A ¥120bn bet on the North American trade, and the exit from the six-line joint service (1986)

The company that sold its assets to buy ships

The character of this decision is caught in a single fact: it sold close to half its assets in order to buy ships. Its unrealized asset value was a little over ¥100bn against more than ¥1tn at NYK, so the route of working the balance sheet to buy time was narrow. What remained was to put four times its share capital into the very trade that was losing money, and to order large container ships at about ¥5bn each in the depth of a slump, when newbuilding prices had fallen. The talk of bankruptcy and the merger speculation were outsiders’ readings; inside the company the plan already ran as far as selling those ships to an overseas subsidiary five years later.

What the investment changed, though, was the company’s standing in North America, not its dependence on liner earnings. The ¥1.7bn profit of the year to March 1989 was gone within a few years; by the year to March 1994 K Line was back in ordinary loss, and president Shintani Isao had again put the elimination of losses in the liner division — 52% of sales — at the top of his agenda. The company survived, and it went on running its own container ships until 2018. Even so, the condition behind the line that it would “either go under or be absorbed” persisted for a long time, as a gap of scale.