JPRS ID: 9989 JAPAN REPORT

• Document Type: CREST
• Collection: JPRS
• Document Number (FOIA) /ESDN (CREST): CIA-RDP82-00850R000400050039-0
• Release Decision: RIF
• Original Classification: U
• Document Page Count: 41
• Document Creation Date: November 1, 2016
• Sequence Number: 39
• Content Type: REPORTS

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JPRS L/9989
17 September 1981
Ja an Re ort
p p
cFOUO 55is1~
~ FB~$ FOREIGN BROADCAST fNFORMATION SERVICE
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JPRS L/9989
i7 September 1981
_ JAPAN R~PORT
(FOUO 55/81)
CONTENTS
SCTENCE AND TECHNOLOGY
Toyota Group Unifies, Prepares for Competition With GM
(NIKKEI BIJINESU, 29 Jun 81) 1
U.S,-Soviet Confrontation Over Yamburg Pipeline Project
(Susumu Ohashi; TOYO KFIZAI, 1 Aug 81) 23
New Developments in Biotechnological Industry
. (Various sources, various dates) 27
Maruzen ~il Co
Sumitomo Chemical Co
Hayashibara Biochemical Laboratories
- Society for Plant Breeding Technology
Yakult Honsha Co
Titanium Indus~ry Plannir.~ for Expansion
(YQahihiro Iinuma; TOYO KEIZAI, 1 Aug $1) 33
- a - [III - ASIA - 111 FOUO]
r!AT Af~nl/'~~ ~ ~ �~/YO+ /~lli
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SCIENCE AND TECHNOLOGY
TOYOTA GROUP UNIFIES, PREPARES FOR COriPETITION WITH GM
~ Tokyo NIKKEI BIJINESU in Japanese No 295, 29 3un 81 pp 40-50
[Article: "Unification of Toyota Motor and Toyota Sales Is a Gamble"]
[Text] As the worldwide campact car warf ~e unfurl,, the
Toyota Group hae f inally begun a move to intercept GM~
Changing its former image as a"Bank of Toyoda," each
aff iliate of the Group has initiated bold equipment invest-
ment.
~
The changing of the presa.dent of Toyota Motor Sales Co Ltd
[hereafter, Toyota Sales] is aimed at reinforcement of a
sales force that would support its positive measurPS. But,
�he possibility of this gamble succeeding is not a~l that
certain.
The cohesiveness of the aff ilistes is so strong that it is
hindering the development of international stategies. Is
it possible [for Toyota] to succeed in overseas prodUction~ ~
in the United States and Europe while solidi=ying ~ts
stronghold at home?
With Shoichiro as the [NewJ President~of Toyota Sales, Toyota Is Ready for Small
Car Warfare
Even on a rainy day, from the e~:ecutive suite of Toyota Sales, one can see in the
direction of Suidobashi, the Tokyo office of Toyota Motor which has just undergone
a roof -laying ceremony. Indeed, it is within hailing distance. The building is
expected to be completed next spring. The executives of Toyota Sales expect much
f rom Shoichiro Toyoda who will be~ome their new president. They are hopeful that
"since the distance between the office of Toyota Motor and Toyota Sales will be
shortened, the relationship between r.he two will also be corrected so tha~t if we
were to yell we would get an immediate response."
On June 29, Shoichiro Toyoda, the prince of the Toyoda family, became the new
president of Toyota Motor Sales, moving laterally from his former position as a
vice president of Toyota Motor. The first step toward a"closer relationship" be-
tween Toyota Motor and Toyota Sales was thus taken. This drama of change created
various speculations and took the insiders and outsiders by surprise since
Sadozo Yamamoto, the former president of Toyota Sales, was dismissed after serving
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only one term, or 2 years; it was "as if an aircraft was forced to land while
coasting at an altitude of i0,000 meters" (according to an executive of Toyota
Motor Sales). President Eiji Toyoda of Toyota Motor emphasizes that the change
"was not a matter of dispatching personnel. Sales wanted Shoichiro and we judged
that the change would be a plus for the entire Toyota Group." Chairman Masayuki
Kato of Toyota Sales also conf irms that it was "Sales that initiated the change."
Frustration Due to Decline in Share
The general view of Toyota Motor and Toyota Sales is that "this [change] will iun-
prove communication between the two." (Shin'ichi Kanda, vice president of To}*ota
Motor Sales). The relationship between the two companies has been awkward during
the past several years. It was partially due to the fact that Taizo Ishida and
Shotaro Kamiya who had been mainstays in the post-war development of both companies
resigned from the frontlines and passed away at~~about the same time. While the
rival manufacturer, Nissan Motor Co Ltd, has slightly increased its share of
domestic sales by making its "technology" a selling point and has been aiming to
restore its 30 percent market share, Toyota has seen its share drop to the 40 per-
~ cent level after it reached its ~highest r ate of 40.4 percent in 1974. Its share
kept declining point by point. Although it recovered slightly in 1978, it again
declined so that last year` s rate of 37.3 percent was the second lowest i.*? the past
10 years. However, May sales brought the rate up to the 40 percent level for the
' first time in a long time, indicating a big change.
According to Toyota Motor Sales [the cau se of this dPCline in sales] "comes from
the inability [of Toyata] to produce merchandise which can overcome the slack in
_ domestic demand." On the other hand, th e frustration of Toyota Motor lies in "the
inability of Toyota Sales to catch the market trends as soon as they surface and
transmit such data quickly to Toyota Motor." Chairman Shohachi Hanai of Toyota
Motor is of the strong opinion that "the present share is not satisfactory" and
that [Toyota] "should solidify its management structure by regaining the 44 percent
market share."
In addition, in terms of the world market, Japanese auto manufacturers have become
the targer. of criticism since the rapid gr owth of Japanese cars in the United States
and Europe has said to have contributed to the increase in unemployment there. As
a result of the settlement of the U.S.-Ja panese automobile export issue at the
beginning of May, Japan had no choice but to restrict voluntarily its auto exports
to the United States from 1.82 million car s in 1980 to 1.68 million in 1981.
Japan's auto exports have thereby fallen into an era of decline. Coinciding with
this, the "J-car," developed with the full force by the world's largest auto manu-
- facturer, GM, as its "advance scout" in the international small car warfare,
appeared on the U.S, market in mid-May and soon its production as the "world car"
in Gri's overseas subsidiaries will start.
"[The question has been] how would GM and Ford transf orm themselves by the 1980's.
For us to survive we need to strike first. For 3 years Ueginning in f iscal 1981 we
will invest a total of 1 triliion yen f or rationalization of equipment and R& D
of small cars" (chairman Hanai). This policy applies consistently to such aff ili-
ates of Toyota Group as Toyoda Automatic Loom Works Ltd, Toyoda Machine Works Ltd,
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Toyota Auto Body Co Ltd, Aishin Seiki Co Ltd, and Nippondenso Co Ltd:, all of them
are active in making equipment investment. The 1981 investment plan of Toyota
Motor itself is 280 billion yen; however, it is certain that the investment for
the entire Group will reach a giant scale of 600 billion yen.
"To See Toyota Motor and Sales on Equal Footing Is a Mistake"
tJh~.le the affiliates are all involved in reinforcing their structure in preparation
for the competition with GM, Toyota Sales cannot alone sit idly by. It would then
seem true that chairman Masayuki Kato of Toyota Sales took the initiative in invit-
ing Shoichiro Toyoda to become the new president by saying "now is a rare oppor-
tunity f or us to enhance the sense of unity between Toyota Motor and Sales inasmuch
as the entire Toyota Group is taking a positive step forward." flowever, when we re-
view the movement of the past 4-5 years, although the core structure comprised of
Ei~i Toyoda-Masayuki Kato-Shohachi Hanai is solid, the reinforcement of the dominant
position of Toyota Motor over Toyota Sales has become even stronger.
There ha.s always been not a few among the executives of Toyota Motor who would
openly denigrate Toyota Sales as "a sales department." For example, the percentage
of the share held by Toyota Motor, a tnaior shareholder of Toyota Sales, has in-
creased from 38.9 percent in March of 1976 to 44.;L percent in March of 1981.
During this period total capital increased from 16.9 billion yen to 23.6 billion
yen due to capital increase [of shares] issued at market prices and gratuitous
capital incr~ase of premium restoration. In addition, the shares held by aff iliates
of the Group were transferred to Toyota Motor 'and a considerable amount of sha.res
were purchased on the open market. The capital assistance from Toyota Motor to
Toyota S~les which was not considerable during the Kamiya era increased rapidly in
the form of sales commissions as incentives to dealers. This has reached the scale
of 50-60 billi.on yen, resulting in the loss of independent status of Toyota Sales.
Althaugh it is said that "[incentives] are appropriated as 'dealers' help,' there
is a trend toward reduction of the same so as to maintain order in the market,"
(Gentaro Tsuji, executive director of Toyota Motor), the normal relationship of
this sort would be that once money is off ered it talks.
During the era of Ishida-Kamiya, the relationship between Toyota Motor and Toyota
Sales was well coordinated like the wheels of an automobile and equality bet~~iPen
the two was maintained. The fact that Toyota Sal.es was given special treatment
among the Toyota Group, whose central role is played by Toyota Motor, was due to
the presence of Mr Ka.miya who was considered "god of sales." When the pressure of
Mr Kamiya was eliminated, it was easier f or Toyota Motor to say what it wanted to
Toyota Sales, The "tragedy" of the former president, Yamamoto, began when he
expected an equal relationship [with Toyota Motor] even after Mr Kamiya had passed
away. Chairman Hanai affirms that "there is a constant awareness among the execu-
tives to make Tyota Sales better and on closer terms with Toyota Motor; however,
it is a mistake to feel that the two are on a same footing."
Demerits of Separation Are Surfacing
Within the Group, Hino Motors Ltd and Daihatsu Motor Co Ltd have the. position of
tie-up companies. Like Toyota, both had separate manufacturing and sales
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divisions, but on July lst Daihatsu decided to merge them. Originally the divi-
sions were not separate but on the occasion of the tie-up with Toyota in 1967,
the two were separated. As a result of this trial and error, Daihatsu has returned
to its former structure.
What promoted the merger was the statement that "r~ increase knock-down exports,
there are limits to how much we can rely on sales alone" (Ohara, president of
Daihatsu). Inasmuch as Ohara is the product of Toyota, he could not have taken
this step without their consent. As for the other tie-up company, Hino Motors,
President Seiji Arakawa observes the situation rather baldly as follows: "[The
merger] was a result of Daihatsu's special circumstances. Hino has had separate
divisions f or the past 30 years. This is because the trucks require a sales
structure that is closely connected to the users. What can be said is that since
Toyota has numerous small dealers, it is not impossitile to interpret Daihatsu's
[merger of the two divisionsJ as a kind of a test case."
With the promotion of Shoichiro as the new president of Toyota Sales, President
- Eiji of Toyota Motor has, a*_ least for now, denied~:the possibility of a merger
between the manufacturing and sales divisions, saying "In the past there were
merits in separating the two and it is possible to ma~nage them so as to produce
merits in the future." But he does not categorically deny the possibility of a
merger: "Should the relationships between the two divisions produce only demerits,
then we should not waste our time in merging."
When the sales and manufacturing separated in 1950, it was not the intent of Toyota
Motor; it was done in an effort to revitalize Toyota Motor which was on the verge
of bankruptcy. The merits of the split were that the sales company could 1) help
- dealers grow, 2) procure sales capital, and 3) gather data on product development.
With this, the manufacturing side could concentrate on production. The fact that
Toyota grew to be the most profitable enterprise in Japan attests to the merit of
such a split.
Recently, however, demerits have surfaced. Within Sales, there is a voice of
criticism: "The two companies cannot coordinate their moves. Increasingly they
tend to lose their timing in determining their intents. It is doubtful whether
[Sales], interposing itself ~etween the users and dealers on one hand and Toyota
Motor on the other, is gathering appropriate market inf ormation. Despite the fact
that the automobile industry has entered an important phase in world market
strategy, as against GM's 'world car,' there is a feeling that [Sales] in the over-
seas market is too busy trying to sell the cars and has time only for handling
product claims. The collection of data for world market strategy is at the moment
impossible." In this manner, there are many who would question the role of [an
independent] sales company.
The New Structure To Restore the Relationship
As Go Oshima, managing director of Toyota Motor Sales looks back--"among the
executives, those who once shared the same messhall are no highPr than where I arn
' now"--the age has come in which the majority of the rank-and-file of board and
division directors are those who have always been with Toyota Sales. It is said
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that up to 1959-60, [SalesJ division directors and assistant directors were
temporarily assigned [to Motor] so that exchange between the two was active and
there was no problem in understanding each other. It is said that the greatest
problem lies in the fact that the first generation of Toyota Sales people retired
and the wofk is now in the hands ~f those who do not realize the Toyota Motor-
Toyota Sales relationship. The pre.;cription is there to remedy this situation:
"In order to esta'-,~.sh better communications between Toyota Motor and. Tayota
Sales, we must promote more personnel exchanges." The question is how to enforce
it. ~
The program of personnel exchange is about to be consolidated. In 1978, a mutual
dispatch of section managers started. Presently, one person to Toyota Motor and
three persons are sent to Toyota Sales. The three dispatched to Toyota Sales
are specialists in QC (quality control) and their duty is to inctill quality con-
trol within Toyota Sales and among its dea.lers. Also, a joint study program for
new employees and new assistant directors started about the same time and this
year a similar program f or~~new directors of Toyota Motors and Sales are put into
effect. This sudden active exchange of personnel is a reflection of the sense of
crisis which Toyota faces in the worldwide stnall car warfare; unless Toyota Motor
_ and Sales are in unity, this crisis cannot be overcome.
With a return to a low-growth period, the relationship between Motor and Sales be-
came clouded; however, for the time being, the proposed new structure is intended
- to restore the strained relationship between the two. At present when the mana.ge-
ment ability of the new preside~at, Shoichiro, is being questioned, the answer to
the question of whether the new structure will be a plus or minus f or the Toyota
Group cannot be given immediately. The sa.le of automobiles, aside from the capa-
bility of top management, is strongly af~ected by autside factors; therefore, it
is also true that among the executives of the Toyota Group there are those who
doubt "whether the present situation requires the playing of their trump card
[i.e., Shoichiro]." Should demerits incr.ease, traen it may be tha.t Toyota Sales
will be absorbed by Toyota Motor, without having the opportunity of restoring the
~ reins to the prince.
The hi,hest organ of mutual exchange among the Toyota Group is the "Asa-no-kai"
[Morning Group] which is comprised of 14 major companies with Toyota Moto~ Co
Ltd at the center; they include Toyoda Autamatic Loom Works Ltd, Aichi Steel Works
Ltd, Toyoda Machine Works Ltd, Toyota Auto Body Co Ltd, Toyoda Tsusho Kaisha Ltd,
Aishin Seiki Co Ltd, Ninpondenso Co Ltd, Toyota Motor Sales Co Ltd, Toyoda Spin-
ning and Weaving Co Ltd, Kanto Auto Works Ltd, Towa Real Estate, Toyoda Central
Research Center, and Toyoda Synthetics. There are also the "Kyoho-kai" (172
firms) comprised of parts-related manufacturers, the "Seiho-kai" (we f irms), a
group of molding and gauge manufacturers, and the "Eiho-kai" (37 firms), a group
of facili~y and construction campanies, all of which are cooperative companies of
Toyota. In addition, Hino Motors Group and Daihatsu Kogyo Co Ltd are considered
as tie-up companies.
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llelayed International Strategy: As a Result of Thorough Efficiency Measures,
Toyota Must Now Think Twice About "Cost Hike"
"Toyota Group cannot get bigger than it is now. The~ say it has no ou~standing
loans, but tha.t is because it has had no other choice. This has at tt~e same tim~
made it incapable of taking gambles. But it's alright since it has enjoyed the
best of life over the past 10 years." Even a taxi company operating in the Mikawa
district of the Toyo~a "c~:stle town" is under the influence of Toyota. I was, sur-
prised to hear from the taxi driver such a clearcut analysis of the essential
quality of Toyota as that above. It would seem that even ~.he Toyota Group which
has established itself on three pillars of management-- people, material, and
- money"--which succeeded particularly in revolutionizing the awareness of its
"people," has a blind spot.
As the international small car ~aarfare intensifies, it is the common view of the
executives of the industry that the exports of finished automobil~es will becom~e
diff icult in the future. However, when it comes to export strategies f or various
European countries and the United States for which two-thirds of exports are now
consigned, each company shows different approaches. Presently, N'issan Motor is
surging ahead colorfully; it t~~s begun constructing a small truck pTar.t in ~t~ie
Unit~d States, and in Europe it plans to establish joint production with Alfa
Romeo and produce small cars with Volkswagen. Honda Motor too, is ~,oving to~ward
production of automobiles in the Un~ted States.
Toyota Is Oppos:Lte of Nissan and Honda
On the other tiand, Toyota's move is opposite that of the above two campanies.
Although last July it lavishly launched a plan to form a joint ventur~e company with
~ Ford, the later negotiations receded greatly from the original plan and it now
appears that an immediate solution is unl~kely. Although managing diree~or
= Tsuji of Toyota Motor says, "Indeed Nissan's moves in the past several yea.rs have
been lavish, but in terms of ~he overall past overseas strategy, Toyot~'s were
far more advanced," it is not a convinci.ng st-atement. Furthermore~ '~oyota is in-
volved in knock-down production in 15 countries including Indonesia, Aus~;:aiia,
Thailand, and the Philippines; however, as chairman Ka.to of T~yota Sales notes,
"in all of these, except Brazil, it was with the leadership of Toyota Sa1es that
overseas productions were started"; in other words, in almost no cases was
Toyota Motor itself forced to make decisions.
Tlie cause of Toyota's delay in overseas ventures seems, ironically enough, to lie
in ~*s production system which is pervaded by utmost devafiiczn to effici~ncy. Tak-
ing Toyota Motor alone, for example, 5 of 10 of its plants are concentrated in
Toyoda City where the headquarters are located. At som.e distance from Toyoda are
the newest plants, Iura (in Hekinan City) and Tahara (in Tahara-machi, Atsumi-
gun). Al1 of the plants are located in the Mikawa area. Five companies manu-
Facturing automobile-related products, but not Aichi Steel Works, Kanto Auto Works,
and Toyoda Synthetics, have ~heir headquarters and main plants in Kariy~a, a dis-
tance of 30-40 minutes by car f.rom Toyota headquarters.
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If It Doesn't Pay To Build Cars in America
As Taichi Ono, president of Toyoda Spinning.& Weaving and Toyoda Synthetics
observes, "Nissan missed a chance to make money," the source of Toyota's power
is that all aff iliates of the Group "lived" together, rubbing each other's
shoulder, in a small area and earnestly tackled the problem of cost reduction.
Since the f irst oil shock i.n 1973, Toyota Motor has, while reducing its own pro-
duction volume, sent parts and assembly works to all aff iliates. Contradicting
Ono's statement that "Toyota intentionally promoted the strengthening of its
forces and as a result, gained much strength," it became difficult for Toyota to
go abroad.
For example, is it possible for Toyota Motor alone to make an advance in the
Jnited StatES? It is said that production cost in Australia is now 2.5 times
that of Japan. Eben with Nippondenso close by, the production costs are rising.
In the United States, a further cost hike is expected. If Toyota were to produce
200,000 cars a year ir, the United States, it would mean that that much less must
be produced at home. This will not only result in reduction in production of
Toyota Motor but also those of final assemblers, Toyota Auto Body, Toyoda Auto-
matic Loom Works, Kanto Auto Works, Hino Motors, and Daihatsu.
Furthermore, such parts manufacturers as Aishin Seiki, Nippondenso, Toyoda Machine
Works, Toyoda Synthetics, Toyoda Spinning & Weaving must also reduce production.
Even Nippondenso, which is one of the more independent members of the Toyota
Group is also cautious: "We have no international strategy independent of
Toyota Motor"~(President Sakan Hirano). The system is so structured that only
after having secured a f~ed volume of production under the umbrella of Toyota
Motor, the aff iliates will find other work. It can be said that the structure has
become such that reduction of production by Toyota Motor will directly affect the
entire Group.
Regarding the negotiations with Ford for a 50/50 joint venture, it was Toyota that
threw the first ball. The negotiations, however, h.ave toned down: "In the nego-
tiations we will choose a way which has merit to both parties" (President Eiji
Toyc~da). How the talks will end is foreseeable, There is the view that "purely
in terms of economics, the production in the United States will not pay. The
question is whether we can win over the weeping boy [i.e., MITI] and the vassal
[GM]" (Chairman Hanai). In this sense, Toyota's move into the United States will
not appear as something smart or chic as one would expect from a project that is a
part of an international strategy. It will most likely remain a well calculated
"Mikawa style" move, designed to save the faces of MITI and GM without suff ering
any losses.
Priority In Production Technology: Toyota Shows Comprehensive Force but Lacks
Universality
"Although car elecrronics and microcomputers and turbo are considered the ~ost ad-
vanced automobile technologies, there are those, not all, who use technology to
improve their image and users, too, who pay for these [technologies] as 'car
fashion."' Perhaps overly conscious of Nissan Motor, whose selling point is
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"Technology of Nissan," Executive Director Masatoshi Morita of Toyota Motor ttaus
emphasizes that the mainstream of automobile technology lies elsewhere. However,
since Toyota's la.test luxury car, "Soara," is a di~ital car, which is surprisir~g
for a conservative car manufacturer such as Toyota, and since it is making sales
_ pitches e~:phasizing the digital aspect the above statement must be qualified.
Today, [Japan's] automobile technology in competing with GM's strategic sma.ll
cars, puts great store on the development of engines with high ftiel eff ici~ney,
FF (front engine and front wheel drive) cars, and full use of car electronics. P1~'1
o~ these can become weapons for producing small and lightweight cars. Up tp r~crw
and worldwide, the ratio of investment in research and development to ov2ra11
sales was 3 percent; Toyota's ratio, however, "has exceeded 3.5 percent rece'ntl;'"
(Executive Director Motita). In fiscal 1981, investment in the development af n~e~w
~ products, including safety and energy saving measures, has reached 16 mil3ian yen,
of the tota~ 28 billion yen set aside for equipment investment. If ar~ e~q~aiptn~nt
investment plan exceeding 30 billion yen a year were to continue for the next 3
years, there is a strong possibility that investment in R& D will ~oon :.eac~. a
5 percent level.
"Branch Factories" Have the Fund Raising Ability
Automobile technology is facing a turning point worldwide. Herin lies t'he need
for large investments in R& D. Executive Director Tsuji analyz~s [the Ail~erican
situation] in terms of finances: "When we compare our selves with GM and Ford,
their domestic production rates are high. This is the bottleneck limiting their
ability to raise capital. They would be unable to spare muc'h for deve3opment pur-
poses." In this respect, Toyota is about to display the Gr~oup's full force in
technological development as well. It is said that GM`s d+omes~.ic pr~oduction rate
has reached 70 percent. As for Toyota, "if each affiliate of thP Gr~up is re-
y
garded as a branch factory, its rate will also exceed 60 percent. Since these
branch factories have their own fundraising ability, a quic~ response [to any
situation] is possible" (Executive Director Tsuji).
Although the engine proper will be developed by Toyota Motor, since "one-third of
all models will be coFrverted to FF system in the next 2-3 years," (Executive
" Director Tsuji), Aishin Seiki will specialize in the development of transmis~ions.
In addition, Aishin will be responsible for electronic-controls for brakes and
the transmission system. Nippondenso is responsible for electronics comprising
the core of engine control. As President Hirano of Nippondenso boasts-- In car
electronics at least our technology is superior to that of Toyota Motor"'-ICs ~
and microcomputers produced by Nippondenso are incorporated into the digital indi-
cators of ineasuring equipment and used to improve emission controls and fuel
efficiency.
Production Technology Ba~ed on Reliance on Men
In producing J-cars, GM has introduced not only robots but also Japanese-stple
production technology. In this way its aim is to reproduce "strong American cars."
Executive Director Morita observes that "competitian [with America] will not be
simply one of development of technology but also of management ~tyle in terms of
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technology incorporating production technology, production [personnel], and
affiliates of the Group." In this respect, Toyota Motor, which succeeded in
restructuring the awareness of its "men" based firmly o~l "Toyotaism," has an
advantage. The superiority of the Toyota Group has been maintained mainly on the
basis of its production technology.
Huwever, as the characteristic of the Toyota production system is one of "single
nationality.type enterprise," limited to a small area of Mikawa, its production
technulogy, too, relies heavily on "men." Accordingly, its weakest point is its
~ lack of universality. Chairman Ono of Toyoda Spinning & Weaving and Toyoda
. Synthetics admits this defect when he observes, "We probably wi~l not do well in
the United States. If we are to mo�~e into the United States, we must adopt the
production system of the United States." At present, the utilization of robots
is limited to painting and welding. Although automation and labor reduction in
production of parts and processing are being ma.de, the final assembly still relies
a great deal on manpower.
In m~ving into the LTnited States, it is necessary to consi.der a production system
which is not influenced by the quality of labor. It means that "Toyota must take
with it a facility which is superior to that found in Mika~aa" (Chairman Kato of
Toyota Sales). To a certain extent, this means a conversion to an equipment
industry-like manufacturing facility, and there will be a demand for plant engineer.-
ing technology, in addition to development and production ~echnologies. In this
sense, even from the standpoint of technology, Toyota's advancement into the
United States is "no easy task"; we can see why it is hesitating.
The Return of the "Toyota Bank": One Trillion Yen To Be Invested in 3 Years;
Funds to Be Procured Through Stock Market and Banks
.
Finally the aff3liates of the Toyota Group have the opportunity to spend the great
deal of the money they have saved up. Not only that, it w~uld now.seem that they
ha.ve to procure additional large sums of capital from the stock market and banks.
This is because, GM's worldwide small car strategy will be completed in 1983 in-
stead of 1985 as was expected. In response to this [Toyota] had to complete its
equipment investment in 3 years instead of 5. Starting with this year's 28 billion
yen equipment investment, it will invest a total of 1 trillion yen in 3 years.
This equipment investment represents an annual average of more than 30 billion yen,
or 3 times the 11 billion yen average of the past 5 years.
At the press conference which took place in mid-June, President Eiji Toyoda of
Toyota Motor explained that in preparation f~r the full-scale sma11 car wa.rfare,
and in order to radically increase equipment investment, the company has decided
to issue its shares (70 mi_llion shares) at the market price; the issue represen.*_s
the largest one of its kind by a Japanese enterprise. Although he half jokingly
called f or the cooperation of his audience, he probably showed his true colors.
After the first oil shock, the policy was to strengthen the ~anagement structure
and save as much as possible. There is now a stronger need to go into raising
- capital, which costs less and is more advantageous.
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"Premature Accounting" Is Subject to Stock Prices
Cash flow (derived from deducting outside expenditures from the total of deprecia-
tion and profits) indicates the amount of capital which an enterprise produces
through its business activities. In the case of Toyota Motor, for. the period of
- June 1980, its total depreciation was 105.6 billion yen and profits after taxes,
143.5 billion yen; the cash f low after deduction outside expenditures such as
dividends, was 219 billion yen. Should this pace continue and equipment investment
of more than 300 billion yen a year be made, it would mean that about 100 billion
yen annually must be procured from outside sources.
The stock price as of June 1, when Toyota Motor announced the issue of 70 million
_ shares at ma.rket price, was 1,130 yen. By mid-June it went up to the 1,400 yen
level. Suppose that a share issued at market price is 1,130 yen, the capital
gained would then be 79.1 billion yen for 70 billion shares; if 1,400 yen, then the
capital gained will reach 98 billion yen and the needed funds (100 billion yen) f or
this year will almost be met.
According to the rules of the stock market, once shares are issued at market price
they cannot be reissued for one full year. In other words, shares can be issued
once a year. If the stock price keeps going up in the future, and the sha.res are
issued at ma.rket price every year, then Toyota can make a 1 trillion yen equipment
investment for 3 years without hardly touching the large liquidity (current savings
and short-term securities; 274.1 billion yen at the end of December 1980). It is
understandable then that even Eiji To}~oda, tne leader of the Group, is concerned
with the stock price.
Compete With Productivity All the Way
Since the first oil shock Toyota Motor has been enjoying the reputation as the
"Tayota ~Bank" by rapidly increasing its liquidit~. However, as ~xecutive Director
Tsuji explains Toyota~s policy was a natural one for an enterprise: "Lack of
. debt and accumulation of equity capital are simply means to an end. Our pur-
pose is to create a structure which is capable of responding to emergencies before
they rise."
At the end of the June period, in 1974, Toyota Motor discounted a bill ~f 10
billion yen and temporari'�� ~etracted the "honor" of being a firm without debt.
Since then capital has accu,aulated rapidly and the liquidity has risen by 3.5 times
in the 3 years between June 1974 and June 1977. At about the time when the name
of "Toyota Bank" was spreading throughout Japan, Chairman Shohachi Hanai (vice
president then) was already saying, "Just because our earnings increased through
- operation of funds, it does not mean tha t we should simply rejoice. If we can
appro~~riate it skillfully for production investment, we can expect an even higher
- profit rate." It is in this sense that we can say that an opportunity has at last
arrived for Toyota to invest its accumulated capital in what it was originally
intended for (production investment).
- Of course, if international strategy such as that of constructing a plant in the
Linited States were to be pursued, the amount of investment will multiply. But,
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since Toyota has a reputation for "ma.king things doubly and triply sure," it
- remains patient for the moment, casting sideway glances as Honda and Nissan build
their plants in the United States. As for the issue of establishing a joint
venture with Ford, Toyota's position is explained by Eiji Toyoda: "Ford has
always been unwilling to do anything overssas unless it can invest 100 percent of
the capital. Moreover, (even considering the fact that the venture will be in the
United States), they proposed a 50/50 investment. In other words, they threw in
the bait that was most difficult for us to swa.llow. (No negotiations are easy) and
there is no telling when they will end." For Toyota, this was an ultimate state-
ment of backdown. One wonders whether it was seriously considering a joint venture.
Concerning the small car warfare with GM, Toyota Motor, convinced that its "first
priority is to build cars that can at least beat (GM) cars and thereb~r solidify its
foothold at home" will m~ke its production base in Japan. It is trying to com-
pete with GM using its superior productivity as a weapon. Whereas Nissan, even in
tEie area of production, is trying to extend its frontlines in the fight with GM
to overseas markets, Toyota is convinced that it is better to compete using home-
ground advantages. No one knows what the outcome will be in 10 years, but at
least for the next few years, Toyota's risk i~s smaller than that of Nissan! since
the former will not commit itself to a full-scale overseas investment. This is
Toyota`s decision even though it is fully aware of "the fear that this [decision]
might be a source of trouble in the future" (Chairman Kato of Toyota Sales).
Moratorium on Internationalization
Which is more of a burden, Toyota Motor`s 1 trillion yen total investment or GM's
approximately 8 trillion yen ($40 billion) investment? In terms o~ finance, as
mentioned above, Toyota can manage almost two-thirds of the 1 trillion yen by cash
flow, and the liquidity at the time of initial investment would be 270 billion
_ yen, which is the equivalent of nearly 30 percent of its total investment amount.
On the other hand, based on the figures for December 1980, GPi's cash flow is about
500 billion yen and the cash flow difference between the two is as great as the
difference between the total investments. Also, GM's liquidity is about 750
billion yen which is less than 10 percent of the total investment amount. Based
on above, it would seem that in terms of finance Toyota Motor is superior to Gri.
But the fundamental difference between the two is tha.t while GM could for the
moment complete its worldwide strategy with this large-scale investment, Toyota
has to keep developing its worldwide strategy. Toyota Motor, Sales, and other
- affiliates of the Group are united in their view that "there will soon come a time
when there will be no more free trade and overseas production must be increased,"
The postponement of overseas ventures in places like the United States is, in a
sense, an attempt to buy time. Toyota's strategy, in terms of internationalization,
is based on "moratorium mangement"; in the meantime it can strengthen its manage-
ment strticture. In terms of finance, its goal for now is to further increase its
savings while making large-scale investments. There, however, is a trap. If the
stock price goes up steadily there will be no problem, but there is the fear that
the price will decline and advantageous financial procurement will become impos-
sible. In addition to restricting its exports to Europe and the United States,
its burden of depreciation, due to large-scale investments, would increase greatly.
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Both are major f.actors that threaten earnings. It would appear that the June
1931 period will show a large decline in earnings for the first time in a long
time, but if this continues its aegative effect on the stock price will be great.
Then, if liquidity is di.minished or if a loan is made, that would cause further
decline in profits in the form of a drop in monetary earnings and outstanding
interests. It would be exactly opposite of the "Toyota Bank" days when, with
fewer equipment investments and less depreciation burden, Toyota was raking in
monetary earnings with an abundant money supply. If this is the case, even
Toyota Motor cannot help but face a difficult situation in financing.
Eow To Make the Most of the Group Force: Danger Lies Behind Intimacy
Chairman Ono of Toyoda Spinning & Weaving and Toyoda Synthetics, the creator of
the Toyota~s production system, speaks of "areas where Toyota makes money and
Nissan loses it." This applies to the parts manufacturers. While Toyota`s parts
manufacturers are concentrated in Aichi Prefecture, Nissan has its main plant in
~ Kanagawa and others, spread more widely than Toyota, in Tochigi, Yoshiwara ~
(Shizuoka Prefecture), and Kyushu (Fukuoka Prefecture). As far as Nissan parts
Manufacturers are concerned, in order for them to make deliveries quickly to the
Kyushu plant, they must have a warehouse near their client; packing must be done
securely and transportation would be costly. These costs accompanying the delivery
of parts are "mostly borne by the parts manufacturer"(an executive of Nissan
aff iliated parts manufacturer); in Toyota's case the burden would be less.
Unity as a Product of the Age of Ma:lagement by Reduction of Labor
Of course, Toyota will not allow its parts roanufacturers to reap the benefits of
low cost delivery; on the contrary they require an even more severe reduction of
cost. In concert with production control achieved through the [trade mark
system, Toyota affiliated manufacturers are gaining strength by being in step with
their parent company. Moreover, since they exchange information on a regular
basis at all levels--executive, engineering, clerical, etc.,--and at the meetings
of the "Asa-no-kai," composed of top personnel of the 14 major companies, all
affiliates move in the same direction without questio~ or discussions: "When
another company does something we naturally know that our turn is next" (off icial ~
of Toyoda Automatic Loom). ~
A good example of the unity of the Toyota Group is seen in the reduction of debt
which took place in all companies during the period of management by reduction of
labor. With the first oil shock as the turning point, Toyota Motor's management
strategy turned 180 degrees; the previous expansion policy of "3 million annual
production" was converted to one of defensive management which aimed at thorough
rationalization. This was symbolized by reduction in debt; the total debt of 9
To}~ota affiliates (including the amount of discount bills) was nearly 150 billion
yen in fiscal 1974, but it was reduced to less than half in 2 years, or 66
billion yen in fiscal 1976.
At about the same time the production volume of Toyota began to increase rapidly,
and did so in such a way that exports and domestic sales compensated for each
other--when overseas sales were down domestic sales were promoted, and vice
versa. The structure of the affiliates of the Group became so that profits could
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be made without saying anything. Then by the second round of this management
based on reduction of labor, the Group had in name and in fact become debtless
and their goal was set on accumulation of capital in preparation for the future.
Since Eiscal 1977, the total debt of the nine companies of the Group fell below
_ the liquidity and recorded no actual debt. Ar,iong the nine companies,,four, includ-
- ing Aishin Seiki, Toyota Auto Body, Toyoda Ma.chine Works, and Toyoda Synthetics
had no debt, and Nippondenso and Toyoda Autamatic Loom Works chose to carry some
debt for policq sake, even though they could repay it anytime. The total liquidity
of the 9 companies in f iscal 1979 reached 93.2 billion yen, 5 times greater than
their 17.1 billion yen debt.
It can be said that up to f iscal 1979, was a period of accumulating capital for
Toyota. Each aff iliate managed its extra money supply efficiency in bond markets
and others and was thereby able to increase its capital even more. As President
Yoshio Naka~ of Aishin Seiki admonishes, "The job of the accounting department is
not to procure money. Think of it as a sort o� production department where money
is used to make money." Each affiliate practiced to the letter the famous saying
attributed to the accounting department of Toyota Motor that "money is the merchan-
dise of the accounting department." Not only Toyota aff iliates but also many
other enterprises tried to reduce debts and manage extra capital eff iciently during
_ the period of management based on reduction~of labor; however, Toyota aff iliates
were more thorough in their approach. In this manner, Toyota Group became the
champion of management based on reduction of labor.
The era of spending money began in fiscal 1980. According to Executive Director
Tsuji, "the amount of total equipment investment by respective aff iliates of the
Group is almost equivalent to that of our company [i.e., Motor]"; the amount of
equipment investment is therefore great. "This equipment investment totals 55
billion yen. A 50 billion yen plus pace will continue for 2-3 years" (President
Hirano of Nippondenso). Each company is expected to maintain a high level of
investment until fiscal 1982 and 1983. In fiscal 1980, too, while liquidity in-
creased as a whole, Aishin Seiki, Toyota Auto Body, and Toyoda Ma.chine Works were
already beginning to transfer their liquidity to establish equipment funds. We
hear Toyota people saying, "To be without a debt is no honorable thing" (Toyoda
Automatic Loom Works), or "In f iscal 1982, we may be in debt for about 10 billion
yen" (Toyota Auto Body), The Group has thus abandoned its temporary image as a
"bank," and has seriously begun to make production investments, which is how a
manufacturer ought to be.
The Attitude Toward Overseas Ventures Is Also "Controlled"
[Toyota's] tendency to "control" is not limited to areas of capital and equipment
investment. Concerning the issue of a full-scale advanceu~ent in the United States,
one executive of a Toyota aff iliate says that, "the wage level of UAW (United
Auto Workers) is 50 percent higher than that in Japan, and considerably higher than
other American unions." Another executive cautions that, "In the United States,
- there are very high level skilled workers.but it is difficult to recruit a large
labor force that is above a certain standard," and further opines that, "if on top
of this difference in the quality of labor force, we were to add the higher wages
of UAW, it would become an obstacle which could not be overcome." Naturally, the
- opinions of the affiliates concerning the venture in the United States are the same
or even more cautious than that of Toyota Motor.
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I
In this respect, there is a considerable distance between Toyota and Nissan gr~ups. ~
When Nissan Motor decided to move into the United States, an executive of Nissan ~
aff iliated parts manufacturer quipped that, "If we could, we would like to go
abroad together and cooperate with Nissan. But it's a big problem for our company,
since we may die a beggar." In the Nissan Group, therefore, the manufacturer8 are '
caught between the concern for their own management and loyalty for the parent ~
~
company. ;
i
The Toyota lineage companies are concentrated in the small Mikawa area and are
blood relations of Toyota Motor. On the periphery are the two affiliates,
Daihatsu and Hino Motors. If Toyota lineage companies are "inner-circle" ~
daimyo, then the affiliates are "outer daimyo." Although [Daihatsu and Hino] ~ ~
may build their own automobiles and are considered major enter~rises with � ;
sales of 300 billion yen, they cannot join the "Asa-no-kai"; there is a clear
line between the Toyota lineage companies and the affiliates. Their position
within the group is lower than the direct affiliates. Even Pres~dent Ohara of ,
Daihatsu, who originally came from Toyota Motor, admits simply that, "We are ' ~
an affiliate, not a direct Toyota lineage company. It is natural that there
will be differences in the degree of intimacy."
Can Toyota Be a"Responsible" Giant? '
On the other hand, Toyota Motor has been buying up the shares of its tie-up compan- ~
ies. In the case of Hino Motors, the shares owned by Toyota Motor have increased i
gradually and the percentage of Toyota's ownership at the end of Ma.rch 1981 was
9.8 (9.6 at the end of September 1980). In these purchases, Toyota does not send ,
Hino any advance notices. Hino's response to this is: "We are close, so they do ;
not have to notif y us each time, (President Arakawa). Somehow one gets the f eel- i
ing that Toyota is flexing its muscle. Partly due to overwhelming differences in
power, Toyota af~iliates and tie-up companies have not been the cause of any dis-
harmony such as the kind we see between Toyota Motor and Toyota Sales. The
affiliates, in particular, are, in their closeness to the parent company, trying to
conform with Toyota Motor in establishing such specif ic policies as the rate of
equipment investment and even in the way of thinking concerning the issue of inter-
nationalization. They have no other choice but to follow Toyota Motor. The fact
that the vector is perfectly aligned means that Toyota can display great strength
as a group unless the course of direction is mistaken. Thus far, at least it has
taken the right course. However, we need further time to judge whether the present
leadership is on the right course or not.
Toyota rapidly became a giant and gained strength. In the past several years, be-
cause tlie strength of GM and.Ford is declining due to their delayed entry into
small car production, Toyota's strength has become even more noticeable. But
from the standpoint of Toyota, we could say that it was lucky that small cars
were rediscovered thariks to the oil shock and that its competitors failed to enter
early. In one sense Toyota became a world power through the grace of others.
This is the age in which free competition has become limited: "The exports of
finished cars will become gradually restricted. We must work now in such a way
that our successors 10 years fram now will have no cause to admonish us" (Chair-
man Kato of Toyota Ptotor Sales). As it is, Toyota, in Japan, is criticized by the
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economic circles for its failure to fulfill social responsibilities befitting a
giant corporation. And now the international co~unities are demanding that
Toyota take actions and responsibilities as a giant. This demand will intensify
in the future.
Under this situation, the fact that Toyota Sales can have a different feel of
things from Toyota Motor and can express its own opinion has a significant mean-
ing. As President Seizo Ezaki of Toyoda Tsusho conf esses--"We look at anybody who
does business with us as our dear customer. We always adopt a lower posture wher-
ever we go"--the position of a trading firm is quite diff erent from that of a
manufacturer who only purchases materials and produces merchandise. Furthern~re,
in terms of orientation internationally, Toyota Sales is a few steps ahead of
Toyota Motor. If the "intimate relationship" is promoted through Toyota Motor
applying pressure to Toyota Sales~, or if Motor and Sales were to merge with the
former taking the leadership, then, ToyoLa's "check and balance" would be lost.
Depending on the degree and content of the intimate relationship, such a relation-
ship can either benefit or damage the entire Toyota in the long run.
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[Key on Eollowi.n~ pa~e]
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hey:
1. Degree of Unity Between Toyota 23. Daihatsu Motor Co Ltd
Motor aid Affiliates of the 24. Manuf acturing of automobiles and
Toyota Group vehicle generators
2. Toyota Motor Sales Co Ltd 25. Automobiles (Starlet, etc.); com-
3. Sales of automobiles and indus- mercial vehicles (Town Ace, etc.)
trial vehicles 26. Toyoda Gosei [Synthetics]
4. Automobiles, auto parts, housing 27. Manufacturing and processing of
5. Toyoda Automatic Loom Works, Ltd. resin and rubber products
6. Manufacturing of textile 28. Rubber and plastic processed
machines, industrial vehicles, products
small automobiles 29. Nippondenso Co Ltd
7. Automobiles (Collora, Starlet) 30. Manufacturing of automobile electri-
8. Aichi Steel Works, Ltd, cal parts, air conditioners, etc.
9. Manufacturing and processing of 31. Electrical parts
special sr_eel and forged steel 32. Toyoda Tsusho Kaisha, Ltd
products 33. Sales and purchase, import and ex-
10. Special steel for auto parts port of raw materials and products
1]. Toyota Auto Body Co Ltd 34. Various raw materials
12. Manufacturing of bodies for 35. Toyoda Machine Works, Ltd
automobiles, trucks and sgecial 36. Manufacturing of machine tools and
vehicles auto parts
13. Automobiles (Corona, Carina, 37. M achine tools, processed parts
- etc.) and commercial vehicles 38. Toyoda Spinning & Weaving Co Ltd
(Light Ace. etc.) 39. Manufacturing of cotton fabric,
14. Aishin Seiki Co Ltd synthetic products, and auto parts
15. Manufacturing of auto parts, 40. Car interior products
home appliances, diecast 41. Toyota Motor Co Ltd
products 42. Manuf acturing of automobiles
16. Parts 43. Total cu~ulative Number of
17. Kanto Auto Works, Ltd Vehicles Produced
18. Manufacturing of bodies of auto- 44. Degree of dependency on Toyota
mobiles and cou�nercial vehicles, Motor
and housing related equipment 45. Sales volume for the latest settle-
19. Automobiles (Century. Crowm, ment period (unit: 100 million yen;
etc.) rounded off to the nearest 100
20. Ilino Motors, Ltd. million)
21. P1anuFacturing of various diesel 46. Capital as of May 1, 1981 (unit:
and gas automohiles 100 million yen; 10 million yen and
22. tlutomobiles (Tarcel Corsa under disregarded)
- car?mirrcial vc~hic.les (Hi- 47. Number of employees (unit: person)
Luxc)
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FOR OFFI('IAL USE UNLY
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ICey:
1. The flow of. executives fram 51. (D) Eiji Toyoda
Toyota Motor to the affiliates 52. (A) Shoichi Saito
2. Toyoda Automatic Loom Works, Ltd 53. Nippondenso Co Ltd
3. (F.) Toshimitsu Irie 54. (C) Takeaki Shirai
4. (D) Eiji Toti~oda 55. (P) Sakan Hirano
5. (A) Shoichi Saito 56. (V) Kengo Toda
6. (A) Masayuki Kato 57. (E) Satoru Usui
7. Toyota Motor Sales Co Ltd 58. (E) Taketoshi Fukatsu
8. (C) Masayuki Kato 59. (M) Yoshifumi Sugino
~ 9. (P) Shoichiro Toyoda 60. (M) Tadashi Yamanaka
10. (V) Susumu Otake 61. (M) Kiyoshi Inao
11. (V) Shin'ichi Kanda 62. (D) Shoichiro Toyoda
12. (E) Isao Ttakino 63. (D) [Yoshi Suzuki
13. (E) Kozo rfinowa 64. (D) Masaharu Takahashi
14. (M) Piikio Hayashi 65. (D) Wataru Imai
_ 15. (M) Chiharu Ino 66. (A) Shohachi Hanai
16. (M) Go Oshima 67. (A) Toshiro Kageyama
17. (M) Hideo Kamio 68. Toyoda Spinning & Weaving Co Ltd
18. (D) Gensei (?J Fujimaki 69. (C) Taiichi Ono
19. (D) Keiichi Tsuzuki 70. Kanto Auto Works, Ltd
20. (D) Ryo Urano 71. (C) Tatsu Inagawa
21. (D) Tamotsu Arashima 72. (V) Hiroomi Hayashida
22. (D) Takao ~'loki 73. (E) Toru Kobayashi
23. (A) Eiji Toyoda 74. (D) Masatoshi Morita
24. (A) heiicliiro Kur.oda 75. (A) Shoichiro Toyoda
25. Aichi Steel Works, Ltd 76. (A) Shigenobu Yamamoto
26. (P) Tozo Yabuta 77. Toyoda Gosei [Synthetics]
27. (D) Eiji Toyoda 78. (C) Taiichi Qno
28. (A) Shoichi Saito 79. (E) Saburo Kimura
29. (A) Kiyoshi Ptiyairi 80. (M) Eizo Suzuki
~i0, (A) ichiro Takahashi 81. (M) Horoshi Nozawa
, 31. Toyoda Maclii.ne Wor.ks, Ltd 82. (D) Masao Nemoto
32. (P) Shigemilsu ~sai 83. (A) Shoichi Saito
33. (ll) Eiji Toyoda 84. (A) Isaburo Yamashita
34. Toyota Auto 13ody Co Ltd 85. Hino Motors Co Ltd
35. (P) Sliun Fu.j imoto 86. (V) Akira Sakuma
36. (V) Kenso Ono 87. (D) Shohachi Hanai
37. (E) Ichiro Matusi 38. Daihatsu Kogyo Co Ltd
38. (E) Tsuyoshi Sawao 39. (P) Sakae Ohara
39. (D) Tatsuo Flasegawa 90. (V) [Tomo---?] Eguchi
40. (D) Shin,ji Tsotani 91. (E) Junji Takahashi
41. (A) ht~zsanori Iwasaki 92. (D) Akemitsu Makino
42. Toyoda Tsusho Kaisha, Ltd 93. (D) Ko Yasumura
43. (P) Seizo Esaki 94. (A) Masanori Iwasaki
44. (E) Toshio S~~to 95. (C) Chairman
45. (D) rlokuzane Ono 9h. (P) President
46. (D) rtatsuo Nakaizumi 97. (V) Vice-president
47. (A) Giji Toyoda 98. (E) Executive Director
4R. (A) htasayuki Karo 99. (M) Managing Director
49. Ai~hin Seiki Co Ltd 100. (D) Director
50. (C) Takeshi Komuro 101. Auditor
19
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Key:
1. Location of the Plants of the 9. Chuo Expressway
Toyota Group 10. Toyohashi
2. Owari 11. Toyota Motor Co Ltd
3. C~iCu 12. Toyoda Automatic Loom Works, Ltd
4. Nagano 13. Nippondenso Co Ltd
5. Nagoya 14. Aishin Seiki Co Ltd ~
6. Nagoya city 15. Toyota Auto Body Co Ltd
_ 7. Toyoda 16. Aichi Steel Works, Ltd
3. Mikawa 17. Toyoda Machine Works, Ltd
20
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