Licensing from three foreign brake makers, and an Iwatsuki plant costing several times the company’s capital (1960)

Borrowed technology, paid for ever after

What distinguishes this decision is that technology and plant were procured in different ways. The technology of the brake itself was borrowed under contract from three of the world’s specialist makers. The volume factory and the test course, by contrast, were built with Akebono’s own money, at several times its capital, however unreasonable that was. The asymmetry seems to rest on a reading that technology can be bought and had within a few years, while a factory and a trading relationship with customers cannot. The execution deserves recording too: the argument that had got Nobumoto Yasusada expelled in the mid-1950s was turned, in under a decade, into a 65% market share.

The borrowed technology, though, came with a long tail of payments. Royalties were calculated in proportion to Akebono’s sales, so Bendix’s patent income rose even as Akebono’s own designs displaced its licensor’s, and by the mid-1980s the bill was put at some $2.5M (¥600m) a year. While the tie-up lasted, the route to making and selling brakes in America alone was closed. The $3.3M (¥1bn) sunk into Iwatsuki was in sight of payback within a few years; the contract signed in October 1960 ran twenty-six years, until it lapsed in November 1986 — and to undo it Akebono needed its next gamble, the joint venture with GM.