Even as severe measures to streamline the company including personnel reductions were implemented, diversification was also pursued to overcome the downturn.

First, Shonaigawa Dye Works was established in December 1928. The company performed bleaching and was able to ship processed cotton with high added value. Next, Shonaigawa Rayon was established in December 1932 adjacent to Shonaigawa Dye Works and rayon production began.Later, both companies merged with Toyo Rayon Co., Ltd. in June 1941 in accordance with national wartime policies, and today they are the Toray Industries, Inc. Aichi Plant.

Chuo Spinning & Weaving Company was established in March 1929 in Kariya with equal investments from Toyoda Boshoku and Toyo Menka Kaisha, Ltd. The company was established to construct a model plant with state-of-the-art spinning machinery. Initially, the latest spinning systems manufactured by Platt and imported by Mitsui were used, but spinning machinery manufactured by TALW was introduced in 1933 under a plan to increase facilities by 42,000 spindles.

When TALW entered the automotive industry, Chuo Spinning & Weaving transferred 48,358 square meters of its 333,300 square meter plant site to TALW's automobile department for an assembly plant. Operations at the assembly plant began in June 1936.

In February 1942, Chuo Spinning & Weaving, according to national policy, merged with four spinning companies including Toyoda and Toyo Menka-related companies to form Chuo Boseki Co. In conjunction with the merger, the Chuo Spinning & Weaving plant was renamed the Chuo Spinning & Weaving Kariya-kita Plant. In November 1943, the company merged with Toyota Motor Company, became an aircraft plant, and began manufacturing aircraft engines.1

Toyoda Boshoku posted a loss for the fiscal term ended September 1930 (April to September 1930), the first loss in its history, reporting losses of 228,625 yen. Kikui Boshoku reported a loss of 280,507 yen during the same fiscal term. In response to these poor results, both companies cut operations for five days and nights per month starting in June of that year and reduced wages by 10 percent. The two companies merged in May 1931 with the aim of drastically streamlining and increasing the efficiency of their production systems.

In September 1930, Mitsui proposed a merger of TALW, Toyoda Loom Company, and Platt in the United Kingdom, and negotiations took place, but no agreement could be reached and the proposal was withdrawn the following year.