Mazda - Company History

The disappearance of cork demand and the turn to machinery

In January 1920 Toyo Cork Kogyo was established as a rescue company bringing together the cork manufacturers of Hiroshima Prefecture[1]. It was set up in the expectation of demand for a substitute for the European cork imports that the First World War had cut off; when the war ended and imports recovered, that demand shrank and the company fell into difficulty almost immediately after its founding. In 1921, at the request of local interests, Matsuda Jujiro (松田重次郎) became its second president[2]. Born in Hiroshima in 1875, he was an inventor of machinery who had made pumps and fuses carrying the Matsuda name in Osaka[3], and he took the post bringing orders for precision machinery for the Navy with him. From 1922 the company mass-produced pressed cork board, but it suffered a plant fire in 1925[4] and struggled with the swings between busy and slack spells in the Navy work. Matsuda looked for a way out in a commercial vehicle to replace the horse-drawn cart, and pressed his son Tsuneji (松田恒次) and others to build a three-wheeled motor truck[5].

In September 1927 the company changed its name to Toyo Kogyo[6] and shifted the axis of its business to machine tools and three-wheelers. Machine-tool production began in April 1929, three-wheeled truck production in October 1931[7]. The Mazda-Go DA, which carried Matsuda’s surname, spread among small hauliers throughout the country[8], and for a long time the product name was better known than the company’s[9]. To prepare for growing output the 3,000-tsubo site became too cramped, so the company bought a 10,000-tsubo tract of reclaimed land along the Enko River at Fuchu village, at about ¥10 per tsubo, as the site of its main plant[10]. Those 10,000 tsubo were later expanded until they were only a small part of the works[11]. In October 1935 it also began producing rock drills[12], and together with machine tools its machinery division built technical strength approaching that of the specialist makers[13].

Recovery from war damage and a base built on three-wheeled trucks

On 6 August 1945 the atomic bombing of Hiroshima damaged the head-office plant as well. Its position at Fuchu, away from the city centre, meant that damage to equipment was comparatively light, and production of three-wheeled trucks resumed in December of the same year. Under occupation controls the company handed over its head-office buildings to serve as temporary offices for the Hiroshima prefectural government. In May 1949 it listed its shares on the Tokyo Stock Exchange[14], opening a route to raise from the market the funds the increased output of the recovery years demanded. Having taken up machine tools early proved a strength at a time when materials and equipment were scarce: no small number of the machine tools now in use are of our own making, and that is a great strength[15].

In 1953 the company completed a painting and assembly plant for three-wheeled trucks with capacity for 3,000 units a month, taking the leading position in the three-wheeled truck industry[16]. Matsuda Tsuneji looked back on the promulgation of the Military Vehicle Subsidy Law in 1918 as the point from which Japan’s domestic car market began to move in earnest[17]. In 1951 Tsuneji, the eldest son of Matsuda Jujiro, became president[18]. The mainstay three-wheeler market, however, was being pushed aside by small four-wheeled vehicles from the middle of the 1950s, and the industry was already talking of demand receding as four-wheel output rose in competition with it[19]. Toyo Kogyo launched a small four-wheeled truck in April 1958 and entered the four-wheel business[20].

Choosing to go it alone on rotary technology

In May 1960 Toyo Kogyo launched the R360 Coupe, a kei passenger car[21]. The KRBB version was priced at $833 (¥300,000), an unprecedentedly low figure among the kei four-wheeled passenger cars of the day, which stood close to ¥400,000[22]. In October of the same year it announced that it would take over the patent rights to the rotary engine from NSU of West Germany, dividing the field with NSU and Curtiss-Wright of the United States by making petrol and diesel engines of 200 horsepower and below its own area[23]. In February 1961 it concluded a technical tie-up with NSU and Wankel[24]. It launched a small passenger car in April 1964, completed the Miyoshi proving ground in May 1965 and, in November 1966, the Ujina plant dedicated to passenger cars inside the head-office works[25], moving from a maker of three-wheelers to a full-line car maker[26].

Bringing the rotary mechanism conceived by Dr Wankel to volume production was a hard problem. In 1963 the company set up a Rotary Engine Research Department with Yamamoto Kenichi (山本健一) as its first head, gathering about 47 engineers from across its divisions[27]. Yamamoto recalled in later years that an authority on internal combustion engines had dismissed the rotary as something that would never come to anything, and that the wind blowing on him inside the company was harsh as well[28]. Having solved the problems, beginning with the wear of the apex seals, on 30 May 1967 the company launched the Cosmo Sport, the world’s first car with a two-rotor rotary engine[29]. Total displacement was 491cc × 2, maximum output 110PS and top speed 185km/h[30]. When the government resolved in cabinet in October 1969 that capital liberalisation would take effect from October 1971[31] and the finished-car makers moved towards foreign tie-ups and mergers, Toyo Kogyo returned its own capital tie-up to a blank sheet and chose to go alone on its own technology[32].

How the oil crisis turned the rotary into a weakness

The first oil crisis of October 1973 thrust the rotary’s poor fuel economy in front of the market, and in January 1974 the US Environmental Protection Agency announced that a rotary engine consumed some 50 per cent more petrol than a reciprocating one[33]. In Japan too its poor fuel efficiency was reported[34]. Inventories at home and abroad swelled to 200,000 units, equivalent to three months of production[35], and sales of rotary-powered cars in the United States halved year on year. In the year to October 1975 the company fell to an ordinary loss of $57.9M (¥17bn)[36][37]. Losses that did not appear on the face of the accounts — $80.3M (¥24bn) of write-offs relating to the US sales company, repair costs for 80,000 defective vehicles and the like — ran to the order of $167.2M (¥50bn)[38].

Some 65,000 people depended on Toyo Kogyo and its first-tier subcontractors for their income; in Hiroshima City one person in four was said to be connected with the company, which accounted for roughly a fifth of the prefectural economy[39]. Being so embedded locally that it could not bring itself to cut staff even as results deteriorated was pointed to as an obstacle to the rebuild[40]. In October 1974 it accepted directors from Sumitomo Bank and Sumitomo Trust & Banking[41]. President Matsuda Kohei (松田耕平) described the arrangement as a pipeline for funds with a two-year limit, but from then on the company was placed under Sumitomo Bank’s direction[42]. The bank created a cost-control department, seconded staff to dealers and extended emergency loans, then sent its managing director Murai Tsutomu (村井勉) in as vice-president[43], hardening the rebuild from support into full custody. Isoda Ichiro (磯田一郎), the bank’s president, decided on the rescue on the grounds that letting Toyo Kogyo fail would put its employees out of work, break its subcontractors and devastate the Hiroshima economy[44].

As a plan to rebuild sales, the AM scheme was introduced, sending company staff out to dealers across the country; in December 1977 a policy was set out to widen secondments that had been running at a thousand-odd people on one-year rotations to 5,000 people on three-year terms[45]. On the ground, voices were raised: car selling is punishing work even in your twenties — for an amateur in middle age it is harder still, and the cohorts that followed went as if their turn had come round for conscription[46]. Isoda told Matsuda Kohei in June 1977 that he was being removed, and in December of that year installed Yamasaki Yoshiki (山崎芳樹), a career company man, as president[47]. With exports strong and domestic sales growing, the year to October 1978 produced a record ordinary profit of $74.6M (¥15bn)[48].