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. His starting point was the conviction that building Western-style vessels — far superior to the traditional Japanese ship — was a matter of national urgency. In March 1881 he opened the Kawasaki Hyogo Shipyard at Higashide-cho in Hyogo, and in 1886 he moved the entire business from Tokyo to Kobe. 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. In July the following year, 1887, he was granted the outright sale of that state-run Hyogo Shipyard, 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.

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. 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. 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. With the new company came work on the long-pending large dry dock for vessels of 6,000 gross tons, 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.

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. In 1897 it built the Iyo Maru, the first ship to qualify under the Shipbuilding Encouragement Act. In 1904 it became the first private yard to take an order from the Navy for two submarine craft, 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. Between 1902 and 1912 it also handled several foreign vessels, 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.

In May 1907 the company acquired the manufacturing rights to the Curtis steam turbine, and in 1911 it signed its first technical agreement with M.A.N. of Germany for diesel engines. 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. In 1913 it built the battlecruiser Haruna and in 1916 the battleship Ise, delivering both with good results. On the plant side, the Hyogo works opened in September 1906 and began operating in July 1907; in July 1918 a plate mill was added to make the company self-sufficient in shipbuilding steel, and the number of building berths grew from three small ones to eleven large and small. 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.

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. In both warship building capacity and technology the company came to be counted one of Japan's two great shipyards. In April 1919 it established Kawasaki Kisen, and in July of the same year Kokusai Kisen. In May 1920 it signed a second contract with M.A.N. for building marine diesel engines, and from the large submarine I-1, completed in 1924, it contributed to raising the performance of Japanese submarines. Alongside the machinery, boiler and electrical divisions it extended into rolling stock, aircraft and steel, 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.

The reaction to the boom was severe, and in 1927 the company fell into financial distress in the backwash of the Showa financial crisis. 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. A run began on the Fifteenth Bank, its main bank, and the company faced an unprecedented shortage of finance. 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. Those 400,000 shares amounted to 25 per cent of all shares. Matsukata's vision of land, sea and air collapsed, for the time being, in the face of the crisis. Among the means of rebuilding was the separation of Kawasaki Rolling Stock.

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. The works itself dated back to its founding in September 1906. Japan's railway rolling stock at that time was supplied by imports, and the venture was an attempt to build it domestically. When nationwide nationalisation of the railways in 1914 standardised rolling-stock specifications, volume production became possible, and by the end of the Taisho era output had passed domestic self-sufficiency and part of it was being exported to Asia. 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. The relatively stable Hyogo works was carved out and pledged as collateral to raise loans for rebuilding.

The separation was in form only: in capital terms the new company remained under Kawasaki Dockyard's control, 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). 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. 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, and in March 1933 Hirao Hachisaburo took office as president, with Igaya Shosuke succeeding him in December 1935. 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 — and by 1936 results had turned.

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. In November 1937 this division was separated to form Kawasaki Aircraft Industries with capital of ¥50 million. 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. On 1 December 1939 the company changed its name to Kawasaki Heavy Industries. In April 1943 capital was raised to ¥600 million to expand its facilities. After the outbreak of the war with China it entered a state-directed expansion, including construction of the new Senshu works.

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. 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. 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. Alarmed executives mounted a campaign of opposition, and senior staff formed an employees' association to petition the relevant authorities. The cause they raised in public was that aircraft production must not be disturbed under a war footing. 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.

The truce expired after three years, and in May 1942 Yamashita and Murata, judging their own strength insufficient, drew in Sumitomo. Sumitomo's chief director at the time was Furuta Shunnosuke (古田俊之助). 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. 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. Igaya Shosuke changed his mind at once, and the raiders' scheme failed. Sunano Hitoshi (砂野仁) wrote later that this was the incident that shocked him most in his forty-three years of service.

After the zaibatsu dissolution, starting again on shipbuilding alone

From early 1945 the bombing of its facilities intensified, and from March production effectively stopped. When Igaya Shosuke resigned as president in December 1946, the new directors drew up a reconstruction and reorganisation plan by collective decision. They chose first to separate and establish Kawasaki Steel, to close the Senshu works, and to start again with the shipbuilding division alone. 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. 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.

In June 1950 capital was first written down to $166,667 (¥60m), then in August raised to $1.6M (¥560m), and Tezuka Toshio (手塚敏雄) took office as the fifth president. 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, and in June 1954 another with Oerlikon, also of Switzerland, for generators, entering the field of hydroelectric machinery. In 1953 it completed a 17,000-ton floating dock. In that same year Kawasaki Machinery and two other former aircraft-related firms merged to bring Kawasaki Aircraft back into existence, and by June 1955 capital stood at $9.3M (¥3bn). In 1959 Kawasaki Electric Manufacturing was also separated as an independent company.

Chasing scale, and failing at merger three times

The reopening of the Suez Canal in April 1957 was the trigger for a rapid deterioration in shipping markets. A large order backlog from the shipbuilding boom kept operations from falling away immediately, but orders for new ships steadily thinned. The company therefore moved to strengthen production on the land side, diversifying its product range and building scale. Japan's economy was heading into the Iwato boom, and the expansion of the land-side business was well timed. In November 1961 it adopted a divisional structure with four divisions — shipbuilding, machinery, precision machinery and steel structures — and in December that year executive vice-president Sunano Hitoshi became the sixth president. Managing Director Kato (加藤) and his colleagues took an axe to costs, cutting overheads by forty per cent across the board.

Scale was also sought through mergers, and three attempts failed in succession. Around April 1961, at the urging of Dai-Ichi Bank, the company took up a merger with Harima Shipbuilding, but the prevailing view inside the company was that with shipbuilding in recession there was little to be gained from joining two firms both strong in shipbuilding, and the talks stalled for a month or more. While the answer was delayed, Dai-Ichi Bank managing director Hasegawa Jusaburo (長谷川重三郎) took the proposal to Doko Toshio (土光敏夫), president of Ishikawajima Heavy Industries; Doko asked for three days, and after three days placed the whole matter unconditionally in Dai-Ichi Bank's hands. Sunano reflected later that the time had probably not been ripe, and that it was the result of an internal posture which long habit had made unwilling to move decisively.

In the same year, conveying the wishes of Tokai Bank president Suzuki Kyoichi (鈴木享市), Yamamoto Torao (山本寅夫) — a managing director of Kawasaki Kisen and president of Tokai Rinko — brought a merger proposal with Nagoya Shipbuilding. Tezuka Toshio and Sunano went to Nagoya together to pursue it, but partly because Nagoya Shipbuilding's president Fukuhara (福原) was ill, agreement could not be reached, and this too passed to Doko. Behind their inability to press hard lay the banking side's wish that the Nagoya Shipbuilding name, a symbol of the locality, be preserved, and a concern that the deal would go no further than a business alliance. The third was Uraga Dock, immediately after Sunano's appointment as president, and this too came from Dai-Ichi Bank. In the middle of several meetings with Uraga's president Taga (多賀), the Nihon Keizai Shimbun ran an article saying that Uraga would become a repair dock while Kawasaki took charge of new construction; feelings on the Uraga side soured and the matter reverted to a blank sheet.

Sakaide as the alternative, and a dock of the newest kind

The failures led, as it turned out, to a renewal of the company's plant. Sunano wrote that a merger would have increased the number of engineers but that nothing could be done with obsolete facilities, and that in that respect the collapse of all three was fortunate. From about the autumn of 1962 shipping markets recovered and hull sizes grew larger still. With other firms starting to build new yards one after another, Kawasaki Heavy Industries had also been looking for a site since about the summer of that year. Consulting president Nishiyama Yataro (西山弥太郎) of Kawasaki Steel, it was recommended the E district on the west side of the Takahashi river at Mizushima in Okayama prefecture, where reclamation was already under way. The land was cheap, but investigation showed the sludge layer was relatively thick and the works would be considerably difficult.

In July 1964 Sunano, together with Managing Directors Kato and Hasegawa (長谷川), called on Governor Miki (三木) at the prefectural office to decline, saying the works would take a long time and the site could not be reclaimed at the price offered. The governor replied that however much it cost, the prefecture would carry out the reclamation for them at the price offered and they need not worry. But a shipyard needed close to 1.2 million square metres of land including the connection to the mainland, a breakwater was required because of the strong west wind, and $1.1M (¥400m) of fishery compensation would have to be advanced. Governor Miki died suddenly some three months later, in October. He had continued until then to call on president Nishiyama to ask that the decision be reconsidered.

What emerged in its place was Bannosu in Kagawa prefecture, an approach made through Nakagawa Yukiyoshi (中川以良) of Shikoku Electric Power. The disused salt fields first inspected there had a sludge layer as thick as Mizushima's, but Bannosu itself came under consideration because Daikyo Oil, which had been due to move in, happened to cancel. Being a sandbank, the ground showed at low tide, and the reclamation could use spoil dredged from the Bisan Strait, so the cost of the works was low; the area needed was also smaller than Mizushima's, at 770,000 square metres. Kagawa prefecture attached the further condition that it would reclaim the land to suit the shipyard's layout. The decision to go ahead was taken at the very end of 1964, and in April 1967 the keel-laying ceremony was held for the first ship, a 120,000-deadweight-ton tanker for Kawasaki Kisen. The Sakaide works has a building dock of 350,000 tons and a repair dock of 500,000 tons.

The three-company merger, and the end of across-the-board allocation

Sunano, who had returned from Kawasaki Aircraft to Kawasaki Heavy Industries in December 1959, had settled on the view that the two companies ought to merge. He put it to president Nishiyama of Kawasaki Steel that the Kawasaki group could not develop while it stayed scattered, and that Nishiyama — with the largest capital and as the senior figure — should raise the flag and drive a grand consolidation of the Kawasaki companies. Nishiyama, absorbed in the move into Chiba, would not listen. In 1966, joining the Oya mission (大屋ミッション) sent to observe the structure of European companies ahead of capital liberalisation, Sunano found a view common to leading figures in every country: that the strength of a company organised on a single-nation scale would not survive even within the EEC economic area, still less stand against the giant capital of the United States. Both Sunano and Managing Director Hasegawa, who travelled with him, came away convinced that companies had to grow very large.

In January 1968 Sunano put it to Yotsumoto Kiyoshi (四本潔), president of Kawasaki Aircraft Industries, that the time for a merger seemed to have come at last, and Yotsumoto asked what would be done about rolling stock. Sunano answered that if president Ueda would join them it would be all the more desirable, and when Yotsumoto conveyed this to Ueda Masao (上田将雄), president of Kawasaki Rolling Stock, Ueda agreed. After the three men had talked for a little over an hour the merger was settled in principle at a stroke. Kawasaki Rolling Stock was then paying a 12 per cent dividend and its business was stable, so its participation had been thought unlikely. Concrete discussions began in January 1968, the merger was formally announced on 19 March, and it took effect on 1 April 1969. Annual revenue after the merger was expected to be about $472.2M (¥170bn).

In the early period after the merger, harmony came first. Of the five-year plan drawn up in 1969 and running to 1973, president Yotsumoto said that because his chief aim was to bring the three companies into accord, the allocation of management resources had inevitably been spread across the board. The new plan beginning in fiscal 1971 therefore shifted to concentration: alongside ships and plant engineering, it placed labour-saving machinery — automatic control equipment, industrial robots, NC machines, automatic conveyors and unmanned warehouses — among the priority sectors. Four fields were chosen as strategic sectors to be nurtured: aircraft, ocean development, large civil-engineering and construction machinery, and nuclear power. Revenue for fiscal 1975 was set at $2.1B (¥626bn), 2.54 times the $683.6M (¥246bn) actually recorded in fiscal 1970, and in April 1972 the company merged Kisha Seizo. In 1976 it began selling industrial gas turbines to civilian customers, from 1977 it embarked on full-scale rationalisation, and in June 1978 it started licensed production of the P-3C anti-submarine patrol aircraft.

Leaving the order-taking model: four principles from a motorcycle man

Overseas business widened through the 1990s: in March 1990 production of aircraft parts for Boeing moved into full swing, and in 1997 the company began building subway cars for the New York City Transit Authority. In June 2000 Tazaki Masamoto (田崎雅元) became the first career motorcycle man to take the presidency. Tazaki had joined Kawasaki Aircraft Industries in 1958, gone to the United States in 1965 to set up a motorcycle parts and service centre in Chicago, and served from 1981 as president of Kawasaki Motors Corp., U.S.A. In heavy machinery the customer decides the specification, the delivery date and the price, and the maker answers on cost through its production engineering. General-purpose products centred on motorcycles are the opposite — a catalogue business, in which product appeal, market orientation and a worldwide sales and service network are what count.

Immediately after taking office Tazaki emailed the entire workforce to urge four basic principles: moving from a business that passively supplies products at low prices to one that opens up markets with the power to propose; deploying management resources horizontally across the whole company; lowering the break-even point by valuing the quality of orders rather than chasing their volume; and pursuing alliances, plant consolidation, spin-offs and M&A actively. What the previous president, Kamei Toshiro (亀井俊郎), had looked for in Tazaki was the same shift in constitution, from an order-taking company to a proposing one. The reshaping of the business did begin: in September 2001 the company scrapped its planned shipbuilding combination with IHI, and in October 2002 it separated the ship business as Kawasaki Shipbuilding and transferred the precision machinery business to Kawasaki Precision Machinery.

The combination collapses, and the portfolio narrows

The spin-offs continued: in April 2005 the plant business went to Kawasaki Plant Systems and the crusher business to Earth Technica, and in April 2009 the construction machinery business moved to KCM. Then, in October 2010, the three companies — Kawasaki Shipbuilding, Kawasaki Precision Machinery and Kawasaki Plant Systems — were merged back in. In 2013, with the heavy engineering firms under pressure to reorganise against a shipbuilding slump and the so-called 2014 problem, and with a chain of industry restructuring such as the creation of JMU by the JFE and IHI groups, Kawasaki Heavy Industries negotiated a business combination with Mitsui Engineering & Shipbuilding. The concept was to fold both companies' shipbuilding divisions into JMU under Kawasaki's lead.

The negotiations were blocked by opposition inside the company. On 13 June 2013 an extraordinary board meeting voted ten to three to remove president Hasegawa Satoshi (長谷川聰) and two others, and broke off the talks. Internal governance and the view taken of the business portfolio, rather than the economic logic of the combination, settled the outcome. His successor as president, Murayama Shigeru (村山滋), turned the company towards management that gives weight to return on invested capital, and narrowed the portfolio. In October 2015 it transferred all shares in KCM to Hitachi Construction Machinery and withdrew from construction machinery, and in March 2017 it began structural reform of the ship and offshore business. The removal was a revolt staged ahead of the annual general meeting, and an unusual way for matters to be settled in the heavy engineering industry.

In June 2016 Kanehana Yoshinori (金花芳則) came from the rolling stock division to the presidency. Carrying on Murayama's line, Kanehana saw his company's weakness in its name recognition. I was posted in Britain for six years and the United States for fourteen, but outside motorcycles our recognition abroad is not that great. The image is plain, too, he said (Shukan Toyo Keizai, 27 August 2016). Setting out to strengthen the company's voice by combining technologies, he described tying hydraulic technology — capable of greater force than an electric motor — to robots. In cost reduction, the production efficiency system used in motorcycle manufacturing was applied to aircraft. When the company joined the joint development of the Boeing 787 in 2004 and 2005 the rate was near ¥110 to the dollar; as the yen then strengthened to around ¥80, this application made it possible to withstand a rate as strong as ¥90.

Betting on hydrogen, and the misconduct exposed in defence

In June 2020 Hashimoto Yasuhiko (橋本康彦), from the robot division, took the presidency. For the year to March 2021 the aerospace systems segment, and the motorcycle and engine segment that includes large motorcycles, were among those forecast to fall into loss. Hashimoto drew up Group Vision 2030 in November 2020, merged the ship and offshore segment into the energy and environmental plant segment in April 2021, and in October that year transferred the rolling stock business to Kawasaki Railcar Manufacturing and the motorcycle and engine business to Kawasaki Motors. Executive vice-president Yamamoto Katsuya (山本克也), in charge of finance, said of the spin-offs that returning to profit next year is an absolute requirement (Shukan Toyo Keizai, 23 January 2021). Against a target of an 8 per cent operating margin in fiscal 2030, the figure actually recorded in fiscal 2019 was 3.7 per cent. On stacking up measures within a year of taking office, voices were raised from a shop floor with much long-lead work asking whether this was not overhasty.

In energy the company made its concentration on hydrogen explicit. We have all but given up nuclear power, and we have no large thermal either. In that sense we have turned the wheel entirely to hydrogen, Hashimoto said (Shukan Toyo Keizai, 12 February 2022), putting the scale of the hydrogen-related business at ¥300bn in 2030 and ¥2tn in 2050. The company built the Suiso Frontier (すいそ ふろんてぃあ), the world's only liquefied hydrogen carrier, and the standards being drawn up by the International Maritime Organization are also being considered on the basis of this ship. When the use of LNG began in the 1970s Kawasaki was on the side importing technology that others held abroad; with hydrogen it aims to reverse the order and earn by granting licences. The personnel system was also changed from fiscal 2021, abolishing pay rises and cuts tied to age and introducing role-grade assessment on a company-wide standard. Hashimoto had made a similar proposal around 2017 without progress, and reflected that the pandemic was what triggered it.

In 2024 misconduct in the defence business came to light. In the submarine repair business the company created a slush fund through fictitious transactions with a supplier, and used it to supply Maritime Self-Defence Force personnel with tools, gift vouchers and entertainment. Submarines are an oligopolistic market in which orders alternate every other year with Mitsubishi Heavy Industries, and at the Kobe works MSDF crews had been working alongside the yard for months at a time. A tax investigation by the Osaka Regional Taxation Bureau in late February that year uncovered the fictitious transactions, and a tax expense of $4.3M (¥600m) was recorded in the fiscal 2023 annual securities report. The Ministry of Defence decided on a special defence inspection in July. In August falsification of inspection data for marine engines also came to light, and in November a defence business management headquarters reporting directly to the president was set up. The final report of 30 July 2025 saw more than ninety people disciplined, including the Chief of Staff of the Maritime Self-Defence Force, and in December that year the ministry imposed a two-and-a-half-month suspension from bidding.