Toyo Kogyo, the Mazda-maker, is back in the black
''To me, the most important element in management is the human being,'' said Yoshiki Yamasaki, president of Toyo Kogyo, the world's ninth-largest automobile manufacturer (and third-largest in Japan).
''You can have the best plans in the world, you can have the most marvelous equipment. But it is people that carry out the plans and use the equipment. Without willing workers, you have nothing. So the first essential is to treat people with consideration.''
Toyo Kogyo, which sells cars under the brand name of Mazda, has gained global fame as the only car manufacturer to successfully develop and commercialize the Wankel rotary engine (named after its German inventor, Felix Wankel).
It may be even better known for having almost gone bankrupt in the mid-1970s. But it has since risen, phoenix-like, through the collective teeth-gritting efforts of its employees and the wholehearted support of its main bank, Sumitomo.
Representatives of Sumitomo still sit on Toyo Kogyo's board of directors and play an active role in its management. Since November 1979, 24.44 percent of Toyo Kogyo's shares have been held by the Ford Motor Company of the United States, making Ford by far the company's largest single shareholder.
In Japan, a country which prizes homogeneity, such diversity on the board is rare. One of Mr. Yamasaki's chief tasks as president has been to have all Toyo Kogyo's 28,000 employees understand that top management is not some three-headed monster, but a group pulling together for the sole purpose of making Toyo Kogyo a better company.
Mr. Yamasaki, a 68-year-old engineer trained at what is now the engineering faculty of Hiroshima University, has worked all his life for Toyo Kogyo. Jujiro Matsuda of Hiroshima started the company as a cork factory in 1920. Mr. Yamasaki worked for three generations of the Matsuda family.
Toyo Kogyo has undergone a transition from being run by a family to being run by a group. What does that mean in Japan, where a person expects to be with one company for life and give it his entire loyalty?
''Well,'' said an insider, who has worked for Toyo Kogyo for 26 years and who today occupies an important executive position, ''an employee's loyalty is to his company as an organization. He will follow the leadership as long as it is successful. The third Matsuda generation was not successful. Of course, many employees felt sorry for the Matsudas. But everyone who heard Mr. Yamasaki's (December, 1977) speech as incoming president had no doubt times were desperate, the company's survival was at stake. He spoke of his determination to do his best and appealed to us to do likewise, and I think all the employees responded to the transparent sincerity of his appeal.''
The crisis of the mid-1970s cannot really be blamed on a single individual, although some employees talk of the third-generation Matsuda's tendency to resort to one-man decisions. It was a direct result of the 1973 oil shock, which came just as Toyo Kogyo, having staked its future on the Wankel rotary engine, seemed finally to have developed it into a commercially viable engine.
Toyo Kogyo bought the original Wankel technology from NSU-Wankel of West Germany in 1961. Toyo Kogyo was then making minicars, light trucks, and three-wheelers, and struggling to progress into the big leagues. When he heard from a German friend of the Wankel engine, Tsuneji Matsuda, the second Toyo Kogyo president, felt this was it - the rotary engine would establish a unique image for his company.
By 1967 Toyo Kogyo had put a rotary-powered car on the market, and in 1970 it began exporting them to the US. Powerful, but quiet and light, the rotary engine caught the imagination of the American public. Its only drawback was that in order to control emissions, it had to sacrifice fuel efficiency. When the oil crisis of 1973 hit unprepared Western nations, this drawback nearly proved fatal.
US sales plummeted, inventories bulged, and in the 1974-75 fiscal year, Toyo Kogyo suffered an operating loss of 17.3 billion yen ($72 million) and a net loss of 1.7 billion yen. That year sales turnover totaled $2.163 billion. Accumulated debts, long- and short-term, amounted to $1.559 billion.
This was when Sumitomo, Toyo Kogyo's main bank, stepped in. It called in the 62 banks and insurance companies that had supplied credit to Toyo Kogyo and assured them Sumitomo would stand by the company no matter what. It also assured them all creditors would share equally in future repayment of Toyo Kogyo's loans. It put key Sumitomo officials on Toyo Kogyo's board and replaced Kohemi Matsuda, who had succeeded his suddenly deceased father as president in November 1970, with Mr. Yamasaki. But Mr. Matsuda was not kicked out without ceremony. He was moved to the titular position of chairman of the board and then, in January 1980, to an advisory directorship.
There were no employee layoffs. But the number of workers, which peaked at nearly 37,000 in 1974, was brought down by natural attrition to the present 28, 000. Furthermore, as an emergency measure, 5,000 employees, both blue and white collar, were shifted to sales. Their basic wages were paid by the company, but sales bonuses came from the dealers to whom they were farmed out.
The rotary engine was not abandoned, but conventionally powered cars were developed for the mass market, one of them being the immensely successful Familia. As Kenichi Yamamoto, senior managing director in charge of advanced technology recalled in a speech last year: ''We could not abandon the rotary engine. We had a special responsibility to many rotary-engine customers who had already placed their trust in us.''
There followed ''five long, tough years'' during which the rotary engine was refined and installed in a new sports car, the RX-7, with a 30 percent improvement in fuel economy over the 1974 engine.
Today Mazda is the only car manufacturer in the world that produces all three types of internal combustion engines - piston, diesel, and rotary - piston engines for economy-minded general passenger cars, diesels for trucks and some passsenger cars, the rotary for sports cars.
''Of course, if we can achieve a rotary engine that outperforms piston engines in terms of fuel efficiency, we may go over to the rotary entirely,'' say President Yamasaki. But he does not expect this to happen for many years. At present rotary engines account for 6 percent of Toyo Kogyo's total sales.
With Mr. Yamasaki at the helm and Sumitomo-supplied executives in key sales and accounting areas, Toyo Kogyo's recovery progressed step by step. Waste was eliminated and production made more efficient. The number of cars produced per employee rose steadily, from 19.3 in the crisis year of 1975 to 30 in 1978 and 45.7 in 1981. Workers sent out as salesmen were brought back. The hiring freeze was lifted.
Last year, Mr. Yamasaki noted in the annual report, Toyo Kogyo produced 6.3 percent more cars than the previous year. Export sales reached 869,566, a 13.9 percent jump. Total revenues came to nearly $5 billion, and net after-tax income to nearly $85 million, up 5.2 percent from the previous year.
Toyo Kogyo has been restored to sound health. But Sumitomo and Toyo Kogyo realize that for a car manufacturer of this size to survive in the world market, some form of capital cooperation with a larger company is essential. That is the rationale for the hefty Ford stake in the company. Toyo Kogyo now has an assured market for some of its engines and auto parts in the US, while Ford gets an important business partner for its world strategy.''We want this link to have benefits for both sides greater than if we continued on our own,'' says Mr. Yamasaki.
''We want two plus two to add up to five.''
Mr. Yamasaki says his style of management is to let his top executives argue out their views and then reach a decision, sometimes immediately, sometimes repeating the exercise several times until something close to consensus is reached.
In contrast to his immediate predecessor, he feels it is important to heed opinions from his subordinates, especially those on the production side. He knows some executives look down on ''bottom-up'' decisionmaking as reflecting a lowest-common-denominator type mentality, that fear of offending superiors keeps most subordinates from preparing and defending bold, controversial proposals.
''But don't forget,'' Mr. Yamasaki said, ''that in production, it's the people on the shop floor who know the best. We neglect their views at our peril.''
Mr. Yamasaki also knows that in a consensus-oriented society, the kind of cantankerous genius who might come up with a totally unexpected and brilliant invention is likely to be shoved aside.
''Every enterprise needs one or two of these people, however difficult it may be to get along with them. They aren't any good as line officers, but when I find one, I try to set him up as a specialist and let him work on whatever he wants.''
In the end, it is the president who has to decide. The biggest lesson learned from the crisis of the mid-'70s, Mr. Yamasaki says, is that superior engineering alone is not enough to keep a company prosperous.