Ataka & Co.
Corporate History & Strategy

In July 1909, Yakichi Ataka, then 31 years old, founded 'Ataka Shokai' as a sole proprietorship in Funakoshi, Osaka, with the aim of entering the trading business. The firm had approximately 10 employees, composed of staff who had previously worked with Ataka at the trading organization 'Nisshin Yoko.' A branch was established in Hong Kong as an overseas base, and in the early days, the main merchandise consisted of importing American products from Hong Kong to Japan and exporting cotton goods from Japan to Tianjin, China. At its inception, Ataka Shokai was a small-scale trading firm, with a significant gap in business scale compared to the major zaibatsu-affiliated trading companies.

Subsequently, the firm's main product line converged on the import of bullion (lead, zinc, tin, copper, antimony). Leveraging the favorable conditions of Hong Kong—a hub for active bullion trading—the firm established a business model of procuring bullion from overseas and supplying it to domestic Japanese manufacturers. By the Taisho era, the firm had become known in the industry as 'Ataka of Bullion,' establishing a firm position in the field of bullion imports. By concentrating on a narrow range of products, Ataka Shokai secured its footing as a specialized trading company during its founding period.

The customers to whom Ataka Shokai supplied bullion included leading Japanese manufacturers such as Sumitomo Electric Wire (lead, copper), Fujikura Electric Wire (lead, copper), Nippon Paint and Sakai Chemical (zinc), Sumitomo Copper Rolling Works (copper), and Kawasaki Shipyard and Yawata Steel Works (tin). From its founding period, the firm conducted direct transactions with leading domestic manufacturers, and these relationships became a distinctive feature of Ataka Shokai's business. While major zaibatsu-affiliated trading companies focused primarily on overseas trade, Ataka Shokai placed its center of gravity on domestic manufacturer transactions.

Through these transactions, Ataka Shokai steadily expanded its domestic sales network and customer base. Unlike major trading companies with numerous overseas offices, Ataka Shokai consistently adopted a policy of using relationships with domestic manufacturers as the starting point for its business. These ties to domestic manufacturers later became the foundation upon which Ataka Sangyo expanded its handling of raw materials such as steel, timber, and pulp.

The outbreak of World War I in 1914 caused a worldwide shortage of goods, and for Japanese trading firms that were spared from the ravages of war, this represented a business opportunity. Ataka Shokai also benefited from the wartime boom, expanding its operations and broadening its range of business partners. As Japanese trading firms gained a greater presence in international markets amid the war, Ataka Shokai also reached a point where it needed to outgrow the scale of a sole proprietorship.

In 1919, Yakichi Ataka reorganized his sole proprietorship into a joint-stock company, establishing 'Ataka Shokai Co., Ltd.' and transitioning to a modern corporate structure. Incorporation opened up means of capital procurement and formalized the employment structure. Thereafter, Ataka Shokai expanded its product lineup, and in 1943 changed its name to 'Ataka Sangyo,' beginning its full-fledged journey toward becoming a general trading company.

Throughout the prewar era, Ataka Sangyo pursued a policy of expanding domestic transactions centered on relationships with Japan's leading manufacturers, rather than overseas trade. In steel, the company dealt with Nippon Steel (Yawata Steel Works); in industrial machinery, with Tsudakoma and Hitachi; in chemical fertilizers, with Nippon Chisso and Ibiden; in pulp, with Oji Paper; and in woolen textiles, with Nippon Keori—procuring from top manufacturers across various industries. The broad range of manufacturer relationships formed the foundation of Ataka Sangyo's domestic sales base.

In the 1930s, Ataka Sangyo became the authorized agent for Gleason, a prominent American machine tool manufacturer, and took on the domestic sale of Gleason machines. The sales destinations were invariably domestic Japanese manufacturers, and Ataka Sangyo's emphasis on its domestic customer base was consistent even in its role as agent for foreign manufacturers. The approach of expanding business areas horizontally, with domestic manufacturer relationships as the starting point, was Ataka Sangyo's fundamental prewar strategy.

Among the various products it handled, steel trading held extraordinary importance for Ataka Sangyo. In 1926, Ataka Sangyo was certified as a designated merchant by the government-run Yawata Steel Works (later Nippon Steel), becoming one of the trading companies authorized to sell its steel products. Designated merchant status was a privileged position limited to major zaibatsu firms such as Mitsui Bussan and Mitsubishi Shoji, and it was significant that non-zaibatsu Ataka Sangyo obtained this certification.

The primary customers for the steel that Ataka Sangyo sold as a designated merchant were shipbuilding manufacturers, led by Kawasaki Heavy Industries (formerly Kawasaki Steel and Kawasaki Shipyard). Japan's shipbuilding industry expanded throughout the prewar era, and by functioning as an intermediary between steel manufacturers and shipbuilders, Ataka Sangyo secured stable transaction volumes. Trading with Yawata Steel became a pillar of revenue as Ataka Sangyo grew into a general trading company.

In addition to manufacturer transactions, Ataka Sangyo also expanded its business into timber imports. Throughout the prewar era, it built a system for importing timber from Manchuria, Sakhalin, and the South Pacific, developing it into a major product category alongside steel. The broad range of products in the raw materials field formed the foundation for Ataka Sangyo's future ambitions of becoming a general trading company.

By this point, Ataka Sangyo had grown into a trading company handling a diverse array of products spanning steel, machinery, chemical fertilizers, pulp, woolen textiles, and timber. In every product category, direct transactions with leading domestic manufacturers formed the base, and this sales network was the source of Ataka Sangyo's competitive strength. After the war, as production volumes at each manufacturer expanded with Japan's economic recovery and high-growth period, Ataka Sangyo's transaction volumes also expanded in tandem.

After the 1956 stock listing, the largest shareholders of Ataka Sangyo were Sumitomo Bank (5.0%) and Tokyo Marine Fire Insurance (5.0%) in a tie, with Eiichi Ataka (eldest son of founder Yakichi Ataka, 2.29%) ranked third. The Ataka family's shareholding was well below the 50% considered necessary for controlling interest, yet the family continued to behave as the de facto owners of Ataka Sangyo. A significant gap existed between the founding family's stock ownership ratio and their actual influence over management.

In 1955, Eiichi Ataka became chairman of Ataka Sangyo, and until the company's collapse in 1977, he controlled the company's key personnel decisions. Numerous employees who had joined through the founding family's scholarship program were on staff at Ataka Sangyo, and Eiichi Ataka appointed these individuals, known as 'Ataka Family members,' to key positions. A surveillance system was reportedly in place to prevent employees deemed unfavorable by the Ataka family from being promoted to section chief or higher.

After Eiichi Ataka's appointment as chairman, it became the norm for Ataka Sangyo's management to be dictated by the founding family's wishes. A confrontational structure emerged between non-Ataka family presidents and Ataka Family members, creating governance problems. The founding family's de facto exercise of personnel authority without holding corporate control rendered Ataka Sangyo's organizational management personalistic and opaque.

In addition, the Ataka family's diversion of company funds for personal use was reportedly rampant. According to contemporary reports (Gekkan Keizai, March 1976 and July 1976 issues), Eiichi Ataka's son (then executive vice president) used 10 to 15 million yen per month in entertainment expenses and purchased over a dozen classic cars from overseas with company funds. Eiichi Ataka himself assembled the 'Ataka Collection' of approximately 1,000 ceramics (including 2 National Treasures and 12 Important Cultural Properties) using company funds, among other expenditures unrelated to the business.

The Ataka family's personal use of company funds continued over many years, and by the time of the 1977 collapse, Ataka Sangyo's unaccounted funds reportedly exceeded 10 billion yen. The accumulation of expenditures unrelated to the business unknowingly eroded the company's financial base. The founding family's personal extravagance has been cited as one factor in Ataka Sangyo's inability to maintain financial reserves during its later management crisis.

Ataka Sangyo's governance structure was a distorted form in which a founding family with a minority stake effectively controlled personnel decisions and the use of funds. Despite being a listed company, external checks and balances did not function, and the main bank tacitly accepted the founding family's management involvement. This governance problem would cast a shadow over the decision-making process when Ataka Sangyo heavily invested in the NRC project in the 1970s.

In October 1973, the oil crisis erupted, and Middle Eastern crude oil prices skyrocketed abnormally. The surge in crude oil prices dealt a direct blow to NRC's refinery, which used Middle Eastern crude as its raw material. The price competitiveness of refined aviation fuel was lost, and NRC's refinery utilization rate fell to 70%. As the unprofitable situation continued, NRC went bankrupt, with total liabilities amounting to $570 million.

Ataka Sangyo had extended massive loans to NRC through its subsidiary Ataka America. In addition, of the $500 million in crude oil already sold to NRC, only $130 million could be recovered, and most of the remainder became bad debts. The bankruptcy of a single business partner, NRC, directly impacted Ataka America's finances.

What made the crisis decisive for Ataka Sangyo was the existence of the '10-year oil purchase contract' with BP. Even after NRC went bankrupt, BP continued to demand fulfillment of the contract, meaning Ataka America had to continue purchasing crude oil at inflated prices. The company found itself in the worst possible situation for a trading company: the purchasing obligation remained even though the customer had ceased to exist.

The entity that directly bore the losses from the NRC project was Ataka America, a 100%-owned subsidiary of Ataka Sangyo. Ataka America's financial situation for fiscal year 1974 showed capital of 8.3 billion yen against revenue of 386.7 billion yen, ordinary income of 480 million yen, net income of 190 million yen, and borrowings of 170 billion yen. The ratio of borrowings to net income reached approximately 100 times, making self-rehabilitation impossible.

Since Ataka America's debts were consolidated into parent company Ataka Sangyo, the subsidiary's financial collapse directly impacted the parent's creditworthiness. Ataka Sangyo's NRC-related losses were reported to range from 50 to 150 billion yen, and the company was forced to request additional financing from main banks Sumitomo Bank and Kyowa Bank. However, both banks judged that rescuing Ataka Sangyo was not feasible and refused the additional financing.

For Ataka Sangyo, which had pursued large-scale projects dependent on borrowings, the main banks' refusal to lend was fatal. Having incurred losses far beyond what its equity could cover, with new borrowing now impossible, Ataka Sangyo's insolvency was effectively sealed. The vast majority of Ataka Sangyo's employees were engaged in work unrelated to NRC, and the company's management crisis was an unexpected turn of events for most staff.

Ataka Sangyo's management crisis became publicly known through a scoop published in the morning edition of the Mainichi Shimbun on December 7, 1975. The article reported on the massive losses stemming from the NRC project and revealed that Ataka Sangyo was on the brink of collapse. Following this report, Ataka Sangyo's management crisis became a publicly acknowledged fact both inside and outside the company.

Internally, the report triggered widespread unease. The NRC project had been an initiative pursued by one department at the US operation, and for employees in core divisions such as steel and timber, the transaction was entirely unrelated to their work. Yet the losses from that single project had ballooned to a scale threatening the entire company's survival, plunging Ataka Sangyo into a full-blown management crisis.

After the report, credit concerns spread among Ataka Sangyo's business partners and creditors, and a simultaneous contraction of commercial transactions and tightening of cash flow ensued. Although Ataka Sangyo's management attempted to bring the situation under control, domestic real estate investment losses were also revealed alongside the NRC-related bad debts, and it became clear that Ataka Sangyo's liabilities were even larger than initially estimated.

In the fiscal year 1976, Ataka Sangyo recorded an unprecedented net loss of 133 billion yen. Its financial condition had deteriorated to the point where independent survival as a company was impossible, and Ataka Sangyo's bad debts were reported to exceed 200 billion yen. Of this, approximately 100 billion yen was attributable to the collapse of the NRC project, but the remaining approximately 100 billion yen was revealed to be losses from domestic real estate investments.

While attention focused on NRC-related losses, the revelation of domestic real estate bad debts demonstrated that Ataka Sangyo's management control problems were not limited to NRC. The simultaneous emergence of losses in the different fields of oil projects and real estate investment caused Ataka Sangyo's liabilities to significantly exceed initial estimates.

Concerned that Ataka Sangyo's collapse might ripple through the broader Japanese economy, financial authorities and main banks began formulating a coordinated rescue plan. A syndicated lending group of 16 banks was formed, centered on Sumitomo Bank and Kyowa Bank, and total lending to Ataka Sangyo reached 264.6 billion yen. The burden on main bank Sumitomo Bank was particularly heavy, as it wrote off 113.2 billion yen in bad debts in a single year in fiscal 1977.

On October 1, 1977, Ataka Sangyo was absorbed by Itochu Corporation, bringing to an end 68 years of history since its founding in 1909. Itochu Corporation would have preferred to avoid the merger, but was placed in a position where it had no choice but to proceed due to strong pressure from Sumitomo Bank and Kyowa Bank, which were also Itochu's main banks. A framework was adopted in which Ataka Sangyo's debts were processed through coordinated lending from 16 banks while Itochu took over the business operations.

However, Itochu did not take on all of Ataka Sangyo's divisions—it selectively absorbed only the competitive departments. Of Ataka Sangyo's 3,681 employees, only 1,058 were accepted by Itochu. Whether one could transfer to Itochu became the focal point for employees, and fierce competition unfolded among staff for the limited number of permanent positions.

Approximately 2,000 employees who could not transfer to Itochu accepted voluntary retirement and left Ataka Sangyo. The mass loss of employment by people who had been regarded as elite employees of a major general trading company sent shockwaves through Japan's salaryman society, where lifetime employment was becoming established. Ataka Sangyo's collapse and restructuring brought into sharp relief the reality that employment at a large company was not in itself a guarantee of livelihood security.

Ataka Sangyo's collapse was exceptional in scale for a postwar Japanese corporation and was counted among the top ten news stories of that year. The process by which a general trading company—an enterprise with high social prestige—came to collapse captured public attention with its dramatic twists, reminiscent of a corporate novel. The many books published about Ataka Sangyo that were widely read reflected the fact that Ataka Sangyo's collapse was not someone else's problem for Japan's salaryman class.

In 1980, NHK broadcast 'The Trading Company (Za Shosha),' a fictional drama modeled on Ataka Sangyo's collapse, and the story of Ataka Sangyo became widely known through visual media as well. →Link to NHK's 'The Trading Company' The series of events—founding family control of management, concentrated investment in a large project, the relationship with the main bank, and mass layoffs—has been handed down as a case study that encapsulated the structural problems of Japanese-style management.

The lessons from Ataka Sangyo's collapse include: first, the governance distortion of a founding family with a minority stake effectively controlling management; second, the fragility of large investments through excessive borrowing relative to equity; and third, the concentration risk of a business portfolio where the failure of a single project can threaten the entire company's survival. These issues were repeatedly referenced in subsequent corporate governance reforms in Japan.