Unknown to most, forgotten by others, Toyota Boshoku Corp., the corporate forebear of Toyota Motor Corp., has emerged from the shadows onto center stage of Japan's automotive world.
A major restructuring has thrust the one-time cotton-spinning company into third place among suppliers to Japan's automotive giant, trailing only Denso Corp. and Aisin Seiki Co. Ltd.
Toyota Boshoku sales last year grew to a record ¥877.6 billion ($7.6 billion), 20 times higher than a decade ago and seven times the revenue reported as recently as fiscal 2003, just prior to the company's October 2004 3-way merger with seat and trim supplier TakaNichi Co. Ltd. and the seating operations of Araco Corp.
This year's forecast calls for further growth to ¥950 billion ($8.3 billion).
Meanwhile, operating profits rose from ¥5.3 billion ($46 million) in fiscal 2003 to ¥33.8 billion ($294 million) last year, placing the company among Japan's 10 most profitable suppliers.
By almost any measure, Toyota Boshoku, based in Kariya, should have ceased to exist in the mid-1990s, been absorbed by a larger supplier or forced to enter into a joint venture to achieve some sort of synergy through increased size and scale.
The company had a weak balance sheet, with little cash available for acquisition of new technology and growth, and barely 20 years' experience making auto parts, much of that with the active support of Denso.
And it remained too dependent on woven materials for car seats, seatbelts and airbags, all of which could be sourced more cheaply from Southeast Asia and China.
One of the few things the company had going for it was its linkage to Toyota, which at the time owned 9% equity. Even more important was its personal ties to the highest reaches of Toyota management, then-Chairman Shoichiro Toyoda and former Honorary Chairman Eiji Toyoda.
Toyota Boshoku was founded by Sakichi Toyoda, loom inventor and entrepreneur, as well as the family patriarch, uncle of Eiji and grandfather of Shoichiro. Toyota Boshoku was the first Toyota company, founded in 1918 to produce cotton cloth at a small mill in Nagoya, Japan.
During World War II, the company was dissolved. It was reborn under another name in 1950 and finally reclaimed its original name in 1967.
By the time the dollar fell to ¥100 levels in the mid-1990s, analysts openly were skeptical about Toyota Boshoku's prospects for survival, though most knew intuitively Toyota never would allow it to go under.
Ironically, it was an outsider, Renault SA/Nissan Motor Co. Ltd. CEO Carlos Ghosn, and his spring 2000 Nissan restructuring plan that inspired Toyota to introduce a cost-cutting plan of its own and ultimately do something with Toyota Boshoku.
Shortly after completion of that plan, dubbed CCC21 for Construction for Cost Competitiveness for the 21st Century, Toyota created a new company combining the assets of Toyota Boshoku, TakaNichi (previously known as Takashimaya Nippatsu Industries Co. Ltd.) and Araco's seating unit.
Between them, Araco, with more than ¥400 billion in sales ($3.4 billion) prior to the merger, and TakaNichi had more than 15 overseas manufacturing plants.
In addition to making seats for Toyota, Araco also assembled SUVs such as the Toyota Land Cruiser and Lexus LX 470. After the deal, Araco's vehicle assembly business was transferred to Toyota Auto Body Co. Ltd., another group company, while it and TakaNichi formally disappeared as corporate entities.
Meanwhile, Toyota raised its equity stake in Toyota Boshoku to 41.6%.
Former Toyota executive Masano Motonami would be point man for the undertaking, first as president of Araco from June 2001, then as president of Toyota Boshoku from October 2004. In July, he stepped aside for Shuhei Toyoda in another highly symbolic move linking the company's past to its future.
Shuhei is Eiji's youngest son. His older brother, Tetsuro, is president of Toyota Industries, while Shoichiro's son, Akio, is now one of eight Toyota executive vice presidents and reportedly is being groomed for president after Katsuaki Watanabe completes his term. Shuhei served as president and CEO of Toyota Motor Europe before joining Toyota Boshoku.
Interviewed shortly before Shuhei Toyoda's accession, Motonami told Ward's Toyota Boshoku's goal “is to become a global supplier of automotive interiors. We aren't there yet, as we almost exclusively supply Toyota and Daihatsu (Motor Co. Ltd.), but we certainly hope to broaden our customer base in the future.”
In 2005, the company through its Mexican subsidiary, Araco de Mexico, S.A. de C.V., won its first seating contract with General Motors Corp. for the Chevrolet HHR cross/utility vehicle. More business is believed to be in the pipeline.
Meanwhile, management just held the groundbreaking for Toyota Boshoku's first Canadian plant in Woodstock, Ont.
Scheduled to begin operations in 2008, the 269,100-sq.-ft. (25,000-sq.-m) facility represents an estimated investment of C$65 million ($57.9 million) and is slated to produce seats, door trim and carpet for up to 150,000 vehicles. Initial production is earmarked for Toyota's RAV4 CUV to be built at Toyota Motor Mfg. Canada Inc.'s nearby Cambridge, Ont., plant.
