Section 6. Postwar Arrangements and Labor Disputes
Item 6. Labor Disputes and President Kiichiro's Resignation
Establishment of Toyota Motor Sales Co., Ltd.
In the New Year of 1950, negotiations with the Bank of Japan began on the Toyota Motor Co., Ltd. reconstruction plan. As vehicle sales payments arrears were a major cause of business deterioration, the establishment of a system to separate sales funds and manufacturing funds formed the basic strand of the reconstruction plan proposals. Among the specific points agreed upon were the establishment of a sales company, the establishment of a system of sales by monthly installment, the maintenance of orderly marketing, the alignment of vehicle production and sales with market trends, and a loan of 400 million yen in necessary funds.
The idea for the establishment of a sales company-which was said to have been an idea held since before the war by Shotaro Kamiya, managing director responsible for sales-was announced to the Management Council meeting on February 5, 1950.1 Originally, Toyota Motor Co., Ltd. had set up Toyoda Kinyu Kaisha in October 1936 to perform the financial functions required for a system of monthly installment sales. However, under the system of rationed vehicle distribution during the war, loans to support installment credit became unnecessary. The company changed its business activities and was renamed Toyoda Sangyo Kaisha.
Immediately after the war, Toyoda Sangyo resumed vehicle financing. At the time, sales on credit were made to the dealer through Toyoda Sangyo and the charge was settled with a bill. A system was in place whereby Toyoda Sangyo provided a loan to dealers who could not obtain a bank loan.
This operation was run by the Toyoda Sangyo Vehicle Financing Section, but Toyoda Sangyo was dissolved in September 1947 after being designated a holding company. The Vehicle Financing Section therefore became independent as Taiho Industrial Corporation. However, as Taiho Industrial had little capital and a poor credit rating with financial institutions, it did not function adequately. Vehicle financing operations were therefore transferred in November 1948 to Toyota Motor Co., Ltd., which however had its own difficulties with shortage of funds.2
Regarding the need to establish a vehicle financing company, President Kiichiro Toyoda commented as follows at a Management Council meeting on February 28, 1950:
Today, in the transition to a free market economy, the vehicle industry, which grew up under a controlled economy and had almost no experience of the free market, is likely to face increasingly intense competition going forward from non-Japanese vehicles. Concern over whether it can survive at all is considerable in the business world and especially in the finance business. However, I do not share these concerns. Even in the United States, vehicle sales are managed by monthly installment, and I am confident that, as long as we can secure funds for monthly installment sales, the industry will thrive. The idea of establishing an independent sales company came about as a result of our promotion of procuring finance for monthly installment sales in the relevant quarters. However, there were various issues and things did not go as we might have wished.
Among the main reasons for this were:
- 1. Lack of confidence in the finance world regarding Toyota's operations
- 2. Concern over the future of the automotive industry
- 3. The opinion that funds for monthly installment sales would instead be used for stockpile financing.
In other words, the lack of confidence in Toyota has arisen from the fact that our development of technology has preceded our development in business management (nowadays the situation is reversed and finance comes before business management and technology), and from the impression that when you lend money to Toyota, it is not clear how it will be used.
To remedy this situation, the finance industry is willing to send a representative to join Toyota's management, and we held an informal meeting to discuss this with business representatives from the finance world on February 18. Additionally, we need, first of all, to restore the confidence of the finance world and, secondly, to remedy the precedence of technology and create a more streamlined operation. We have already strengthened our management team's abilities in relation to internal and external issues and are working to establish a sales company at the earliest date possible.3
President Kiichiro believed that if a sales company could be established and a system of sales by monthly installment set up, the problem of collection of sales payments would be resolved.
After obtaining the agreement of the banks and the labor union4, with the aim of establishing a sales financing system and increasing sales capacity, the sales department of Toyota Motor Co., Ltd. became independent with the establishment of Toyota Motor Sales Co., Ltd. on April 3, 1950. Shotaro Kamiya was appointed president and the company head office was located in the Nagoya Office of Toyota Motor Co., Ltd.-where the former sales department had been-at 221 Sasashima 1-chome, Nakamura-ku, Nagoya City.
At the time, as Toyota Motor Co., Ltd. was designated a Restricted Company, it was not able to provide finance to Toyota Motor Sales Co., Ltd. The latter's capital of 80 million yen (1.6 million shares) was therefore provided by 18 individuals who were due to become officers or executives at the rank of section manager or above in Toyota Motor Sales Co., Ltd., including Shotaro Kamiya (president), Shiro Onishi (managing director), Shikanosuke Hanasaki (director), Kenichiro Kunori (corporate auditor), and Seishi Kato (monthly installment sales division general manager).
On April 11, 1951, the Restricted Company designation was removed from Toyota Motor Co., Ltd., and it was listed as one of the major shareholders for the first time in the Business Report for the Sixth Business Period (October 1952 to March 1953) of Toyota Motor Sales. The number of shares held by Toyota Motor Co., Ltd. was 900,000, or 22.5 percent of the total of four million shares.5