Koyo Seiko’s huge loss, the appeal to Toyota, and the share issue (1979)

What was gained in exchange for letting independence go

At the centre of this decision was not the loss itself but the fact of delay. Where a competitor moved to cut output 40% at the same time as its loss in the year to March 1976, Koyo Seiko stayed in profit until the year to March 1977 and was a year late in suspending its dividend. The longer it managed without letting the deterioration show, the less room it had left to right itself once it did act. The resignation of the entire board and the appeal for support were also an act of disclosing management failure to the outside world — a painful choice for a distinguished independent.

That said, looking at the quarter-century that followed, what this choice gave Koyo Seiko was more than rescue. With Toyota’s capital and production management inside it, the company grew more firmly into an auto parts maker and became the side that expanded steering operations into Europe and North America. Entering the keiretsu came at the cost of reduced autonomy, but without that capital relationship the 2006 merger would not have been possible either. How far to go on one’s own in a crisis, and from what point to accept another company’s capital and methods — that question remains exactly as it was in a parts industry where keiretsu restructuring continues today.