Toyobo - Company History

The dawn in which privately financed spinning surpassed the state mills

In May 1882, under a partnership between aristocratic capital led by Shibusawa Eiichi (渋沢栄一) and private entrepreneurs[1], Osaka Boseki was established in Osaka[2]. Former daimyo houses — the Maeda, the Mori, the Tokugawa, the Date — made up 38% of the shareholders, and the mill was equipped at its founding with 15,000 spindles, more than seven times the scale of the state-run mills of the day. The Sangenya head plant began operating in July 1883, and by adopting what was then a radical production method — steam power driving twenty-four-hour continuous operation — it achieved an operating efficiency ahead of its rivals in both productivity and utilisation. In its fourth year of operation the mill employed 1,073 workers[3], and twenty-five years later 10,950[4]; it stood as the demonstration that privately financed spinning could be made to work as a commercial business.

In 1886, again on Shibusawa’s advice, Mie Boseki was founded at Yokkaichi in Mie prefecture with 10,000 spindles[5], and the two companies grew in parallel while keeping a close relationship through the shared capital network and shared management thinking that ran through Shibusawa. In June 1914 the two merged as equals to form Toyo Boseki Co., Ltd.[6], with 440,000 spindles installed and cotton-yarn output of 28,000 bales — first in the country on every operating measure, and ahead of the industry’s number two, Kanegafuchi Boseki, in an oligopolistic position. Capital at formation was ¥14.25 million (¥13.009 million paid in)[7], and the company set out as Japan’s largest specialist in cotton spinning and cotton weaving[8]. Through the development of Japanese capitalism from the late Meiji into the Taisho years, Toyo Boseki established itself as the representative of a prewar textile industry built on cotton yarn, accumulating plant, sales network and people as the base for its growth.

A prewar peak of fifteen companies bound together, and a summit on the Korean boom

From 1919 onward Toyo Boseki turned from being a single-line cotton spinner to diversification, moving — directly or through affiliates — into silk yarn, rayon, staple fibre, tyre cord, knitted goods, lace, cotton sewing thread, wool, rubber, heavy cloth and pulp[9]. The expansion also proceeded by outright acquisition, and the number of companies absorbed eventually reached fifteen[10]. Beginning with Ise Boseki in 1923, it took in Nagoya Kinu-bo in 1926, Osaka Godo Boseki in 1931, Showa Rayon in 1934, Izumi Boseki in 1936, then Kotoura Boseki, Itami Seishokujo, Mie Seiseijo, Yoshimi Boseki, Izumi Orimono and Naigai Boseki in 1941, and Toyo Keito Boseki, Toyo Keori Kogyo, Nihon Keito Boseki and Fukushima Jinzo Kenshi in 1942[11]. At its prewar peak it held 66 plants and 1.95 million cotton spindles, with affiliates outside Japan numbering a hundred — swelling into the largest textile company in the world[12].

After the war, the industry that recovered fastest in a wrecked economy was cotton spinning, and Toyo Boseki set about rebuilding early. It merged Toyo Senshoku in 1949, opened Toyobo New York at the end of 1951, built and started up a new state-of-the-art cotton mill at Hamamatsu in 1952, and established Toyobo Brazil in 1955, widening its selling and production footholds in the Americas[13]. Riding the Korean War boom as the top company in cotton spinning, it posted, for the year to April 1951, sales of $95.8M (¥35bn) and reported profit of $16.9M (¥6bn) on capital of a little over $3.9M (¥1bn), and paid a dividend at the high rate of 48%[14]. This was the best performance of any company in Japan[15], and it showed in the figures that the company still held after the war the industry’s grand-champion seat it had taken from Kanegafuchi Boseki before it.

Turning down the ICI licence, and the eight years of lateness it produced

In the first half of the 1950s the world textile industry was passing from a market structure centred on natural fibres — cotton, wool, silk — into the age of synthetics, and Japanese spinners were being offered one opportunity after another to enter the new field through technical tie-ups with Europe and the United States. In 1954 Toyobo received a formal approach from Imperial Chemical Industries of Britain offering a technical tie-up in polyester fibre, but after repeated deliberation its management finally decided to decline. Producing the terephthalic acid feedstock would require capital investment in a chemical plant, and the marketability of polyester fibre products for apparel had not been sufficiently demonstrated; the main reason was that the company could not reach the managerial conviction it needed to commit to capital spending on that scale.

Then in 1956 Toyobo signed a technical assistance agreement with the American Cyanamid Company and entered the acrylic fibre field head-on, and for some time afterwards it kept choosing, under a policy of concentrating resources on acrylic, to avoid parallel investment in the more uncertain polyester. The consequence of that judgement was that in polyester it was Teijin and Toyo Rayon — tied up with the same ICI — that captured the first-mover advantage, while Toyobo’s own entry came in 1964, nearly eight years late. An industry assessment in 1961 held that Toyobo, which had taken the grand-champion seat from Kanebo before the war, had since subsided in the face of Toyo Rayon’s rise to no more than a komusubi-grade presence in sumo terms — throwing into relief a structure in which lateness to the synthetic shift translated directly into a reordering of the industrial hierarchy[16].

Polyester went on to become the largest synthetic fibre in the world in apparel use, a strategic material, and because the two companies that moved first built their advantage in both capital equipment and sales networks, Toyobo’s competitiveness in synthetic fibres carried a deep constraint for a long time. That a company which had achieved the changing of the guard against Kanebo before the war should, after it, be the side handing the winner’s seat to Toyo Rayon was an illustration of the dynamic by which the textile industry’s rank order turns over once a generation. The eight-year head start it conceded at the point where capital spending begins spread into three areas at once — the learning curve of volume production, contact with customers, and feedstock procurement routes — and stayed in the downstream processes as a structural disadvantage that a mere difference in timing cannot explain. The 1966 merger with Kureha Boseki[17] was itself conceived by the company as the means of recovering this accumulated lateness, and the practical logic of the merger drama described in the following era takes its background here.