Asahi Glass Company, Ltd. - Company Profile, Information, Business Description, History, Background Information on Asahi Glass Company, Ltd.



21-1, Yurakucho 1-chome
Chiyoda-ku, Tokyo 100-8405
Japan

Company Perspectives:

"Look Beyond" is the slogan of the AGC Group, and it is the title of the AGC Group Vision as well. "Look Beyond" captures and expresses this vision. It inspires the Group's mission and shared values to which every member of the Group must subscribe. As a global materials and components supplier based on our core technologies in glass, fluorine chemistry, and their related fields, we will continue to: Look Beyond ... Anticipate and envision the future; Look Beyond ... Have perspectives beyond our own fields of expertise; and Look Beyond ... Pursue innovations, not becoming complacent with the status quo. By "Looking Beyond," we will continue to create value worldwide, demonstrating the vast potential of the Group's entire organization.

History of Asahi Glass Company, Ltd.

Asahi Glass Company, Ltd. operates as the leading glass manufacturer in Japan and is also one of the largest glass manufacturers in the world. The firm's flat glass and fabricated glass segment secured 45.3 percent of sales in 2001. This unit manufactures products such as windshields for the automotive industry and glass used in construction. Overall, Asahi controls nearly 20 percent of the global flat glass industry. The company's electronics and display operations business segment also manufacturers glass bulbs, cathode ray tubes, and glass substrates used in television, computer monitors, and liquid crystal displays. Through its chemical operations segment, Asahi produces chlor-alkalis, fluorochemicals, and urethanes. Asahi has over 200 subsidiaries, with the majority of sales, in order of volume, stemming from Japan, Asia, Europe, and the Americas.

Origins

Asahi's founder, Toshiya Iwasaki, was born into Japan's most formidable industrial family in 1881, and he decided early in life to build his country's first successful glass company. A nephew of Mitsubishi founder Yataro Iwasaki, he studied applied chemistry at the University of London before returning to fight in the Russo-Japanese War of 1904 to 1905. As a member of the Imperial Cavalry, Iwasaki realized the importance of increasing Japan's native industrial base. Drawing upon his chemical studies, he decided to make glass his area of specialization.

Japan had been unable to support even a single glass-making facility until 1907, although the Meiji government had tried to establish sheet glass manufacturing. The country had just emerged from 200 years of isolation, and in the last half of the 19th century Japanese businessmen scrambled to compress centuries of technological progress into a few decades of growth. They had succeeded in most areas by the turn of the century, but the glass-making field remained open until Iwasaki founded Asahi Glass in 1907 with a factory in Kansai. Iwasaki was able to draw upon his family's powerful banking and political allies, and from the beginning he planned to build a world-class organization. Instead of merely importing technology from Belgium, then the world leader in flat glass production, he brought over Belgian glass-blowers to get his company started properly. By 1909, these craftsmen had succeeded in producing Japan's first flat glass, giving Asahi a national lead it has never relinquished.

Because the Japanese industrial economy remained primitive, Asahi was forced to engineer its own equipment and to produce its own raw materials. This situation led to the 1916 construction of an addition to the Kansai factory, where the company began making its own fire bricks for use in its glass furnaces, and in 1917 to the production of soda ash, required in glass manufacture, at a separate facility in Kita-Kyushu. Asahi thus got its start not only in glass but also in ceramics and in alkali-chlorine-based chemistry, which have remained the firm's three main concerns. With a concerted marketing effort and the economic boom afforded by World War I, Asahi was soon profitable and grew rapidly. The company faced a temporary setback in the early 1920s, when large quantities of natural soda ash were imported from Kenya and dumped on the Japanese market at artificially depressed prices, undercutting Asahi's position as the country's leading supplier of that commodity. In the ensuing political battle Japan adopted its first anti-dumping legislation, and Asahi recovered by 1924.

Along with the rest of Japanese industry, Asahi found excellent markets and a convenient labor pool in neighboring China. As the two countries edged toward war in the 1930s, Asahi shifted a good part of its growing glass and chemical business from Japan to 17 small Chinese plants. With the onset of World War II, Asahi found itself with four times as many overseas as domestic plants. The company was caught up in Japan's mammoth war effort, and in 1944 the government merged Asahi with another chemical firm to form Mitsubishi Chemical Industries Limited. The new name was an indication of Asahi's close ties with the Mitsubishi group, which today remains among Asahi's largest stockholders. This belated effort at rationalizing Japan's chemical industry was little help, however, and by the following year Japan was totally defeated. Asahi lost its 17 Chinese factories.

Finding Postwar Opportunity

The postwar years were grim. Allied occupation forces took control of the Japanese economy and directed its every move, initially in the hopes of dismantling the great trading companies, or zaibatsu. As Mitsubishi was one of the most important zaibatsu, the recently formed Mitsubishi Chemical Industries was again broken into its constituent pieces, and a new Asahi Glass was incorporated in 1950. The reborn Asahi faced formidable problems but equally vast were the opportunities for growth. The company's four domestic plants had survived the war in relatively good condition, and the rebuilding of Japan would require a great number of new glass products. In addition, two inventions still largely unknown in Japan would soon play a dominant role in its development into economic maturity--the automobile and television. As Japan's young auto industry got off the ground in the 1950s, it sparked a huge increase in the demand for windshield glass, which Asahi met with the 1956 creation of Asahi Processed Glass. Similarly, after the 1953 inauguration of Japanese television broadcasts, Asahi established Asahi Special Glass for the manufacture of cathode-ray tubes. As the subsequent history of Japanese industry made clear, Asahi had established strongholds in what became two of Japan's most important industries, ensuring the company's rapid growth into an international power.

Postwar domestic demand for glass kept Asahi busy for the next two decades, when corporate profits averaged three times those of the rest of Japanese industry. At the same time, Asahi's chemical business continued its evolution from a producer of strictly inorganic substances to a diversified supplier of both organic and inorganic compounds. To its traditional strength in caustic soda and soda ash, Asahi added production facilities for chloromethane, propylene glycol, and eventually fluorine compounds.

Overseas Expansion: Late 1950s-80s

Perhaps of greater significance in the long run was Asahi's decision to renew its foreign operations in both glass and chemicals. Beginning with the 1956 construction of Indo-Asahi Glass in Calcutta, India, Asahi committed itself to a program of overseas expansion unusual for a Japanese materials-manufacturing concern. The focus of this expansion was Southeast Asia, where Asahi established dominant positions in Thailand, Indonesia, and the Philippines and maintained a significant presence in many other countries. European and U.S. operations, on the other hand, had to wait until the 1980s. Asahi entered the European market in a major way with its 1981 acquisition of Belgium's Glaverbel S.A. and the Dutch company, MaasGlas B.V., giving Asahi approximately 10 percent of the European flat glass market. U.S. investments were restricted to the automobile industry: during the 1980s Asahi supplied window glass to the U.S. plants of Honda and Toyota from its own factories in Ohio and Kentucky. Finally, to round out its foreign operations, Asahi also manufactured television tubes from plants in Taiwan and Singapore and Corning-Asahi Video products as part of a 1988 U.S. joint venture with Corning Glass.

Such overseas expansion became especially important after the 1965 worldwide introduction of the float process method of flat glass production. Developed in England but soon licensed around the world, the float process had made it possible for anyone to produce excellent flat glass at low cost and without extensive technological experience. It thus became necessary for Asahi, which for years had exported flat glass throughout Asia, to enter into cooperative ventures with local manufacturing concerns in its various national markets or suffer a sharp reduction in its overall sales. With domestic Japanese demand leveling off after the boom years of 1950 to 1970, Asahi was forced to rely more heavily on foreign joint ventures.



As the 1980s began, the fundamental problem of shrinking domestic demand and increasingly standardized production techniques remained a real threat to Asahi's continued growth. In response, the company at first favored a program of diversification outside the glass industry by expanding its already substantial chemical business. Asahi entered into joint ventures with Olin, PPG Industries, and Britain's ICI to produce a wider variety of compounds, including fluorochemicals and plastics, and pioneered the new ion-exchange membrane technique for its manufacture of caustic soda. A company plan developed in the early 1980s called for reducing glass sales to less than 40 percent of total Asahi revenue by the year 2000.

However, this plan changed in the late 1980s under the leadership of Jiro Furumoto, president and chief executive officer from 1987 to 1998. Technological developments opened up a range of innovative glass products for Asahi, promoting Furumoto to design what he called "AGC Vision 21." This corporate forecast called for Asahi sales in the year 2000 of ¥2.4 trillion split evenly between glass and non-glass operations. The key point of Furumoto's plan was to reach ¥800 billion annually in new products, including "new glass," the various applications for glass made possible by technological changes. New-glass uses included reflective building glass, glass-reinforced concrete, flat screens for high-definition televisions, and glass hard discs for personal computers.

Asahi thus planned to maintain and expand its position in the growing field of glass manufacturing. Its strategy of the late 1980s included the employment of its highly automated domestic plants for high-tech, value-added production, while farming out to its foreign subsidiaries the production of standard flat and automobile glass. The other half of Asahi sales were expected to come from chemical products, including old standbys like soda ash and new environmentally safe replacements. At the time, the company continued a small business in refractory products--3 percent of sales--and also pursued its growing segment of the electronics industry--at 4 percent of sales.

Continued Growth: 1990s

Asahi spent the majority of the 1990s expanding internationally. In 1991, Dalian Float Glass Co. was established in China, and the following year Floatglass India Ltd. was created. Growth continued with the 1993 purchase of U.S.-based AFG Industries Inc. The firm also launched Asahi Allglass Pte. Ltd. in Singapore and Beijing Asahi Glass Electronics Co. Ltd. in China.

Asahi continued to focus on China in 1995. It entered the automotive glass industry in the region and also purchased an interest in Qinhuangdao Haiyan Safety Glass Co. Ltd. The company also developed new products as technological advancements in both the television and communications industry continued at breakneck speed. The company began manufacturing fluoro-resin plastic optical fibers that had gigabit communication data throughput capabilities and developed its PD200 glass used in plasma display panels. In 1996, the firm established subsidiary P.T. Video Display Glass Indonesia. In 1998, Video Monitores de Mexico, S.A. de C.V. was also created.

The "Shrink to Grow" Management Plan: 1999 and Beyond

Furumoto retired in June 1998, leaving Shinya Ishizu as president and Hiromichi Seya as chairman. The pair were almost immediately faced with challenges as the Japanese economy faltered. Japan accounted for nearly 70 percent of the company's sales, and when the region experienced a financial crisis, Asahi's earnings plunged. During 1999, the company's net income fell to ¥5.09 trillion, down from ¥20.36 trillion reported in 1998.

As such, the new management team implemented a new business plan they called "Shrink to Grow." The three-year plan was developed with a focus on maintaining profitability and growth. As part of the company's 2000 shrink plan, it reduced overall fixed costs by ¥2.6 billion, closed its float glass line at its Keihin factory, shutdown Chiba Vinyl Chloride Monomer Co. Ltd., and cut 900 jobs. As part of its 2000 growth strategy, Asahi acquired Hankuk Electric Glass Co. Ltd., purchased Imperial Chemical Industries' fluoropolymer operations, and opened a float glass plant in Spain. During that year, net income increased to ¥13,164 million.

In 2001, the firm continued its Shrink to Grow efforts. It sold its interest in Nippon Dry-Chemical Co. Ltd., divested Asahi Komag Co. Ltd., and also stopped production of synthetic soda ash. The company also created three new Thai subsidiaries, and consolidated its India operations to create a single company--the largest glass concern in India.

As part of the overall Shrink to Grow plan, Asahi management expected to raise return on equity (ROE) to 10 percent per year by 2004. During 1999, ROE was .8 percent but climbed to 2.2 percent in 2000. By 2001, it reached 4.1 percent. The company's long term goals included: restructuring its low-profit businesses, which included the planned spin-off of its ceramics operations; expanding its displays business along with its electronics and optical-related materials business; increasing its focus on its fluorochemicals operations that were involved with the development of fluorinated resin optical fibers used in the life sciences and electronics industries; and developing new business opportunities. Overall, Asahi aimed to become the leading corporate group in terms of growth and profitability in both the glass and fluorochemicals markets.

While competition remained fierce in the early years of the new millennium, Asahi management felt its new business strategy left it well positioned in each of its business segments. Situated among the leading glass-makers in the world, Asahi appeared to be on track for future success.

Principal Subsidiaries: Asahi Fiber Glass Co., Ltd.; Ise Chemicals Corp. (52.4%); Optrex Corporation (60%); Seimi Chemical Co. Ltd.; Tokai Kogyo Co. Ltd.; A.G. Finance Co. Ltd.; Asahi Glass Fine Techno Co. Ltd.; Glaverbel S.A. (Belgium; 60.9%); Asahi TV Glass Pte. Ltd. (Singapore); Pacific Glass Corporation (Taiwan); Asahi Glass America Inc. (U.S.); Asahi Glass Engineering Co. Ltd.; Asahi Techno Glass Corp. (54.7%); Asahi Techno Vision Pte. Ltd. (Singapore); AFG Industries Inc. (U.S.).

Principal Operating Units: Glass and Related Operations; Electronics and Display Operations; Chemicals Operations; Ceramics.

Principal Competitors: Nippon Sheet Glass Company Limited; PPG Industries Inc.; Compagnie de Saint-Gobain SA.

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