Kubota
Corporate History & Strategy

In 1890 (Meiji 23), Gonshiro Kubota founded "Ote Imono (Kubota Iron Works)" as a sole proprietorship in Osaka. Kubota was around 19 years old at the time, and driven by a strong entrepreneurial spirit, he left the foundry where he had been apprenticed to start his own business. At his former employer, he had manufactured castings for "kankan (platform scales)," and after going independent, he continued making platform scales while also taking on export match manufacturing machinery (matchstick production), pursuing contract production leveraging cast iron technology.

The turning point came when Kubota noticed the growing adoption of waterworks. Cast iron pipes were a type of casting, but it was difficult to achieve the durability required for water pipes, and domestic production was considered impossible. There were no foreign techniques or reference materials available, and production technology had to be established through trial and error. Around the same time, a company called "Nihon Chuttetsu Goshi Kaisha," founded by a former Vice Admiral, invested one million yen in capital but went bankrupt within a year of establishment, and the domestic production of water pipes was seen as impossible.

Bank financing was not available in that era, and the business started with no acquaintances or customers. Nevertheless, Kubota began developing cast iron pipes in 1893, hiring engineers from the Osaka Artillery Arsenal and working to establish production technology independently without reference to foreign techniques.

After approximately 7 years of development, in 1897 Kubota developed the "mating mold oblique casting method" and succeeded in manufacturing cast iron pipes for the first time. Furthermore, in 1900, he devised the "cast iron pipe round-blow vertical casting method," establishing the prospect for mass production. When Kubota later visited Europe and America, he confirmed that the methods he had independently developed were not inferior to overseas technical standards, meaning he had established internationally competitive manufacturing methods without foreign technology.

With mass production technology established, in 1908 (Meiji 41), a large-scale factory called "Funadecho Plant" was constructed on a 12,000 sq.m site in Osaka's Minami-ku (Namba). It became known as "Kubota of Namba" in the prewar era. In the late Meiji period, Japan's waterworks penetration rate was only 8.4%, and municipalities across the country, including Tokyo and Osaka, were promoting waterworks development.

Leveraging its mass production capacity, Kubota developed sales channels to supply water pipes to municipalities nationwide. The casting method developed by Kubota—pouring molten iron into high-speed rotating molds—later became the industry standard, and Kubota established a position of providing technology licenses to other cast iron pipe manufacturers.

By 1912, Kubota's cast iron pipe production volume reached 40,000 tons, securing approximately 60% (first place) of domestic production share. By building a mass production system ahead of domestic competitors during the expansion of waterworks infrastructure, the company achieved a dominant position in the cast iron pipe market.

The technological capability and financial strength built through cast iron pipes became the foundation for Kubota's business diversification. Entering the Taisho era, as water pipe demand plateaued and raw material (pig iron) prices surged due to World War I, Kubota entered the machine tool business (lathes) in 1917. The Funadecho Plant was converted to "machinery-only" production, and cast iron pipe production was transferred to newly established Amagasaki Plant and Onkajima Plant.

In 1922, Kubota began producing small engines, laying the groundwork for its future agricultural machinery business. Gonshiro Kubota advocated that "we cannot rely solely on iron pipes," pursuing diversified management that expanded product lines with cast iron pipes at the core. Kubota's trajectory of expanding from water pipes to machinery and engines, starting from the foundational technology of castings, was funded by the monopolistic position and accumulated technical expertise in cast iron pipes established during this founding period.

Foreseeing the spread of automobiles, Gonshiro Kubota invested in and established Jitsuyo Jidosha Seizo (Practical Automobile Manufacturing) in 1919, with himself as president. From 1920, production of a three-wheeled vehicle, the "Gorham-type tricycle," began at Kubota's Funadecho Plant, with sales handled by Yanase in the Tokyo area and Kubota headquarters in the Osaka area. Foreign engineers were hired for the company's establishment, and a production target of 50 units per month was set.

However, quality defects persisted, including the three-wheelers' tendency to roll over on curves, and sales did not expand. The foreign engineers soon resigned, and the quality of components constituting the vehicles could not be stabilized, resulting in production far below the target of 50 units per month. While Kubota had independently established production technology for cast iron pipes, automobiles required coordination with numerous parts manufacturers, and quality control of components became a major barrier.

In 1923, the company launched the four-wheeled "Lila" to attempt a recovery, but following the Great Kanto Earthquake in September of that year, GM and Ford entered the Japanese market in earnest, and high-quality imported automobiles gained consumer support. Kubota's automobiles, plagued by quality issues, also reached an impasse with four-wheeled vehicles and could not benefit from the domestic automobile market's growth.

In 1926, Kubota merged with Dat Jidosha Shokai, a Tokyo-based automobile manufacturer that was also in financial difficulty, to establish Dat Automobile Manufacturing. Gonshiro Kubota assumed the presidency of the new company, but management did not improve after the merger, and the disposition of the continuously loss-making automobile business became a pressing issue.

For Kubota, which had inherited cumulative losses from Jitsuyo Jidosha Seizo's founding, a rapid business turnaround amid fierce sales competition with foreign cars was deemed unlikely. During this period, Kubota had begun manufacturing agricultural small engines under the "Kubota Engine" brand, and the company solidified its policy of concentrating management resources on its core casting and machinery businesses.

In 1931, the Nissan zaibatsu, a new industrial conglomerate seeking entry into the automobile industry, decided to acquire the financially struggling Dat Automobile Manufacturing. Kubota transferred all its shareholdings to Tobata Imono (Tobata Casting), a Nissan affiliate, and decided to withdraw from the automobile manufacturing business.

Dat Automobile Manufacturing, which Kubota relinquished, was restructured under the Nissan zaibatsu. After coming under the umbrella of Tobata Casting, the company underwent several name changes and mergers before eventually being operated as Nissan Motor. The automobile business that Kubota abandoned was developed by its acquirer, Nissan, into one of Japan's leading automobile manufacturers.

For Kubota, the automobile business was a loss-making venture spanning approximately 12 years, during which the company attempted various turnaround measures including the transition from three-wheelers to four-wheelers and the merger with Dat Automobile, but could not compete with foreign cars in terms of both quality and cost. While Kubota had independently established technology for cast iron pipes, in the automobile industry—with its broad base of required components—the structural constraint of an immature parts supply chain proved impossible for a single company to overcome.

After withdrawing from the automobile business, Kubota concentrated resources on its core cast iron pipe and machinery businesses, using small engines as a stepping stone to build the foundation for its subsequent agricultural machinery business. Kubota's existence in the genealogy leading to the founding of Nissan Motor is recorded as such, and the circumstances of its entry and exit constitute a chapter in the history of Japan's automobile industry.

Kubota decided to acquire Sumidagawa Seitetsujo (located in Terashima, Mukojima-ku, Tokyo; 600 employees), which held the second-largest domestic share in cast iron pipes, for 850,000 yen. Around 1926, cast iron pipe market shares were: Kubota 42% (No. 1), Kurimoto Iron Works 27% (No. 2), Sumidagawa Seitetsujo 16% (No. 3), and Kamaishi Mine 15% (No. 4). The acquisition pushed Kubota's share above 50%.

Sumidagawa Seitetsujo had fallen into financial distress due to strikes and quality defects, which provided the backdrop for the sale. The factory's location in Terashima was an area with strong leftist influence, and after three strikes, employee morale was low and productivity had declined significantly. Kubota made the decision to acquire this struggling company with the premise of restructuring it.

Taizo Odawara (age 36 at the time) was dispatched from Kubota to lead the turnaround. Odawara later recounted that upon arrival, the factory's dire conditions far exceeded his expectations. He first addressed the disposal of defective inventory and secured employee cooperation by offering concrete incentives such as guaranteed salary increases after the turnaround was complete. Additionally, he demonstrated leadership through measures such as paying out profits from efficiency improvements on the same day.

Through Odawara's management skills, Sumidagawa Seitetsujo's productivity recovered to a level comparable to Kubota's Amagasaki Plant. In 1930, the fourth-ranked Kamaishi Mine withdrew from cast iron pipe manufacturing, and from the 1930s onward, domestic cast iron pipe market shares became fixed at "Kubota 69%, Kurimoto Iron Works 31%" for an extended period. Notably, Odawara later became president of Kubota based on his track record in this turnaround.

Kubota determined that domestic agricultural machinery adoption had peaked and decided to focus on developing overseas markets. Throughout the 1960s, the agricultural machinery division's revenue expanded, growing to account for 35% of total company revenue by around 1970, but domestic rice-farming mechanization was nearing completion. President Keitaro Hiro stated that "replacement demand will arrive in no more than 5 years" and expressed the need to secure overseas markets by then.

In 1972, Kubota established its U.S. subsidiary "Kubota Tractor Corp." and in 1974 established Kubota Europe S.A.S. to set up operations in Europe. In 1976, the company listed its shares on the New York Stock Exchange to raise brand awareness in the U.S. market. Around the same time, competitor Yanmar entered North America through an OEM partnership with major American agricultural machinery maker John Deere, taking a different approach to overseas expansion than Kubota.

Kubota decided on independent entry into the U.S. market. While Yanmar entered through an OEM partnership with John Deere, Kubota chose to expand under its own brand. While John Deere's core products were large agricultural machinery for farmers, Kubota introduced small residential agricultural machinery (for home gardening and lawn mowing), adopting an entry strategy that structurally avoided direct competition with large equipment manufacturers.

President Keitaro Hiro stated that "even on large farms, there are plenty of areas where nimble machinery work is needed," envisioning demand development for large farms through the expansion of small tractor attachment applications. On the production side, Kubota constructed the Tsukuba Plant (tractors) in 1975 and the Sakai Rinkai Plant (engines) in 1985, establishing supply infrastructure for overseas markets. By selecting a segment where the company could leverage its domestically cultivated small tractor technology, the strategy was designed to penetrate overseas markets while minimizing additional development investment.

The cast iron pipe market was an oligopoly handled by only three companies: Kubota, Kurimoto Iron Works, and Nippon Chutetsukan. Around 1960, when Nippon Chutetsukan fell into a management crisis, an industry-wide coordination (underground cartel) was formed. A share allocation rule was established—Kubota 63%, Kurimoto Iron Works 27%, and Nippon Chutetsukan 10%—and this illegal cartel was operated for approximately 40 years.

The specific method involved the sales department heads of the three companies gathering in Tokyo in advance of each municipality's (such as Kobe City or Tokyo Metropolitan Government) water pipe tendering, determining policies and deciding which company would win each bid. Detailed bid prices were coordinated by sales staff from each company over the phone. This coordination know-how was reportedly passed down across generations among the sales representatives of each company.

The cartel's foundation lay in the industrial structure where Kubota held overwhelming superiority in cast iron pipe manufacturing technology and the other two companies had received technology licenses from Kubota. A former executive of Nippon Chutetsukan stated, "Kubota's presence was enormous. Even if you rebelled, you couldn't prevail against Kubota. The share allocations naturally settled as a matter of survival wisdom," indicating that the power dynamic rooted in technological dependence sustained the cartel.

In February 1999, the Japan Fair Trade Commission (JFTC) confirmed the existence of an underground cartel in water pipes spanning approximately 30 years and filed criminal charges against Kubota, Kurimoto Iron Works, and Nippon Chutetsukan for suspected violations of the Antimonopoly Act. The domestic cast iron pipe market was valued at approximately 115 billion yen at the time, and the JFTC judged the impact to be widespread and the conduct to be particularly egregious, proceeding with the unusual step of criminal prosecution.

Following the charges, the Tokyo District Public Prosecutors Office Special Investigation Division launched an investigation, and all three companies were subjected to search and seizure. From Kubota, three department and section-level managers—the "Tokyo Head Office Iron Pipe Sales Department 1 Manager," "Department 2 Manager," and "Department 1 Section 1 Chief"—were arrested, with a total of 10 sales personnel across the three companies being arrested. The case became known as the "Ductile Cast Iron Pipe Share Allocation Cartel Case."

At Kubota, Chairman Shigekazu Mino and President Kohei Mitsui resigned to take responsibility for the water pipe cartel. They were replaced by Osamu Okamoto (former Vice President) as Chairman and Yoshikuni Dobashi (former Senior Managing Director) as President, resulting in a complete change of the top management including the chairman.

In December 1999, the JFTC ordered the three companies to pay a combined 11 billion yen in surcharges. Of this amount, Kubota received a surcharge order of 7,072,080,000 yen. Kubota contested this decision by requesting a re-examination, taking the matter to court.

The legal battle proceeded through the Supreme Court, with a 2009 hearing ruling ordering surcharge payment, a 2010 Tokyo High Court ruling dismissing the appeal, and a 2012 Supreme Court decision dismissing the further appeal. Following the confirmation of the surcharge, Kubota recorded an extraordinary loss of 7.2 billion yen as "Antimonopoly Act surcharge" in FY2009 (ending March). Approximately 13 years elapsed from the initial charges to the final surcharge confirmation.

The water pipe cartel revelation was not a one-time incident for Kubota. From the 2000s onward, bid-rigging scandals in public facility-related businesses emerged in succession: in 2007, the company faced JFTC on-site inspections for gas polyethylene pipes, steel sheet piles, and rigid PVC pipes, and received a business suspension order for human waste treatment facilities, as compliance issues surfaced in a chain reaction.

Kubota operated across six business domains, but each domain ran different core systems independently, making company-wide integration of management information a challenge. Komatsu, a competitor in the construction machinery segment, had been accelerating IT-driven business operations since the 2000s, including construction machinery utilization rate monitoring, while Kubota lagged in IT investment. Internally, the perception that "we are 20 years behind Komatsu" was widely shared.

In response to this situation, the company decided to launch a core system renewal project spanning seven years from December 2019 to December 2026. In March 2020, partnerships were formed with SAP (implementing SAP S/4HANA) and Microsoft (utilizing Microsoft Azure), and IBM Japan became the support partner through a referral from SAP. The planned investment was projected at 37 billion yen through 2026.

The 37 billion yen investment, converted at a unit cost of one million yen per person-month, corresponds to approximately 37,000 person-months. Divided by the cumulative approximately 84 months over 7 years, this translates to an estimated monthly average of around 400 external personnel engaged in renewal work—a large-scale project. As the system integration spanned six business domains, teams needed to be deployed across each area, and the complexity of project management exceeded that of a typical system renewal.

For Kubota, the core system renewal meant integrating management information that had been fragmented across business domains. Having recognized the gap with Komatsu's lead in IT infrastructure, the decision to opt for a comprehensive seven-year overhaul rather than incremental updates was designed as an investment to close approximately 20 years of lag in one go. The adoption of two global standards—SAP S/4HANA and Microsoft Azure—reflects a policy of relying on external platforms rather than in-house development.

In 2008, Kubota established a local subsidiary in India and commenced full-scale sales in the Indian market. India's market was divided between upland farming in the north and rice farming in the south, and Kubota planned to expand sales starting from the south, where it could leverage its expertise in rice farming. The company introduced lightweight, compact tractors and targeted sales expansion in the south.

However, throughout the 2010s, Kubota struggled with sales in the Indian market. The primary reason was Kubota's failure to understand local needs. In India, tractors were used not only for farming but also as towing vehicles for cargo, and Kubota's tractors could not meet the demand for towing power. Additionally, because sales volumes were insufficient to justify local production, tractors were imported from Thailand, putting the company at a cost disadvantage against local manufacturers.

As a result, Indian farmers chose tractors from local manufacturer Mahindra & Mahindra (M&M), and Kubota's share in India stagnated at around 2% as of 2021. M&M held approximately 40% domestic share in India (as of 2023) as the market leader, and had also entered the Japanese market through a partnership with Mitsubishi Agricultural Machinery in 2015, pursuing global expansion.

In April 2022, Kubota acquired a 44.8% stake in Indian agricultural machinery manufacturer Escorts. The acquisition price was 195 billion yen, making it a large-scale acquisition for Kubota. Goodwill of 139 billion yen was recorded in connection with the acquisition. Although the equity stake was below 50%, Kubota consolidated Escorts as a subsidiary by dispatching directors.

The acquisition of Escorts signified Kubota's abandonment of self-reliant market penetration in India. The company's own products could not address the towing power and price range demanded by Indian farmers, and it was unable to independently build the parts supply chain essential for local production. Escorts had strengths in manufacturing and developing "basic tractors" for emerging markets with restrained functionality and pricing, complementing the product gap that Kubota could not fill on its own.

For the post-acquisition management of Escorts, Nikhil Nanda, a member of the Escorts founding family, was retained as CEO. Kubota chose a policy of maintaining local management expertise and customer base while securing management control.

Through the Escorts acquisition, Kubota's share in India expanded from approximately 2% to approximately 12%. Escorts was the fourth-largest company in India's tractor market, and the acquisition increased share sixfold at a stroke.

Kubota continued aggressive investment after the Escorts acquisition and announced a management target to "secure 24% share in India by 2030." In August 2024, three Indian local subsidiaries were integrated to advance unified operations of Kubota Group's India business. Furthermore, the company articulated a strategy of exporting basic tractors from India as a production base to new markets such as Europe and Africa.

Kubota's experience in the Indian market illustrates the limitations of bringing advanced-market products directly to emerging markets. The lightweight, compact features that were Kubota's strengths did not match Indian usage patterns that demanded towing power from tractors, and the cost disadvantage of importing from Thailand compounded the problem, resulting in 14 years of stalled market penetration. The ultimate resolution through acquisition of a local manufacturer to secure market share represented a shift away from the self-sufficient approach of completing product development in-house.