Seeking independence under a tighter Toyota grip (1999)

Independence and dependence — two sides of one coin

At the heart of this decision lies a structure in which a keiretsu supplier cannot choose one or the other between its parent’s control and its own independence. Denso was born as Toyota’s electrical-parts division, has more than 20% of its shares held by Toyota, and owes half of its sales to the Toyota group. At the same time, an era in which even Toyota would buy the best part from outside the keiretsu meant a slow decline for any supplier content to remain dependent on Toyota. When president Okabe set out to expand sales beyond the keiretsu and return to the American Big Three, it was not in order to break away from the parent, but to keep, in the world market, the strength needed to go on being chosen by that parent. Independence and dependence are not opposites but two sides of the same coin.

This tug-of-war did not begin in 1999. Ever since Toyota cut loose its unprofitable electrical-parts division in 1949, and Denso raised the banner of “getting away from Toyota” with its $4.0B (¥1tn) sales plan in 1982, the company has been taking the measure of its distance from the parent. That the share of sales going to Toyota has, a quarter-century on, still not moved from about half tells the difficulty of independence. Its recent concentrated investment in semiconductors and software is an extension of the same question — how to build a distinctive competitiveness while leaning on the parent. How far a keiretsu supplier can stand on its own, and from where it must rely on its parent: Denso is still searching for the answer.