Section 2. The Businesses of Sakichi Toyoda
Item 1. Setbacks at Toyoda Loom Company
Establishment of Toyoda Loom Company
In January 1906, the Shimasaki-cho Plant was completed, and Toyoda Shokai Office transferred from Buhei-cho to Shimasaki-cho. Several new models were released in succession, including the 1906 Toyoda Power Loom, the improved successor to the 1905 Type, and the compact loom, which simplified the warp halting device and other functions, and was affordable. The compact loom was popular as it was not only efficient, but also cost around half the price of conventional looms, and ended up outselling the 1906 power Loom.
All of the looms invented by Sakichi Toyoda, including the 1905 Toyoda Power Loom, were types of power looms known as narrow-width power looms.1 Widths of the looms ranged from 45.5 centimeters for the compact loom to 49.2 centimeters in the 1905 and 1906 power looms. Textiles manufactured using narrow-width power looms were sold in Japan, the Korean Peninsula, and China.
The textile testing plant at Shimasaki-cho operated 120 narrow-width power looms. With the Buhei-cho Plant already running 80 looms and the Nishishincho-Plant operating 100, the total number of looms in operation grew to 300. As a result, profits in the company's weaving department grew strongly and business was brisk.
The success of Toyoda Shokai's popular narrow-width power looms caught the eye of Kamenosuke Fujino, head of the Osaka branch of Mitsui & Co., Ltd. To improve the production capability of the company's looms, Fujino proposed in May 1906 that Toyoda Shokai become a joint-stock company.
At the time, the Japanese cotton spinning industry was undergoing a period of mergers between small and medium firms due to excess production capacity. The number of spinning companies had halved from 79 in 1900 to 36 in 1908. Furthermore, production hours were being cut under the control of the Japan Spinners' Association. Meanwhile, production and export of high added value cotton cloth was promoted as a means of reducing the excess supply of cotton yarn. To achieve this, the spread of power looms which would efficiently produce textiles was necessary.2
Looking at the number of looms in Japan in 1906, there were 716,171 hand looms and 20,657 narrow-width power looms in use, as well as 9,601 broad-width looms operated by the weaving departments of cotton spinning companies. Correspondingly, there were 463,165 businesses in operation, with the majority of the market comprised of small businesses which operated hand looms.3
It was for this reason that as a manufacturer of power looms Toyoda Shokai was singled out. However, as a sole proprietorship there was a limit to the amount of funding Toyoda Shokai Office could obtain, and in order to increase its loom supply capability, it needed to become a publicly traded company and expand its business.
Although Sakichi wavered, the proposal came from the head of the Osaka branch of Mitsui, which had helped this business so far, and felt he could not refuse. He decided to put up the Shimasaki-cho Plant as an investment in kind and restructure the company as a joint-stock corporation. The usage royalty for the patents held by Sakichi was calculated at one third of profits after dividend payment (10 percent). Sakichi closed all of Toyoda Shokai's operations other than the Shimasaki-cho Plant, paid his brothers and the employees that had supported him, and entrusted his fate to the new venture.
As a result of these events, Toyoda Loom Company was established in Shimasaki-cho, Nagoya City in February 1907, with one million yen in capital. The president was Fusazo Taniguchi, while Sakichi was appointed as managing director and chief engineer.
Founders included Fusazo Taniguchi (Osaka Godo Boseki), Ichitaro Tanaka, Seishichi Shikata (both from Nippon Menka), Takeo Yamanobe (Osaka Boseki), Seibee Fujimoto (Kishiwada Boseki), Sosuke Okaya (Nagoya Boseki), Denshichi Ito, Tsunezo Saito (both from Mie Boseki). Given the circumstances surrounding the company's establishment, it was natural that many players in the spinning and textiles industries were involved.