Closing three domestic mills and turning to retrenchment (1975)

Where, and with what, the price of expansion gets paid

What is essential in this decision is that a fibre specialist which had kept adding capacity on the assumption of growth was, on taking the full force of a structural recession, forced for the first time into a defensive move that cut sites, equipment and people at once. Closing the Nagoya, Inuyama and Kiryu mills, shrinking cotton and wool capacity, calling for voluntary redundancies and putting head-office staff on temporary layoff were all painful reductions, and together they formed the first wave of retrenchment — a frontal attack on the excess capacity that had been deferred ever since the merger. It can be seen as the moment when the rehabilitation programme brought in with Mr Obata from Sekisui Chemical moved from writing off latent losses in the good years to compressing the scale of the business itself.

The other face of the decision is that a huge loss in the core business was covered over with gains on sales of land and securities. The ¥24.9bn of asset-sale profits spared the company from failure and separated its fate from that of Kojin, which was fatally wounded holding property inventory — but that was not a solution to the structural problem so much as a stay of execution bought with a temporary weapon, unrealised gains. In fact the recurring loss continued for several more years, and the return to profit had to wait until the year ended March 1979. Where, and by what means, is the price of growth-chasing expansion paid? This decision is instructive because it shows both faces at once — the physical pain of cutting sites, and the reliance on land inflation that was common to Japanese companies of the day — in miniature, as the fibre slump itself.