Kawasaki Heavy Industries - Company History

The state shipyard sold off, and incorporation as a joint-stock company

In April 1878 Kawasaki Shozo (川崎正蔵), a trading merchant, started a shipbuilding business at Tsukiji in Tokyo[1]. His starting point was the conviction that building Western-style vessels — far superior to the traditional Japanese ship — was a matter of national urgency[2]. In March 1881 he opened the Kawasaki Hyogo Shipyard at Higashide-cho in Hyogo[3], and in 1886 he moved the entire business from Tokyo to Kobe[4]. In May of that year he leased the state-run Hyogo Shipyard, absorbed the Kawasaki Hyogo Shipyard into it, and changed the trade name to Kawasaki Dockyard[5]. In July the following year, 1887, he was granted the outright sale of that state-run Hyogo Shipyard[6], and consolidated there the two yards that had been split between Tsukiji and Hyogo. Kawasaki Shozo was named, alongside Iwasaki Yataro (岩崎弥太郎), as one of the founding fathers of Japanese shipbuilding[7].

On 15 October 1896 the business was reorganised from a sole proprietorship into a joint-stock company with capital of ¥2 million, and Kawasaki Dockyard Co., Ltd. was founded[8]. Matsukata Kojiro (松方幸次郎), third son of Matsukata Masayoshi, was brought in as its first president, with Kawasaki Yoshitaro (川崎芳太郎) as vice-president; the founder, Shozo, became an adviser[9]. Matsukata held the belief that building a comprehensive heavy machinery industry spanning land, sea and air would drive stable growth for the company, and that this in turn would contribute to Japan's development[10]. With the new company came work on the long-pending large dry dock for vessels of 6,000 gross tons[11], and the plant was re-equipped. The company mark stylises the character kawa (川) from the founder's name and sets it at the centre of a flying flag, standing for enterprise and forward motion[12].

Importing Western technology, and building warships at home

After incorporation the company worked to absorb European and American shipbuilding technology, and in line with government policy put its main strength into building superior vessels[13]. In 1897 it built the Iyo Maru, the first ship to qualify under the Shipbuilding Encouragement Act[14]. In 1904 it became the first private yard to take an order from the Navy for two submarine craft[15], which later became the origin of its advantage in submarine construction technology. In 1905 it built Submarine No. 6, regarded as the beginning of submarine construction in Japan[16]. Between 1902 and 1912 it also handled several foreign vessels[17], evidence that its technology was recognised abroad as well. Self-sufficiency in reciprocating steam engines and in the principal marine auxiliary machinery was likewise achieved in this period[18].

In May 1907 the company acquired the manufacturing rights to the Curtis steam turbine[19], and in 1911 it signed its first technical agreement with M.A.N. of Germany for diesel engines[20]. Adopting advanced foreign practice in hull design and fabrication as well, it arrived at a capability to build everything from battleships and cruisers to first-class cargo-passenger liners at home[21]. In 1913 it built the battlecruiser Haruna and in 1916 the battleship Ise[22], delivering both with good results. On the plant side, the Hyogo works opened in September 1906[23] and began operating in July 1907[24]; in July 1918 a plate mill was added to make the company self-sufficient in shipbuilding steel[25], and the number of building berths grew from three small ones to eleven large and small[26]. Modern equipment such as the gantry crane frame over No. 4 berth shortened build times, and the company's own ship Raifuku Maru set a world record of thirty days from keel-laying to completion[27].

The Great War boom, and distress in the 1927 financial crisis

When the First World War broke out in July 1914 demand for ships rose and the shipping and shipbuilding industries entered an unprecedented boom[28]. In both warship building capacity and technology the company came to be counted one of Japan's two great shipyards[29]. In April 1919 it established Kawasaki Kisen, and in July of the same year Kokusai Kisen[30]. In May 1920 it signed a second contract with M.A.N. for building marine diesel engines[31], and from the large submarine I-1, completed in 1924[32], it contributed to raising the performance of Japanese submarines. Alongside the machinery, boiler and electrical divisions it extended into rolling stock, aircraft and steel[33], and the shape of a comprehensive heavy industry was taking form. Against that, the Washington Naval Treaty of 1922 struck directly at demand for warship construction, and as compensation for halting work on the Kaga and the Atago the company was privately instructed to build two auxiliary vessels[34].

The reaction to the boom was severe, and in 1927 the company fell into financial distress in the backwash of the Showa financial crisis[35]. Half-year profit fell from ¥3.56 million in the second half of 1926 to a loss of ¥33.46 million in the second half of 1927[36]. A run began on the Fifteenth Bank, its main bank, and the company faced an unprecedented shortage of finance[37]. In the deadlock of 1927 its principal debt was converted into preference shares, and the Fifteenth Bank, its principal creditor, pledged 400,000 of these preference shares to the Bank of Japan as collateral for borrowing, applying the proceeds to the restructuring[38]. Those 400,000 shares amounted to 25 per cent of all shares[39]. Matsukata's vision of land, sea and air collapsed, for the time being, in the face of the crisis[40]. Among the means of rebuilding was the separation of Kawasaki Rolling Stock[41].

Spinning off rolling stock, and rebuilding under the composition law

On 18 May 1928 Kawasaki Dockyard separated out its Hyogo works and established Kawasaki Rolling Stock with capital of ¥12 million[42]. The works itself dated back to its founding in September 1906[43]. Japan's railway rolling stock at that time was supplied by imports, and the venture was an attempt to build it domestically[44]. When nationwide nationalisation of the railways in 1914 standardised rolling-stock specifications, volume production became possible[45], and by the end of the Taisho era output had passed domestic self-sufficiency and part of it was being exported to Asia[46]. The purpose of the separation was not to nurture the business but to disperse risk away from a shipyard imperilled by the crisis, and to permit a financial manoeuvre[47]. The relatively stable Hyogo works was carved out and pledged as collateral to raise loans for rebuilding[48].

The separation was in form only: in capital terms the new company remained under Kawasaki Dockyard's control[49], and its presidency was held concurrently by the president of Kawasaki Dockyard until just after the war — first Kashima Fusajiro (鹿島房次郎), then Hirao Hachisaburo (平生釟三郎) and Igaya Shosuke (鋳谷正輔)[50]. Rebuilding the parent proved harder still. In May 1928 president Matsukata Kojiro resigned; Kashima Fusajiro succeeded him and Ishii Kiyoshi (石井清) took office as acting president to work at recovering the business[51]. Even that did not settle matters, and in July 1931 the company applied for composition with its creditors. Because the question bore directly on the livelihoods of 17,000 employees and on the fortunes of Kobe itself, the government moved to broker a rescue. In 1932 the company came under the Composition Act and set about rebuilding[52], and in March 1933 Hirao Hachisaburo took office as president[53], with Igaya Shosuke succeeding him in December 1935[54]. From the early 1930s orders returned — through the shipping industry's fleet-expansion programme of subsidies for building superior vessels, and through the Navy's start on new warships ahead of the move to a treaty-free footing[55] — and by 1936 results had turned[56].

Spinning off aircraft, and a raid on control of the company

The aircraft division had been set up in 1918 and was mainly engaged in building aircraft for the Army[57]. In November 1937 this division was separated to form Kawasaki Aircraft Industries with capital of ¥50 million[58]. The reason for the separation lay not in the maturity of the business but in relations with the military: the aircraft division was closely tied to the Army and the shipbuilding division to the Navy, and meeting the demands of both within a single company had become difficult[59]. On 1 December 1939 the company changed its name to Kawasaki Heavy Industries[60]. In April 1943 capital was raised to ¥600 million to expand its facilities[61]. After the outbreak of the war with China it entered a state-directed expansion, including construction of the new Senshu works[62].

In April 1939 Yamashita Kamesaburo (山下亀三郎), president of Yamashita Kisen, joined with Murata Shozo (村田省蔵), president of Osaka Shosen, in a plan to buy the 400,000 Kawasaki Dockyard shares held by the Bank of Japan[63]. Their aim appears to have been less the management of the shipyard itself than taking hold of its subsidiary Kawasaki Kisen and standing first in the shipping industry[64]. Kawasaki Dockyard at the time held all the shares of Kawasaki Kisen as well as all those of Kawasaki Aircraft Industries and Kawasaki Rolling Stock[65]. Alarmed executives mounted a campaign of opposition, and senior staff formed an employees' association to petition the relevant authorities[66]. The cause they raised in public was that aircraft production must not be disturbed under a war footing[67]. In the event a contract was concluded under which the new shareholders would not intervene in board appointments or in management for the following three years[68].

The truce expired after three years, and in May 1942 Yamashita and Murata, judging their own strength insufficient, drew in Sumitomo[69]. Sumitomo's chief director at the time was Furuta Shunnosuke (古田俊之助)[70]. Igaya Shosuke and the other senior men were close to resigning themselves to surrender this time, but Managing Director Nemoto (根本) and Managing Director Okubo (大久保), who had led the first round to victory, would not give way[71]. They pressed the president: the argument that employees must not be unsettled under a war footing had, now that the country was at war, grown stronger rather than disappeared; to raise their hands now would bring further pressure from the employees' association and leave them unable to face the world[72]. Igaya Shosuke changed his mind at once, and the raiders' scheme failed[73]. Sunano Hitoshi (砂野仁) wrote later that this was the incident that shocked him most in his forty-three years of service[74].

After the zaibatsu dissolution, starting again on shipbuilding alone

From early 1945 the bombing of its facilities intensified, and from March production effectively stopped[75]. When Igaya Shosuke resigned as president in December 1946, the new directors drew up a reconstruction and reorganisation plan by collective decision[76]. They chose first to separate and establish Kawasaki Steel, to close the Senshu works, and to start again with the shipbuilding division alone[77]. In October 1949 the reconstruction plan was approved, leaving only three divisions — shipbuilding, machinery and electrical equipment. In August 1950 the steel business was separated and Kawasaki Steel came into being[78]. The comprehensive land-sea-air heavy industry Matsukata Kojiro had conceived was cut away piece by piece — rolling stock, then aircraft, then steel — until at this point only the founding business of shipbuilding remained in hand[79].

In June 1950 capital was first written down to $166,667 (¥60m)[80], then in August raised to $1.6M (¥560m), and Tezuka Toshio (手塚敏雄) took office as the fifth president[81]. Recovering technology and importing advanced technology became the pillars of the rebuild: in February 1951 the company signed a technical assistance agreement with Escher Wyss of Switzerland for water turbines for power generation[82], and in June 1954 another with Oerlikon, also of Switzerland, for generators, entering the field of hydroelectric machinery[83]. In 1953 it completed a 17,000-ton floating dock[84]. In that same year Kawasaki Machinery and two other former aircraft-related firms merged to bring Kawasaki Aircraft back into existence[85], and by June 1955 capital stood at $9.3M (¥3bn)[86]. In 1959 Kawasaki Electric Manufacturing was also separated as an independent company[87].