Kurabo Industries - Company History

131 Kurashiki men of property, and a 15 per cent dividend from the first half-year

On 9 March 1888, Yugen Sekinin Kurashiki Bosekisho — the limited-liability Kurashiki spinning works — was established at Kurashiki village in Kuboya district (窪屋郡), Okayama prefecture[1][2]. It was the fruit of local enthusiasm for raising a spinning industry, and with it the wealth of the region, in a town that had flourished as a cotton-growing district and grown into a commercial centre; at the centre of that effort stood the local magnate and first president, Ohara Koshiro (大原孝四郎)[3]. One hundred and thirty-one men of property in Kurashiki subscribed the capital and Ohara became the largest shareholder — the typical shape of a Meiji-era provincial spinner, in which rural capital put its money directly into the spinning trade. Capital at the founding was ¥100,000[4], and in October 1889 the mill began making cotton yarn on a little over 4,000 spindles[5]. From its earliest years the company held down the cost of building its plants so as to keep depreciation light, and paid a 15 per cent dividend from the second half of its first year. Holding together capital spending that costs little and a return to shareholders through dividends was a pattern of management that carried on through everything Kurabo did afterwards.

The country's first capitalist panic struck in 1890, immediately after the founding, but the company came through it, made its leap during the Sino-Japanese and Russo-Japanese wars, and set its foundations firm[6]. In July 1893, with the Commercial Code in force, it was reorganised from Yugen Sekinin Kurashiki Bosekisho into Kurashiki Boseki Kabushiki Kaisha, taking the legal form of a joint-stock company[7]. In 1906 Ohara Magosaburo (大原孫三郎), third son of the founder Ohara Koshiro, became president[8]. He expanded the scale of the business by buying the Kibi spinning works (吉備紡績所)[9] and by building the Manju plant (万寿工場, later the Kurashiki plant) in 1915[10], and at the same time produced one innovation after another: a unified trademark, a technical school for its skilled workers (工手学校), dispersed family-style dormitories, and the individual drive of spinning frames by repulsion motors[11]. The wretched working conditions of women operatives were then a public issue across the spinning trade, and what marked Ohara Magosaburo out was that he raised the rate at which workers stayed by providing company housing and clinics. The social undertakings he founded in Okayama prefecture beyond the bounds of the spinning business — the Ohara Museum of Art, Kurashiki Central Hospital, the Ohara Institute for Social Research — have their source here as well.

The First World War, which broke out in 1914, brought the Japanese spinning industry a prosperity it had never known, but the reaction slump that followed the war hit hard, and Kurabo too suffered a fall in its results[12]. The whole workforce brought out the spirit of the company motto doshin suryoku (同心数力) — one mind, the strength of numbers — and the company came through the downturn by thoroughgoing cost reduction and gains in efficiency[13]. Even in those years it held to an aggressive policy: in 1926 it established Kurashiki Kenshoku (倉敷絹織, today Kuraray) in order to move into the artificial-silk industry, and so entered the rayon field[14]. Rayon was a chemical fibre that complemented natural ones, and at the time the most advanced part of the textile business. Kurabo entered this new field not through the cotton-spinning parent but through an affiliated company, and so began to widen the ground beneath the spinning trade. Kurashiki Kenshoku changed its name to Kurashiki Rayon in 1949[15] and, after the war, grew independently into the company whose invention of the vinylon fibre became the starting point of Japan's synthetic-fibre industry. A sister firm born out of the Kurabo parent had turned into one of the companies supporting the Japanese textile industry in its own right.

Dismissals in the Showa slump, and expansion into wool and a plant in Ehime

Around 1930 the world depression deepened a general slump in sales across the Japanese textile industry, and Kurabo's results worsened with it. To repair its position the company cut output of textile products, moved businesses outside its focus — the Kurashiki Institute for the Science of Labour among them — into the personal ownership of Ohara Magosaburo, dismissed between five and ten per cent of its staff, and reduced directors' remuneration. It is a textbook case of a provincial spinning company under economic crisis separating off the social undertakings that lay outside its main trade and restoring the profitability of that trade by compressing labour costs. Part of the social work Ohara Magosaburo took on personally continued in Kurashiki thereafter, but Kurabo as a joint-stock company chose to concentrate on the spinning business. With the Manchurian Incident of 1931 the Japanese cotton trade entered another period of growth; exports rose, and in 1933 Japan passed Britain to become the world's largest exporter of cotton cloth[16]. Kurabo made a further advance in these years.

In 1936 the company diversified by moving into the wool industry and into staple-fibre spinning[17], making its base of operations firmer still. In March of that year it built the Tsu plant at Tsu in Mie prefecture and began full production of woollen cloth, running it as an integrated works covering woollen spinning, weaving and dyeing, and so widening a business structure that had been cotton spinning alone as far as woollens. In 1938 it built the Hojo plant at Hojo in Ehime prefecture, spreading its spinning mills geographically. With four plants — Kurashiki, Manju, Tsu and Hojo — production sites now stretched across Okayama, Mie and Ehime, and the company secured the scale that made it one of the ten great spinners. In the same period the other majors — Toyobo, Kanebo, Nisshinbo, Shikishima Boseki — were also expanding through mergers and new plants, and the industry as a whole was moving towards an oligopoly built around the large firms.

After the Sino-Japanese hostilities gave way to entry into the Pacific War, controls over the spinning trade tightened and the industry was pushed into consolidation. Kurabo merged three spinning and weaving companies, Kokko Boseki (国光紡績) among them, and brought two dyeing companies under its wing besides, establishing an integrated chain from the manufacture of cotton yarn and cloth through to dyeing and finishing[18]. At the same time the demands of the war turned some of its plants into munitions works, and the company shifted to a two-track operation of spinning and war production; by the surrender it had lost seven-tenths of its productive equipment, and the injury the war did it was severe[19]. Despite that devastation it set about rebuilding at once, and in May 1949, just after the war, Kurabo was listed on the Tokyo Stock Exchange[20]. Textiles in the recovery years stood as the country's leading earner of foreign exchange, and the ten great spinners caught the strong demand for cotton yarn and cloth. In August 1949 the company established Kurashiki Machinery (倉敷機械), separating its in-house manufacture and sale of spinning machinery into a company of its own. Kurashiki Machinery later moved into machine tools and grew in a field quite apart from that of its parent.

The new Anjo plant, and the starting point of the move overseas

Repair went quickly after the war, and in October 1951 the company built the Anjo plant in Aichi prefecture as the largest modern spinning works in the industry[21]. It installed the newest spinning machinery of the day and positioned Anjo as the core plant for cotton and synthetic-blend spinning, built for rationalised production. Anjo ran as a cotton and synthetic-blend spinning site for more than seventy years, until 2024[22], and became the symbolic production base of Kurabo's textile business. In the same years of recovery the company enlarged the Kisogawa plant in its woollen division[23], restoring in both cotton and wool the capacity the war had destroyed. In 1955 it opened a New York office, giving itself a means of gathering information on overseas markets. In a period when textile exports were the central theme of the industry, a point of contact with the American market bore directly on the export of cotton yarn and cloth.

From the surrender through the first half of the 1950s Kurabo carried on the pre-war line of expanding scale, while trying, through renewal of its equipment and the securing of overseas contacts, to hold its place as one of the ten great spinners of a new age. In these years it changed from a company rooted in the ground of its origins, Kurashiki in Okayama, into a national spinner operating a group of plants scattered across the country — Anjo in Aichi, Tsu in Mie, Hojo in Ehime. From the latter half of the 1950s, however, the competitive setting of the textile industry began to change: the rise of synthetic fibres and the advance of producing countries abroad became the problem facing every one of the ten great spinners. Kurabo's next task was to widen its business beyond the spinning trade.

New entries into food, chemicals and electronics

In August 1957 Kurabo established a manufacturing subsidiary in Brazil and began spinning abroad[24]. It was an early move overseas, made with rising domestic labour costs and the advance of the developing producers in view, and the Brazilian site ran for many years as an offshore base for cotton spinning. In April 1961 the company invested in Nippon Instant Foods (日本インスタント食品, renamed Nippon Jiffy Foods (日本ジフィー食品) in May 1963) and so entered the food business, beginning the manufacture and sale of dried foods[25]. In November 1962 it entered the chemical-products business, starting to manufacture urethane foam, moulded plastic parts and other goods in fields related to chemistry[26]. In October 1968 it set up a manufacturing subsidiary in Thailand, extending its production sites into South-East Asia as well.

In March 1970 the company entered environmental engineering, moving into water treatment and air-environment work[27]. In March 1976 it entered electronics[28], beginning to manufacture equipment such as colour-management systems and production-control systems[29]. In November 1971 it built the Susono plant in Shizuoka prefecture as a production site for the chemical-products business[30]. In the twenty years or so between the opening of the New York office in 1955 and the entry into electronics in 1976, Kurabo widened its ground across food, chemicals, the environment, electronics and offshore manufacture. Among the ten great spinners it belongs to the group that began diversifying early, and the pattern of the business portfolio it holds today was assembled in these years.

Behind the diversification lay a structural squeeze on earnings across the textile industry. The Nixon shock of August 1971 and the first oil crisis of October 1973 struck the whole of the Japanese textile trade. Soaring crude prices sent the feedstock cost of synthetic fibres sharply higher, and export margins deteriorated. Through the 1970s the textile industries of South Korea and Taiwan improved in technical strength and in cost competitiveness alike, and Japanese textiles faced a structural decline in international competitiveness. Kurabo shifted the centre of gravity of its management towards making good the falling earnings of the textile business with newly started ones, and adopted a strategy of raising sources of profit outside the spinning trade one after another.

The loss of 1975 and a 20 per cent cut in spinning capacity

For the year to March 1975, after the first oil crisis, Kurabo booked a net loss of about $5M (¥2bn) on a parent-only basis and fell into deficit[31]. Others among the ten great spinners — Daiwabo, Shikishima Boseki and more — were driven to report losses around the same year, and the textile industry as a whole entered a structural slump. In June 1983 Kurabo resolved to cut its spinning equipment by 20 per cent and began in earnest to clear away surplus capacity. It carried out the reductions plant by plant at its main works in Saga, Ehime and Okayama, and alongside the compression of the textile business adopted a policy of raising the share taken by the newer ones.

In 1986 it entered the manufacture of processed fluoropolymer products, taking up, within the chemical-products business, a functional resin of high added value. Fluoropolymer was the material that would later become its mainstay as piping for the cleaning equipment used in semiconductor manufacturing, and the entry made in 1986 laid the ground for catching the demand of that market some thirty years afterwards. In 1990 the company began a property business[32], using the sites of closed textile mills to let space to commercial developments. It was a way of converting the idle land left by the shrinking textile business into continuing income from property, and for a company holding the large sites of spinning mills it was a rational use of assets.

In 1993 Kurabo closed the Kurashiki plant, on the ground where it had begun, and developed the site as Tivoli Park, letting it to Okayama prefecture and putting the land of its origins to use as a tourist attraction. A hundred and five years after the founding of 1888, spinning in Kurashiki itself came to a halt. In April 1994 the company built the Kamogata plant at Asakuchi in Okayama prefecture[33] and in April 1996 the Tokushima plant in Tokushima prefecture[34], reorganising the main sites of textile production. In 1996 it opened the shopping centre The Mall on some 60,000 tsubo of the Anjo site; Anjo went on operating at reduced scale while the retail development on the released land secured rental income. Here the shrinking of the textile business and the turning of mill sites into property ran side by side.

Chemicals go abroad, and the machine-tool business is taken back in

From the late 1990s into the early 2000s Kurabo placed the chemical-products business as its area of growth and extended its product lines in fluoropolymers, urethane foam and waterproofing materials. In December 2001 it established a manufacturing subsidiary in China and built out an offshore production network for the chemical business[35]. Around Guangzhou it put together production of flexible urethane foam for car interiors[36], taking up the demand for components that came with the local manufacture of Japanese carmakers in China.

In April 2009, as structural reform of the textile business, the company decided to close the Tsu and Okayama plants. Tsu, built in 1936, had run for seventy-three years as the main site for woollen cloth and stood as the symbol of Kurabo's pre-war expansion. With the two closures the domestic textile business was consolidated into three plants — Anjo, Tokushima and Kamogata. In December 2010 Kurabo made Kurashiki Machinery a wholly owned subsidiary through a tender offer, bringing back in the machine-tool company it had separated off in 1949. Kurashiki Machinery had built a standing of its own in machine tools, but the judgement was made to take full ownership so as to optimise the use of resources within the group. In April 2012 the company built the Mie plant in Mie prefecture[37], strengthening production for the chemical business. Some thirty years after the entry into electronics in 1976, a structure of six segments — textiles, chemicals, machine tools, property, food and electronics — had settled into place.