Panasonic Holdings - Company History

Four months on an improved socket, and the insulator plates that opened a way through

Matsushita Konosuke (松下幸之助) was born in November 1894 at Wasa village, Kaiso district, Wakayama prefecture[1]. His father’s losses speculating on rice brought the family down[2], and Konosuke, who left primary school after four years, was sent at the age of nine to Osaka as a live-in apprentice at a hibachi (charcoal brazier) shop[3]. Three months later he moved to a bicycle shop, where he spent six years until he was seventeen[4]; reading the spread of the city tram as a coming fall in demand for bicycles, he moved to Osaka Electric Light. From assistant on indoor wiring work he was promoted to charge-hand within three months[5], and in the spring of his twenty-fourth year he became an inspector, the post that wiring men treated as the summit of the trade[6]. Yet a round of fifteen to twenty houses a day was finished in two or three hours[7], and the work ceased to hold him. When he showed the improved socket he had prototyped while still employed to his supervisor, the answer was No good, this one.[8] He resolved, Right — I shall leave the company, much as I regret seven years of effort,[9] and handed in his resignation.

The capital for setting up was less than ¥100 — ¥33.20 of severance pay together with ¥42 from the company savings scheme and his own savings[10] — to which he added ¥100 borrowed from an acquaintance[11]. The works was the two-mat room of the single-storey house he lived in, plus half of the four-and-a-half-mat room, floored over as an earthen workshop[12]; there was scarcely space left to sleep properly. The sockets were finished in October 1917[13], but after about ten days of calling round the city only about a hundred had sold, for less than ¥10 in all[14]. Faced with ¥10 in four months, those who had joined him left, until only Konosuke and his brother-in-law Iue Toshio (井植歳男) remained[15], and the couple’s kimono went to the pawnshop[16]. Then an order arrived from an electrical trader for a thousand insulator plates for electric fans[17]. With no equipment but a stamping punch and a pot for boiling the moulding compound, they finished the work by the year’s end and made their first profit, about ¥80 net[18]. Further orders for insulator plates kept the business going, if only barely, and in March 1918 he founded Matsushita Electric Appliance Factory 松下電気器具製作所 at Ohiraki-cho, Fukushima-ku, Osaka, and began manufacturing wiring fittings[19].

Demonstration selling opens a market for the bullet-shaped lamp

The first product made at Ohiraki-cho was an attachment plug that reused the caps of old light bulbs[20]; priced at thirty per cent below the going rate[21], it caught on, and even working through the night they could not meet the orders, so four or five hands were taken on[22]. The two-way socket adaptor that followed drew more attention still, and Yoshida Shoten, an Osaka wholesaler, applied for sole distribution rights; the contract was signed against a deposit of ¥3,000[23], and that money went into enlarging the works. In 1922, against ¥4,500 of his own funds, he laid out more than ¥7,000[24] to build a 70-tsubo (about 230 sq m) main factory in the same district[25]. That same year he took up the manufacture and sale of the bicycle lamp that became the foundation of Matsushita Electric. Bicycle lighting then meant a candle or acetylene gas; battery lamps ran down in two or three hours and were of no practical use[26]. Setting himself the targets of no breakdowns and more than ten hours of running time, he spent half a year and nearly a hundred prototypes before arriving at the bullet-shaped lamp[27].

The bullet-shaped battery lamp put on sale in March 1923[28] lasted thirty to fifty hours[29], but selling it proved a harder obstacle than making it. Every wholesaler he called on gave the same answer, the stock built up from June reached two thousand units, and with a standing commitment of two thousand a month to the wooden-tube supplier[30], production could not be halted either. Deciding that this means drawing up with our backs to the river,[31] he hired three canvassers and had them leave two or three lamps at every retailer in Osaka[32]. One of each was lit on the spot[33]; only after the shopkeeper had satisfied himself that it ran for more than thirty hours was it sold, and he was told he could pay once he felt reassured. Four or five thousand lamps were placed in this way within a month[34], word spread, and two or three months later orders began arriving from the retailers themselves. Konosuke looked back on it as a piece of selling on which the whole fate of Matsushita Electric was staked.[35] In April 1927 National was adopted as the unified trade mark[36].

Full employment through the slump, and the declaration of the waterworks philosophy

In the financial panic of April 1927 the Fifteenth Bank, which had been at the centre of the firm’s banking, suspended payments[37]. The failure of a counterparty holding ¥70,000–80,000 of discounted bills receivable and more than ¥35,000 on fixed deposit[38] struck straight at the firm’s cash position — but two months earlier a banking agreement had been concluded with Sumitomo Bank[39]. Approached nearly ten times by a Sumitomo officer, Konosuke had demanded, before opening the account, a standing overdraft facility of ¥20,000[40], and pushed it through against a bank that objected there was no precedent. In the middle of the run on the banks he checked, to be safe, and was told: There is nothing in the situation that requires us to alter our promise; please draw on it whenever you wish.[41] In 1929, when a 500-tsubo (about 1,650 sq m) factory was built, he borrowed ¥150,000 unsecured[42].

At the end of 1929, under the government’s deflationary retrenchment, sales halved[43] and stock piled up beyond what the warehouse could hold. Konosuke, who was ill in bed, was asked whether the workforce should be cut by half; he set out his policy the same day. Production would be halved at once, but not one employee would go: the factory would work half-days on full daily pay, and in exchange all holidays would be abolished and everyone would go out and sell the stock[44]. The stock was cleared in about two months and the factory returned to full operation[45]. On 5 May 1932, before an assembly of the entire staff[46], he set out that the mission of a producer is to make goods as abundant as tap water and so banish poverty from this world[47], and named that day the company’s founding anniversary. He allotted 250 years to the fulfilment of that mission, divided into ten stages of twenty-five years each[48].

Self-accounting by product, and wartime shipbuilding and aircraft

In May 1933, at the same time as the head office moved to Kadoma[49], the works were divided into a First Division for radios, a Second Division for lamps and dry batteries and a Third Division for wiring fittings, synthetic resins and electric heating appliances[50], each division manager bearing responsibility for the profit and loss from manufacture through to sale[51]. It was Konosuke’s awareness that he was physically weak and could not oversee the whole by himself that turned his way of entrusting work to young employees into an institution[52]. Matsushita Electric Trading was established in August 1935[53], and in December that year the firm was reorganised as Matsushita Electric Industrial Co.[54] Capital was ¥10 million[55], and the division system went further still, into a subsidiary system with nine companies split out by line of business[56]. In 1934 the firm took up electric motors, forming an affiliate capitalised at ¥1 million in partnership with Sumitomo on the ground that there was not a single small-motor maker in the Kansai region[57].

As the controlled economy gave way to war, materials and machinery grew scarce and only military production continued[58]. When a production programme for 200-tonne wooden ships was allocated to Osaka prefecture, Matsushita Electric took it on, obtained 30,000 tsubo (about 99,000 sq m) at Sakai on disposal terms and set up Matsushita Shipbuilding[59]; the yard was built in about six months and launched fifty-six vessels before the end of the war[60]. A yard that had set itself a target of one ship a day came in time to send out one every six days[61]. In the same year the Navy ordered the manufacture of wooden aircraft; 100,000 tsubo (about 330,000 sq m) was bought and a company capitalised at ¥30 million was formed[62], but the plywood technology proved difficult and only three aircraft were completed[63] — a number far short of the two hundred a month the military had asked for[64].

The public purge, and the union’s campaign to keep him

For five years after the defeat Matsushita Electric was subject to seven sets of restrictions, beginning with designation as a restricted company[65], and was not even permitted to move its assets. Konosuke argued continually against the zaibatsu (family industrial combine) designation that Matsushita was no zaibatsu, and the designation was lifted at the end of 1949[66] — but because he had directed munitions production he was placed in class A of the public purge[67]. He had all but resolved that there was no room to protest against leaving the presidency when the campaign to keep him was taken up by the company’s own labour union[68]. Signatures and seals were collected one by one from the 15,000 employees of the day[69], and representations were made to the government and to General Headquarters. A month later the designation was altered to class B[70], and after review the purge of the entire board was dropped[71].

He kept the presidency, but over those five years the company’s debts reached ¥1 billion and it stood high among defaulters on tax[72]. He brought himself to the workforce reductions he had avoided until then, and employment fell to 3,500[73]. In May 1949 the shares were listed on the Tokyo and Osaka stock exchanges[74]. On 17 July 1950, with the restrictions lifted, he called his senior managers together at an emergency management-policy meeting[75], set out his resolve to rebuild and said that the will has welled up in me to go at this business and nothing else, morning, noon and night.[76] In January 1951 he spent three months in the United States studying management[77], and saw at first hand the gap: a standard GE radio sold for twenty-four dollars, two days’ work for a factory hand[78], while a Matsushita Electric radio cost ¥9,000 against a worker’s monthly wage of ¥6,000[79].

The Philips alliance, the five-year plan, and the Atami conference

Moving into television required the technology of its heart, the cathode-ray tube, and Matsushita Electric, with nothing of its own to draw on, looked for somewhere to bring it in from[80]. Philips, with which it had dealt before the war, set out terms of an initial payment of US$550,000, a thirty per cent equity holding and a six per cent technical guidance fee[81]. Konosuke set a management guidance fee against these, arguing — and refusing to give ground — that since it was Matsushita Electric that would run the joint company, that contribution too should be valued[82]. Negotiations came within sight of breaking down, but were settled by paying a technical guidance fee of 4.5 per cent in exchange for receiving a management guidance fee of 3 per cent[83]. In December 1952 the technical alliance with Philips brought Matsushita Electronics 松下電子工業 into being, and the four plants of the tube works were separated from the parent[84]. At the new Takatsuki plant, production of light bulbs, fluorescent lamps, vacuum tubes, cathode-ray tubes and transistors began in 1954[85].

In January 1952 a capital tie-up with Nakagawa Kikai took the firm into refrigerators[86], and in February 1954 it took an equity stake in Victor Company of Japan[87]. Victor was carrying $1.3M (¥450m) of debt against capital of $69,444 (¥25m)[88], but Konosuke, seeing the goodwill value carried by the dog trade mark, decided to take it on[89]. At the management-policy meeting of 10 January 1956[90] he made public a five-year plan to quadruple the previous year’s sales of $61.1M (¥22bn) to $222.2M (¥80bn) within five years[91]. In an age when no company announced its future targets outside the firm, a half-believing air lingered even internally; the target was substantially met in the fourth year, and five years on production and sales reached $291.7M (¥105bn)[92]. In January 1958 Matsushita Communication Industrial was established, separating the communications-equipment manufacturing operations[93], and in September 1959 Matsushita Electric Corporation of America was set up, opening the build-out of overseas bases[94]. The two-day weekend he called for in 1960 was realised as a five-day week in April 1965[95].

The National Shop Association ナショナル店会, launched in 1957, organised small electrical retailers across the country into a keiretsu (affiliated) sales network[96], and Matsushita Electric came to be called Matsushita the seller.[97] In 1964 the reaction after the Tokyo Olympics turned the home-appliance market down[98], and most of the sales companies and agents sank into loss. In July that year Konosuke, who had stepped back to the chairmanship, gathered the heads of the sales companies and agents from around the country at the New Fujiya Hotel in Atami[99]. One company with $13,889 (¥5m) of capital had run up a deficit of $416,667 (¥150m)[100]; asked to raise their hands if they were making money, about thirty did, and the remaining hundred and seventy or so were in the red[101]. Two days had been scheduled, and on the third the complaints had still not stopped[102], at which Konosuke said from the platform: In the end, it was Matsushita Electric that was at fault. I believe that says it all.[103] He acknowledged the blame, and more than half of those present took out handkerchiefs[104]. After the conference he took up the post of acting head of the sales division in place of vice-president Yasukawa (安川洋), who was away ill[105], and from February 1965 put into effect a new sales system made up of one sales company per region, direct selling by the divisions and a new instalment-credit scheme[106].