Section 7. Modernization of Facilities
Item 2. Special Demand Caused by Korean War
On June 25, 1950, the Army of the Democratic People's Republic of Korea (North Korea) crossed the 38th Parallel and invaded the Republic of Korea (South Korea). This was the start of the Korean War.
To rapidly supply equipment to the South Korean Army, industrial capacity in Japan-which was the closest country to the battlefront-was used, and as early as July 10, an inquiry concerning trucks was received from the procurement division of the Eighth United States Army. Toyota received an order for 1,000 Model BM trucks, and Toyota Motor Co., Ltd. and Toyota Motor Sales Co., Ltd. jointly entered into an agreement for their supply on July 31. The agreement called for 200 trucks to be delivered in August and 400 each in September and October. Toyota later received an order for 2,329 trucks on August 29 and an order for an additional 1,350 trucks on March 1, 1951, for a total of 4,679 Model BM trucks. The total value of these orders was 3.66 billion yen.
In response to this special demand, Toyota Motor Co., Ltd. increased its monthly production plan from 650 units to 1,000 units. The increase in production was implemented by having current employees work two hours overtime each day, and the planned shift from the Model BM truck to the Model MX truck was postponed until after the delivery of all BM trucks.
Toyota Motor Co., Ltd.'s business performance improved rapidly as a result of the Korean War special procurement demand. The situation was explained as follows in the 22nd Business Report (covering April to September 1950) as follows:
Although prices for materials, parts, tires, and so on repeatedly rose after the outbreak of the Korean War due to automobile sale pricing controls-which in the past were a major restraint on operations-were eliminated in the middle of April, we have been able to maintain profitability by adjusting automobile sales prices, and since the resolution of the labor dispute, results have been improving every month as production increases in response to demand.1
Toyota Motor Co., Ltd. fell into a condition of management crisis as a result of the effects from the Dodge Line and it was necessary to reduce personnel, but following the outbreak of the Korean War, business performance recovered and the company was able to take new steps forward.