars of this company's stock. It would seem that there was a

feeling in the past that Toyo Kogyo was relying almost completely on the

Familia, and the emergence of the Capella has finally given this company full

status as a passenger car manufacturer. The particular situation in which

Capella and Familia are enjoying great popularity in the home base of North

American (255,000 cars, a 7.7 percent increase over preceding period) and

Europe (240,000 cars, a 28.7 percent increase) is an indication of the high

technological evaluation of these cars, and the name of Toyo Kogyo in the

international market will have to become more and more immovable.

"Walk One Step Faster and One Step More" Is the Overseas Strategy

With this history it is believed that the moving force in the reconstruction and

progress of Toyo Kogyo has been its overseas strategy, and the problem here is

the background behind this situation. No matter how popular Japanese cars may

be, the international market is not such a soft touch that any car regardless

of quality or technological level will find a ready market. In the shadow of

a market where "Familia" and "Capella" are big hits overseas is the situation

that these cars are the products of the revolution in the product development

of reborn Matsuda.

It is said that there are about 500 monthly foreign visitors at the Hiroshima

main plant, and it is said that all of these visitors seem to say, "How did a

58
Company which underwent such a collapse be able to develop such a superb

vehicle and resurrect itself?"

Matsuda automobiles presently are cars that are international subjects.

Now what could have transpired until the company got to its present position?

The bitter times Toyo Kogyo went through as a result of its financial crisis

were due to the oil shock that hit the world in the fall of 1973. The RE

(rotary engine) on which this company staked its fortune and brought into a

practical status was given the label of a gasoline guzzler by the Environmental Protection Agency of the United States, which helped to cut down its

sales, and this was the cause of this company's descent to a near collapse in

production.

On the other hand, all was not lost as the result of this experience. Because

Toyoko had put excessive weight on the rotary car and put nearly every car into

the RE class, it was in direct confrontation with the oil shock, and the reflections from this experience made manager Shigeki Yamasaki, who took over

from former manager Kohei Matsuda, shift to a more practical course.

Yamasaki said, "There is no success that was achieved disregarding basics.

RE itself was not bad, but we were lacking in discretion." That is to say,

Yamasaki was a firm believer in the statement "there is no business without

sales." Since then the development area forbade the development of cars

strictly by technologists alone so that "the cars we produce are not 'products'

but 'commodities'" was the display that was driven into the company.

Every effort was made to alter the intracompany system from the one-man system

of the past to one that offered an airy atmosphere and improved to a point in

which anyone could express his opinions. For example, the manager himself

handled sales, development and design in the days of manager Matsuda and any

opinions from company members were not heard, but the newborn Matsuda had the

door open for the development people. At the same time, 5,000 people with office and technological duties were transferred to the first line of sales to

experience what business was like and to find out just what kind of car the

users were looking for.

As the result of such improvements, the entire work force was activated, and

this was tied to a mighty consolidation of Toyoko's strength. Thus, it may be

said that the flame of a crisis due to the collapse in production was neatly

converted to a more fortunate situation.

In another direction, the development section established the three goals of

style, performance and comfort as the identity of Matsuda cars, and this

standard was the basis for building "cars that sell" with complete attention

paid to the users' needs. "Familia" and "Capella" were developed in this

manner and sent out to the market. Space does not permit a discussion of the

development process and it will be omitted here, but a single episode will be

mentioned here. There was a time when Toyoko invited the mass communication

media to a test showing of the Capella in Spain. There were the rival European

59
cars Peugeot, BMW, Renault and Citroen alongside, and the request was made to

"please ride these cars and compare." It was an astonishing show of confidence, but the Capella which backed this confidence was FF and RE turboequipped, and it ran in an astonishing manner, it is said.

The superiority of Matsuda Cars was further demonstrated by the receipt of the

following award.

In 1980 an award was established to designate the new model of a domestic car

marketed during the year which demonstrated overall superiority as the

"Japanese car of the year." The car selected for this first award was the

"Familia," the second award went to the "Soara" and the third award went to

the "Capella." That is to say, Matsuda ran off with two of the first three

awards, giving this company the number one crown among Japanese-made cars.

This award was the event that started active sales of the Familia, and its

sales topped those of all other cars on the domestic market 2 years ago. Where

there had been no one to contest Toyota and Nissan in the standing of monthly

best-sellers, Familia neatly broke this record, and it reported its initial

effort four times in taking over top spot in domestic sales.

This performance was not just limited to Japan. At the 1984 European Car of the

Year selections made last fall, Capella ranked top among the Japanese-made cars

and was ranked fifth overall. This award is the most prestigious award given

in Europe for automobiles, and the selection is made by a panel of 53 famous

journalists from 16 countries.

The Japanese cars nominated were the Daihatsu Charade, Honda Prelude, Matsuda

Capella, Nissan March, Toyota Kamuri and Toyota Corolla.

In this manner, the Matsuda Capella followed up its selection as Japan Car of

the Year to take the Import Car of the Year title awarded by the American

MOTOR TREND magazine. The award it received in Europe should be noted as

backing up the evaluation this car was given in Japan, and Matsuda cars are

now basking in worldwide limelight.

Now why was it that a Matsuda car was able to be evaluated so highly in Europe?

This was a point touched on by this company's publicity department that "cars

made by Japanese companies are considered to be low in cost, economical and

high in quality in every country. On the other hand, even the Japanese-made

cars have their weak points. These include style, engine noise, handling,

brakes and turning. Europeans make very strick demands on cars, and we have

made every effort to be one step ahead of the other companies to keep in line

with the European standards and still maintain our low price."

In other words, here again manager Yamasaki's business strategy of "move one

step faster and one step ahead of the enemy" is being exploited to good effect.

In addition, the overseas strategy is aimed at beating other Japanese cars

rather than the cars of the other country or cars from other countries. To

60
this end, the cars will not be sold as Japanese cars but as Matsuda cars, and

this is the feeling that everyone is being imbued with.

This is not "proof rather than logic." Let us see how other countries look at

the active situation of Matsuda cars through an excerpt from a newspaper (a

Chinese newspaper).

The July passenger car registry (limited to small passenger cars) of Holland

and Austria showed Toyo Kogyo's Capella leading the European-made cars and

taking first place.

The 26 July account stated that "Capella1s popularity is rising in Europe, and

a shortage of these cars is being experienced. This car has already registered

top sales for the month of March in Canada, Holland, Denmark and Sweden. The

dealers' inventory in the United States is less than 1,000 cars, and the dealers are suspending "reserved orders" in the situation that is pictured.

In any event, Matsuda's tactic of "move one step faster and one step ahead"

is being applied not only in Japan but at various areas around the world and

is supporting this company's overseas strategy. Whije it may be said this

company ranks third domestically behind Toyota and Nissan, it is certainly

establishing a firm foundation and showing strength in the overseas markets.

(DikntRmmm <2)**J38,5Qö*£-

1M1IÜ Mm&,M^&

(7

(8

(9

(10

(11

on cr

(12)*<7>ffe

rPn- \o>m&t£)

79

33.0%

29.3%

13.1%

9.3%

5.5%

9.8%

'80

36.4%

28.7%

12.4%

8.6%

4.8%

9.1%

(6)(iM*ÄJfc)

79

24.07Ö

31.4%

28.8%

9.1%

5.1%

1.1%

'80

31,6%

31.4%

23.2%

8.1%

4.4%

1.3%

Key:

1. Total worldwide demand

2. About 38,500 million cars

3. Japanese exports

4. About 6.600 million cars

5. Constitutive ratio of demand

6. Constitutive ratio of production

7. North America

8. Western Europe

9. Japan

10. Eastern Europe

11. Central and South America

12. Others

61
Trends in Number Produced and Number Exported at Toyo Kogyo (Includes KD Sets)

TgfnTT

2)48^

3)49#

5)51#

(7)53^

8)54^

(9)55^

(10)56^

(n)57#

(]2)58^

346.810

389,329

349.317

435,508

524,847

535,788

93,600

742,076

740,088

642,614

716,612

800,003

850,155

(KD-fe-yt-S-tf) (lli)1

646,147 1, 034 081

773.527 1,194,576

> .

884,599 1,346,377

820.257 1,253,228

I 1

1,346.377

—1 1 1 1 ] 1 1 1 1 1 1 1 I

10 20 30 40 50 60 70 .80 90 100 110 120 130

Key:

1. Year of Showa

2. 1973

3. 1974

4. 1975

5. 1976

6. 1977

7. 1978

8. 1979

9. 1980

10. 1981

11. 1982

12. 1983

13. Number of exports

14. (Includes KD sets)

62
Toyo Kogyo's Foreign Assembly Plants

(1)

(2>

*'

(20

® %

73)

.41' 26 2fe£tt 1'28) ISfiÄ*

[29l

36. 4 f-v=t

(21)

(2li^l £ :2ii)ra £

(3 ) 7/f i; try 36.10 Francisco Motors

Corp. (2)4P £ ra £

:.3o)

Z -i & v

wi

£ x m & a

(U) t* * -*• 38. 3 ra £

X2000.B600

*-f *x (30)

(5 > 3?77 y * 38. 3

Sigma Motor

Corporation (Pty)

Ltd.

IRI £ m £

CD

2]

"<7,?7*y7 (6

(7

(8

(9

yiV—VT 43. 9

Asia Automobile

Industries Sdn.

Bhd.

m £

Asia Motor Co.,

(KX.)Sdn.Bhd.

3

127)

7 V K

4 4. 5

Mazda Motors of

New Zeal and Ltd.

(25^ÄÄa?

Motor Industries

(InternationalJLtd.

9-^,-/ny—Y

77; yr,^5yrf

oil)

*^7,7r5 y7

T 3000 (83.11 i

J: 51555») i

<f vK*->7 46. 2

P.T. National

Motors Co.

P.T. National

Assemblers

P.T. National

Motors Co.

jtf/l-r-avt 46. 3

Sociedade Comereial Tasso de

Sousa.Lda.

m £ m £

(30) »4 »v

T^)

9p-y—V,f"(*'S

77;!)7, *-<?

(10' r-y-^K 46.12 Southern Sales &

Service Co.. Ltd.

Neal &Massy

Industries,Ltd.

(27)

(ii

(12

•f 7 S 47. 4

Mazda Car Manufacturing Co. m £ Rl £

TO

^ P y— V

, TJ/Vy-sY 4 9. 7

Motor

Manufacturers Ltd. m £

Motor

Distributors Ltd.

(37) 77Ö7

t&)

*^7,77; !)7

7P-7-K

77$y7h?3'^ (13) * 4 50. 1

Sukosol and Mazda

Motor Industry

Co.,Ltd.

m £

Kjkamol Sükosol

Co.. Ltd".

(lk) '**?*? S 52. 4

Sind Engineering

Ltd. m £ IRI £

(30)

(15) * = + 52. 9

Eastern Motors

Ltd.

Associated

Vehicle Assmblers

Ltd.

Layland Kenya Ltd.

Ä»£iEC

(39)

7"B^-F

(16) v>v-V- 55. 7

Boris Mazda

m

(Pvt) Ltd.

Willowvale

Motor Industries

(Pvt)Ltd.

Puzey & Diss

Motors(Pvt) Ltd.

75 y 7

775 VT*???

(17) = p vt"7 58. 4

Compama

Colambiana

Automotriz. S.A

m £ ra £

(39)

-f r> -y— V

63
Key:

1. Name of country

2. Korea

3. Philippines

4. Burma

5. South Africa

6. Malaysia

7. New Zealand

8. Indonesia

9. Portugal

10. Trinidad and Tobago

11. Iran

12. Ireland

13. Thailand

14. Pakistan

15. Kenya

16. Zimbabwe

17. Columbia

18. Start of assembly

19. Year (Showa) month

20. Agreement partner

21. Kia Sangyo (Co.)

22. Second Burma Industrial

Ministry Heavy Industry

Public Corporation

9923

CSO: 8129/1327

23. Assembly plant

24. Same as left

25. Same as left and Motor Industries (International), Ltd.

26. Sales company

27. Same as cooperative partner

28. Main cars assembled

29. Boxer, Titan, Bongo

30. Titan

31. Proceed, Titan, Familia,

Capella

32. Capella, Familia, Bongo

33. Capella, Proceed, Familia,

Bongo

34. Capella, Familia, T 3000 (sales

started from November 1983)

35. Proceed, Titan, Familia,

Capella

36. Proceed, Familia

37. Familia

38, Capella, Familia, Proceed, *

Familia truck

39. Titan

40. Familia, Proceed, Familia truck

64
ECONOMIC

FINANCE MINISTRY URGES CUTS IN BUDGET REQUESTS

OW201231 Tokyo KYODO in English 1212 GMT 20 Jul 84

[Text] Tokyo, 20 Jul (KYODO)—The Finance Ministry Friday asked all government agencies to hold down their budget requests for the next fiscal year to

levels lower than the previous year's actual appropriations for the third

straight year.

The request made at a meeting of secretariat chiefs practically set in motion

the preparation of the government budget for fiscal 1985 starting next April.

Yoshihiko Yoshino, director general of the budget bureau, noting an expected

huge revenue shortfall, called for the same sharp cut of 10 percent in principle compared with fiscal 1984 appropriations.

Specifically, he asked for a 10 percent cut in current expenses, a 5 percent

reduction in public investment, and the pegging of social security expenses

at present levels.

He expressed readiness to accept increases in defense spending, economic aid

to developing nations, personnel expenses and pensions as an exception. But

he also demanded such increases be held down to the absolute minimum.

The Finance Ministry wants to get the formal go-ahead for these principles

at a cabinet session on July 3.1.

Indications are, however, that it faces tough negotiations with the agencies

concerned regarding defense spending, social security expenses and public

works spending.

Yoshino said his ministry is even considering amendment of relevant laws, if

necessary, to whittle down appropriations.

He also voiced a desire to cut government subsidies by 10 percent as in the

current year.

However, Masayuki Fujio, chairman of the policy affairs research council of

the ruling Liberal-Democratic Party (LDP), virtually took issue with the

Finance Ministry's policy the same day.

65
Addressing an LDP seminar in Karuizawa, a summer resort, he emphasized that

it is the LDP, and nobody else, that will take the leadership in the preparation of the fiscal 1985 budget.

He specifically leveled his criticism at Toshiwo Doko, chairman of the administrative reform promotion council, who recently denounced a growing call for

an expansionary spending policy. The call is particularly strong in the

government party.

Fujio asserted that Doko, as doyen of Japan's business community, had been

responsible for the circumstances that led the government to issue a huge

amount of national bonds.

Complaints have been heard in the LDP that Doko's council, which is an advisory body, is going too far in demanding a cut in government spending.

Fujio also hinted at the need to raise taxes to overcome a fiscal crisis.

He charged the Finance Ministry with predicting a large revenue shortfall

without due reason, and called for positive investment in the development of

science and technology and for road improvement, forest preservation and

flood control. He also proposed tax breaks for investment by all businesses.

CSO: 4100/217

66
ECONOMIC

JAPANESE SECURITIES HOUSES SHOW INTEREST IN PRC

OW220941 Tokyo KYODO in English 0710 GMT 22 Jul 84

[Text] Tokyo, 22 Jul (KYODO)—Major Japanese securities houses are showing

growing interest in expanding securities business with China.

Nomura Securities Co and Daiwa Securities Co have already established representative offices in Beijing.

In addition, Nomura set up the Chinese room on July 1 and Daiwa has recently

started a Chinese group—both to gather information about China and introduce

Japanese enterprises wishing to undertake joint ventures with Chinese capital.

Behind the move lies the effort oy the Chinese Government to modernize its

economy. Along with the modernization program, China has designated special

economic zones in such cities as Shenzhen, Shuhai and Xiamen. Fourteen more

cities were designated in April as areas open to inflow of foreign capital

and technology.

A number of large projects on electric power and cement are being planned

in major cities like Shanghai Municipality and Dalian City as well as in

provinces of Guangdong and Fujian.

These projects call for introduction of Japanese and foreign capital, location of foreign enterprises and technical cooperation with foreign governments

and companies.

Some of the projects are being promoted on a joint venture basis with Japanese

companies.

In fund raising, the China International Trust and Investment Corp issued in

January 1982 yen-denominated bonds worth 10 billion yen (41.15 million dollars) in the Japanese capital market. In August 1983, the Fujian Investment

Business Authority also raised 5 billion yen (20.57 million dollars) by

issuing yen-denominated bonds in Japan.

Further, the Bank of China is reportedly planning to publicly offer bonds for

an undisclosed amount in the near future in Japan.

67
The Japanese securities industry expects the Chinese fund raising here to

become even more brisk in the months ahead.

One analyst said, "There won't be any sovereign-risk lending problem about

China since much of the funds raised here goes to investments in plant and

equipment."

In a related development, more Chinese are coming to Japan to study Japanese

financial and capital markets.

One official at Nomura Securities Co said, "We receive some 10 Chinese

trainees each year."

"They are studying hard about the Japanese bond market and the current state

of Japanese small- and medium-sized companies," he said.

Sanyo Securities Co provides a six-month training for Chinese students. "They

are studying the banking and securities businesses as well as the mechanism

of foreign exchange transactions," a Sanyo official said.

"We are unable to fully accept Chinese trainees as their numbers are growing

recently," he added.

No doubt interest in China is growing among Japanese companies and investors.

The Shanghai seminar, sponsored recently by Nomura in Tokyo, Osaka and Nagoya,

for instance, could not accommodate all the visitors.

A reported scheme to establish a stock exchange in China also drew attention

from Japanese investors and the securities industry.

A top official of the China International Trust and Investment Corp reportedly

said recently it would be necessary to set up a stock exchange to raise funds

needed for large projects.

The Japanese securities industry will step up its efforts to approach China

even though the scheme may be a "dream in the future," according to an industry executive.

CSO: 4100/204

68
ECONOMIC

KEIDANREN PROPOSES NEW COMMUNICATIONS SERVICE

OW250105 Tokyo KYODO in English 0055 GMT 25 Jul 84

[Text] Tokyo, 25 Jul (KYODO)—A new communications firm to be set up after

liberalization of domestic communications service from next April should use

both overland and satellite communications circuits, according to an interim

report now being drafted by a committee of the Federation of Economic Organizations (Keidanren).

Domestic communications are now monopolized by Nippon Telegraph and Telephone

Public Corp (NTT), but NTT will be switched to private ownership from next

April when participation in domestic communication service will become free

under a set of laws now before the Diet (parliament).

Keidanren's data communications committee thinks that optical fiber communication or microwave communication circuits should be set up for the main

circuits linking Tokyo and Osaka via Nagoya, while satellite communication

links should be formed to cover other areas, Keidanren sources said.

In addition, the committee thinks, optical fiber and other circuits should be

established as access circuits to link users with the main circuits.

The new firm's services should be limited to telephone and leased line services initially. Value added network (VAN) and international communication

service should be left to further study, according to the committee.

Keidanren plans to complete the interim report late this month and a final

report in October, the sources said.

Already, four groups have revealed plans to set up what is generally called

a "second NTT" upon liberalization of domestic communication service next

April. They are, besides Keidanren, the Kyocera Corp Group, the Construction

Ministry-Japan Highway Public Corp Group and the Japanese National Railways

(JNR) Group.

Keidanren intends to adjust—and possibly unify—the plans of the four groups

according to its plan for using both overland and satellite communication

circuits in order to prevent excessive competition, the sources said.

CSO: 4100/195

69
ECONOMIC

ECONOMIC SURVEY PREDICTS EXPORTS GROWTH

OW251157 Tokyo KYODO in English 1025 GMT 25 Jul 84

[Text] Tokyo, 25 Jul (KYODO)—Backed by growing exports to the U.S, leading

Japanese traders are expecting a 6 percent rise in exports this year, the

Economic Planning Agency [EPA] said in a survey Wednesday.

The survey, covering 32 trading houses and one automaker, also said Japan's

imports this year would increase 5 percent from 1983.

Exports by the 33 traders, covering some 60 percent of Japan's total exports,

were up 4.8 percent in the first quarter from a year before and are expected

to rise 2.9 percent in the second, decline 1.1 percent in the third and go

up 3.5 percent in the fourth, it said.

Exports of machinery, accounting for nearly 70 percent of the total, will

rise 7.4 percent this year but those of textile and steel will go down 3.5

percent and 0.5 percent, respectively, the survey said.

Exports to the U.S., making up 25 percent of the total, will soar 17 percent

in 1984, those to Europe, will be up 10.3 percent and those to Southeast

Asian countries up 5.5 percent, but those to other regions, including African

and Middle East countries, will go down 0.9 percent, the survey said.

The traders' imports, covering some 70 percent of Japan's total imports, were

unchanged in the first quarter, are expected to delcine 2.7 percent in the

second, will be up 0.5 percent in the third and up 0.8 percent in the fourth.

The survey, on a yen and customs-clearance basis, does not include videotape

recorders, integrated circuits and other light electric machinery, EPA

officials said.

CSO: 4100/193

70
ECONOMIC

BRIEFS

TOYOTA SERVICING IN PRC—Nagoya, 9 Jul (KYODO)--Toyoda Tsusho Kaisha Ltd, a

trading company dealing largely in Toyota Motor products, is to set up a

joint Toyota servicing company in China's Guangdong Province, a Toyota spokesman said Monday. The joint venture, to be owned 49 percent by the Toyota

group and 51 percent by Guangdong provincial authorities, will be established

in mid-August in Shenzhen City, he said. The company will carry out checks,

tuning and repairs for Toyota vehicles, whose sales are increasing in China.

Some 4,200 Toyotas were exported to China in calendar 1984. Toyota service

centers have already been established in Beijing and Guangzhou, and a Toyota

sales subsidiary in June set up a joint venture servicing company also in

Shenzhen, the spokesman said. [Text] [OW100623 Tokyo KYODO in English 1127

GMT 9 Jul 84]

PRC TECHNICAL KNOWLEDGE TRANSFER—Nagoya, 13 Jul (KYODO)—Aisan Industry Co,

Japan's third largest engine valve maker in the Toyota Motor Corp, has initialed

a 500 million yen (2.1 million dollars) contract with China to help it in

diesel engine valve production, a company official said Friday. According

to the contract, Aisan Industry will provide the China National Technical

Equipment Corp with production facilities, special metal materials and production and quality control know-how on engine valves for diesel locomotives,

the official said. The Chinese corporation will start production at its

Chishuyen Locomotive and Rolling Stock Works in Jiangsu Province next year.

Production volume is expected to reach 50,000 pieces a year, according to

the official. It also plans to produce engine valves for diesel-engine

trucks in the future, he said. [Text] [OW160307 Tokyo KYODO in English 0555

GMT 13 Jul 84]

YEN INTERNATIONALIZATION PANEL—Tokyo, 24 Jul (KYODO)—A panel of government

advisers Tuesday started discussions on the controversial issue of further

internationalizing the yen with the aim of submitting recommendations to Finance Minister Noboru Takeshita within a year. High on the agenda of the

Foreign Exchange Council, an advisory organ to the finance minister, is how

to proceed with yen's internationalization in relation with Japan's capital

and financial markets and ways to liberalize Euroyen-based lending to businesses for a period of more than one year, now prohibited by the Finance Ministry. Japan and the United States recently agreed on Japanese steps to

internationalize the yen, but concrete measures are to be ironed out after

the ministry receives recommendations from the council. At Tuesday's meeting,

71
Hajime Yamada, president of the Federation of Bankers Associations of Japan,

called for [word indistinct] in liberalizing Euroyen-based lending for a

period of more than one year and Euroyen bonds. But Setsuya Tabuchi, president of Nomura Securities Co, supported the further internationalization of

the yen, saying there is no more need to prohibit Euroyen-based medium- and

long-term lending. [Text] [0W241229 Tokyo KYODO in English 1205 GMT 24 Jul

84]

YEN SPECULATION—Tokyo, 24 Jul (KYODO)—The Bank of Japan Governor Haruo

Maekawa Tuesday indicated willingness to join other central banks in countering speculative attacks on the yen. Maekawa dropped the hint during an

opening speech at a two-day meeting here of the bank's regional branch chiefs.

The governor said his bank would act quickly and explore all possible ways,

keeping a close eye on other major countries' moves, the situation overseas

and market trends. His remarks were taken as indicating an intention to

intervene in the foreign exchange market in a concerted effort with the central banks of the United States, West Germany and other countries. Maekawa

blamed the U.S. dollar's continued rise in value against other key currencies

on "huge" U.S. budget deficits and the acceleration in the U.S. economic recovery. The deficits staying at record levels and the economic recovery

gathering speed at a heady pace are fueling speculation U.S. interests rates

would rise further, he noted. The dollar's appreciation could have a serious

impact on the economies of other countries, notably debt-ridden developing

nations, he warned. [Text] [OW240639 Tokyo KYODO in English 0554 GMT 24 Jul

84]

MITI REHABILITATES CEMENT INDUSTRY—Tokyo, 1 Aug (KYODO)—An advisory body of

the Ministry of International Trade and Industry Wednesday approved a basic

plan to rehabilitate the deficit-ridden cement industry by cutting back excessive facilities and forming corporate groups, MITI officials said. The

structural improvement scheme said the cement industry should scrap 23.3 percent of its current production facilities, totaling 129 million tons in output, by next March 31, the officials said. A total of 22 cement firms will

start forming five business groups from September 1 under a facilities disposition cartel arrangement and avoid excessive competition and cut production

costs, they said. Damaged by decreased fiscal spending on public works projects, the cement industry formed an antirecession cartel last year but suffered a combined loss of 8 billion yen (32.7 million dollars) in the business

year ending last March. [Text] [OW011143 Tokyo KYODO in English 0911 GMT

1 Aug 84]

YAMAZAKI MACHINERY BRITAIN PLANT—Nagoya, 23 Jul (KYODO)—Yamazaki Machinery

Works Co, a leading numerically controlled (NC) machine tool maker, Monday

announced it will establish an integrated plant for machine tools in Worcester,

Britain, to start operating around March 1986. Its decision to make inroads

into Europe came after the European Community (EC) Commission gave a go-ahead

to the British Government to extend its flexible manufacturing system (FMS)

subsidy equivalent to about 24 percent of the 8.5 billion yen (35 million

dollars) plant, Yamazaki officials said. He Japanese maker, based in Aichi

Prefecture, will start construction this October. The new plant will produce

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some 60 NC machine tools and machine centers monthly, and will employ some

200 local people, the officials said. It will be the first time a Japanese

machine tool maker builds an integrated plant in Europe. Yamazaki has a

similar plant in Kentucky, the U.S. Yamazaki plans to export some 80 percent

of its products at the British plant to other EC countries, they said.

Keiichi Konaga, vice minister of the Ministry of International Trade and

Industry (MITI), welcomed the Yamazaki plan, saying it would promote industrial cooperation between Japan and Britain. [Text] [0W231307 Tokyo KYODO

in English 1039 GMT 23 Jul 84]

BUDGET REQUEST GUIDELINE WELCOMED—Tokyo, 31 Jul (KY0D0)—Top business leaders

Tuesday welcomed guidelines approved by the day's cabinet meeting for fiscal

1985 budgetary requests, appreciating the government stance to stick to a

policy of reconstructing state finances without a tax hike. Bunpei Otsuki,

president of the Japan Federation of Employers' Associations, however, said

he regretted a series of remarks by politicians who ignored the severe financial situation by calling for expanded guidelines. Yoshihiro Inayama, chairman of the Federation of Economic Organizations, wished the government to tackle

further cuts in budgetary expenditures while compilation of budget. Hosei

Hyuga, chairman of the Kansai Federation of Economic Organizations, in a

statement said he appreciates the austere guidelines like the current fiscal

1984 budget. [Text] 0W310533 Tokyo KYODO in English 0519 GMT 31 Jul 84]

MITI INFORMATION, TECHNOLOGY ADVANCES—Tokyo, 30 Jul (KYODO)—The Ministry of

International Trade and Industry informed the industrial structure council

Monday that it is planning to establish two new laws for promoting technological development and information services, officials said. MITI will seek

approval of the council at its next meeting on August 27 and ask the Finance

Ministry to take budgetary measures in fiscal 1985 starting next April,

officials said. MITI explained at the council meeting that it is vital to

compile the nation's medium- and long-term plans to extend financial support

for development of new materials, biotechnology, microelectronics and other

highly advanced technology, officials said. MITI also considered that promotion of information services, including development of data base, protection

of computer software and security measures to guard computer data, is vital

for the country and needed legal support, officials said. Touching on Japan's

energy policies, MITI said it would try to increase oil stocks, diversify

oil import sources, promote the proposed nuclear cycle base plan and explore

ways to secure supplies of rate metals in the new fiscal year, they said.

[Text] [OW301207 Tokyo KYODO in English 1159 GMT 30 Jul 84]

CSO: 4100/192 END

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