Dissolving the 36-year joint venture with HP (1999)

The composure to let go of a success

At the core of this decision is the composure that took the practical gains — earning power, competitive position, and the money to invest — over the signboard of a celebrated Japan–US joint venture. A holding carried at ¥1.4bn ($12.3M (¥1bn)) that threw off ¥1.6bn ($14.1M (¥2bn)) a year was let go for ¥60bn ($527.1M (¥60bn)), on a judgement that future dividends had little room to grow. The partner’s own corporate split was an external event, and Yokogawa converted it into the financing for a change in its own business. The character of the decision shows in the coexistence of mild language — that it was “answering in good faith” — with a meticulous calculation of price.

Even so, the cost of losing a pillar tied to its founding trade, electronic measuring instruments, was not small. From the year after the dissolution Yokogawa moved into painful reorganization — plant closures, the retraction of its no-dismissals policy — and down a long road narrowing the core business to control systems. The proceeds did underwrite that concentration, but selection and concentration did not bear fruit at once. At what point to let go of a joint venture that is working — Yokogawa’s choice in 1999 is one example of how difficult, and how weighty, it is to judge coolly when a good business should be sold.