Komatsu - Company History

A machinery maker that set out in mining equipment and electric cast steel

Komatsu’s origins go back to Takeuchi Mining, led by Takeuchi Meitaro (竹内明太郎), an industrialist from Tosa[1]. Takeuchi ran the Yoshitani coal mine (芳谷炭坑) at Karatsu in Saga Prefecture and the Yusenji copper mine in Ishikawa Prefecture, and in 1917, in order to build and repair mining machinery in-house, he opened the Komatsu Iron Works at Komatsu town in Ishikawa, close to the Yusenji mine[2]. As its first director he brought in Hashimoto Masujiro (橋本増治郎) of Kaishinsha, a pioneer of the domestically built motor car[3]. When the slump that followed the First World War forced the parent company, Takeuchi Mining, to contract, the decision was taken to spin the iron works off as a separate company[4], and on 13 May 1921 Komatsu Manufacturing Co., Ltd. was incorporated with capital of ¥1 million[5]. Its business at the outset went beyond mining and excavating machinery to electric cast steel produced by electric steelmaking[6], giving the firm a footing in both machinery and steel.

In April 1922, the year after incorporation, Komatsu took over the Komatsu Electric Steelworks from Takeuchi Mining[7], so that it could cover everything from casting steel in-house to assembling the finished machine[8]. But the Great Kanto Earthquake left the parent, Takeuchi Mining, unable to carry on, and with the post-war slump on top of it the business sank into difficulty[9]. The man who turned it round was Nakamura Mitsugi (中村税), brought in as president in 1925[10]. Under him the company escaped the crisis, and from the Manchurian Incident onwards it expanded on rising demand for cast steel and press machinery[11]. Monthly cast-steel output reached the highest volume in the industry, and the works supplied the machinery division internally while selling high-grade castings on the outside market[12].

Home-grown tractors, and bulldozer prototypes built to Army order

Having found its footing in mining equipment and machine tools, Komatsu looked for a distinctive product no one else was making, and in 1931, at the request of the Ministry of Agriculture and Forestry, moved into building agricultural tractors in Japan[13]. Taking a small tractor made by Caterpillar of the United States as its model, it produced a prototype two-tonne crawler tractor — the first built in Japan[14]. The following year, 1932, it completed an improved version, the Komatsu G25, and delivered it to the Army among others[15]. The tractor was a product that could use a great deal of cast steel, Komatsu’s strength[16], and the fact that its existing steelmaking plant could be put to work exactly as it stood was decisive in the choice. In May 1938 the Awazu plant was built on the outskirts of Komatsu for integrated production[17], and volume output for the settlement of Manchuria began in earnest[18].

Once the war began, Komatsu built various towing vehicles and earth-moving machines at the request of the Army and Navy[19]. The bulldozer was one of them. As vice-president Kawai Ryoichi (河合良一) recounted in 1963[20], the Army ordered that Japan should be able to build the machines the American forces used to lay out airfields, and three prototypes were made working from photographs[21]. They were shipped to the Philippines and Guadalcanal, but the Guadalcanal consignment never arrived, and the machines that reached the Philippines were captured before there was time to use them[22]. The 1943 prototypes never reached volume production before the war ended[23]. Post-war production therefore began in a country with almost no bulldozers in service at all[24].

Orders cancelled outright, and the rebuild under Kawai Yoshinari

After the war Komatsu answered the food-production policy of bringing three million 町歩 (chobu, roughly a hectare each) of national land under cultivation[25], and switched to making petrol-engined tractors. Some five other firms, Niigata Engineering and Kubo Iron Works among them, entered the same product[26]. But the occupation authorities ordered petrol supplies to Japan halted, and petrol tractors could no longer be built[27]. In 1947 the Ministry of Agriculture and Forestry responded by cancelling its tractor orders outright[28]. Tractors and farm implements accounted for more than 60% of the company’s total output value at the time, and their termination was called inside the firm the “second defeat”[29]. At a works that had lost its mainstay overnight, a major dispute broke out over pay demands, growing into the hundred-day struggle spoken of as “Toho in the east, Komatsu in the west”[30].

Kawai Yoshinari (河合良成), brought in as president at this crisis, had as an agriculture ministry official been the very man who urged tractor production on Komatsu, and felt a moral responsibility for the cancellation[31]. He drew ¥30 million of finance from the Reconstruction Finance Bank to settle the dispute[32], and on taking office as president at the end of 1947 pushed through the dismissal of some 700 employees[33] and began the rebuild. In May 1949 the company listed its shares on both the Tokyo and Osaka stock exchanges[34], opening a route to raising money from outside. The D50 bulldozer had been completed in 1947[35], bringing to market as a product the design left over from the wartime prototypes. Even so, the only bulldozers civil-engineering contractors owned were domestic machines or surplus sold off by the occupation forces[36], and the market itself was still small.

Shell orders for the US forces, 72% of turnover

Kawai Yoshinari, in a hurry to rebuild, looked for a way out in producing shells for the American forces against the background of the Korean War, and from 1949 put shell production on a serious footing[37]. Because the occupation authorities made ownership of a dedicated plant a condition of the orders[38], in October 1952 Komatsu took over the Hirakata works of the former Osaka Army Arsenal and set it up as the Osaka plant[39]. In December of the same year it absorbed Ikegai Automobile Manufacturing, which became the Kawasaki plant, and Chuetsu Denka Kogyo, which became the Himi plant[40]. The shell business was vast: orders over the four years from 1952 to 1955 came to more than US$44.78 million, some $44.4M (¥16bn), about 40% of all shell orders placed in Japan[41].

But shells swelled until they made up 72% of turnover[42], leaving the company with an earnings structure that rose and fell on a single order from the US forces. Bulldozer production continued alongside, rising from 10 to 15 units a month around 1952–53 to 20 to 30 a month by about 1955[43]. There were almost no imports, and since the only machines contractors owned were domestic or occupation surplus, the number in service nationwide could be worked out almost entirely from domestic output[44]. Precisely because the market had started from a point where virtually nothing was in service, the growth rate of bulldozer production stayed higher than that of any other machine type[45].

Dropping shells for bulldozers — the conversion of 1956

When the Korean War armistice of 1953 shrank the shell boom[46], Komatsu decided in May 1956 to convert production at the Osaka plant — formally transferred to it by then — from military work to bulldozers across the board[47]. As early as 1950 bulldozers had accounted for 53% of total output value[48], so a mainstay product had already grown up even if shells were let go. New models had been introduced almost every year since the D50 was completed in 1947, and cumulative production passed 1,000 units in 1954[49]. Annual turnover reached $34.4M (¥12bn) in 1958[50], and the year to December 1959 recorded turnover of $25.6M (¥9bn) and profit of just over $1.9M (¥700m), the highest in the company’s history to that point[51].

The conversion was underpinned by demand from road building: road investment by the state, the highway public corporation and local authorities together grew from $169.4M (¥61bn) in 1954 to $381.1M (¥137bn) in 1958, $876.7M (¥316bn) in 1961 and $1.2B (¥415bn) in 1962[52]. The Third Five-Year Road Improvement Plan, begun in 1961, ran to $6.4B (¥2.3tn)[53], and investment in 1963 was put at $1.4B (¥520bn) to $1.5B (¥530bn)[54]. Bulldozer sales moved with the volume of that work, with roughly a quarter of all units sold going to road projects[55]. Alongside this, from 1957 the company placed branches and sales offices in every prefecture across the country, switching to selling construction machinery itself rather than through agents[56].

Capital liberalisation and the Maru-A campaign — concentrating on quality alone

When the government adopted the Outline of the Plan for the Liberalisation of Trade and Foreign Exchange in 1960, imports of machinery were progressively freed[57], and the liberalisation of capital came onto the agenda. Caterpillar, which held more than half the world bulldozer market, was preparing to produce inside Japan through a joint venture with Shin Mitsubishi Heavy Industries[58]. Kawai Yoshinari protested to the Ministry of International Trade and Industry, but judged that the tide of national policy would be hard to stop, and narrowed the counter-measure to a single point: improving quality[59]. The reasoning was that Komatsu was behind on neither sales network nor production capacity, and that only reliability and durability fell short of Caterpillar’s machines[60]. Around 1961 the company set up a liberalisation task force internally and began redesigning its bulldozers[61].

In August 1961 it established the Maru-A task force (マルA対策本部), with executive director Kawai Ryoichi in charge[62]. Named after the ace in a pack of cards, it was positioned as a campaign taking precedence over any other matter inside the company[63]. User criticism meetings turned up 182 items, and claim analysis and field surveys identified 1,657 problem points; some 3,200 of the machine’s 4,000 parts — about 80% — were modified[64]. Total quality control, going beyond statistical quality control alone, was introduced company-wide, and the policy of developing everything in-house was bent far enough to fit engines from Cummins of the United States[65]. For the three highest-volume models, 32 prototypes each were built, 96 in all: six were run day and night on endurance tests, and 90 were put into the field with engineers attached to observe how they performed[66].

In September 1963 the first counter-measure machines went on sale[67], and when the D50A embodying the quality improvements was launched as the “Super” series, the number of claims fell to a fifth of what it had been[68]. The warranty was extended from 300 hours and three months to 600 hours and six months[69]. At that point Komatsu held about 60% of the domestic bulldozer market, first in the industry[70], and led in motor graders, forklifts and shovel loaders as well[71]. Construction machinery accounted for 62–63% of total turnover, industrial vehicles about 17% and industrial machinery 7%[72]. The scale of the company had changed beyond recognition in five years: comparing the first half of 1958 with the first half of 1963, capital had gone from $6.3M (¥2bn) to $41.7M (¥15bn), total assets from $39.4M (¥14bn) to $229.4M (¥83bn), and sales from $16.4M (¥6bn) to $82.2M (¥30bn)[73].