TOYODA AUTOMATIC LOOM WORKS, LTD. - Company Profile, Information, Business Description, History, Background Information on TOYODA AUTOMATIC LOOM WORKS, LTD.

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Toyoda Automatic Loom Works (Loom Works) is the originator of the Toyota Group of companies and is recognized as a diversified corporation whose central activities include automobile assembly and the manufacture of automobile components, industrial vehicles, and textile machinery. Founded in the 1920s to produce and sell automatic looms, the company is one of Japan's larger integrated manufacturers of textile machinery, producing both weaving and spinning machines, and the largest domestic manufacturer of forklift trucks. The company manufactures engines for Toyota Motor Corporation passenger cars in addition to diesel engines for the industrial vehicles it produces, which are marketed under the Toyota name.

Since World War II, Loom Works's focus has shifted gradually from textile machinery to automobiles, with a growing percentage of its activities involving consignment work for Toyota, which owns better than 20% of Loom Works's stock. In the past two decades Loom Works has established joint ventures in the United States with other Toyota Group members for the local production of two of its principal products, air conditioner compressors and industrial vehicles. It also has attracted compressor-production work from major U.S. automobile manufacturers. Additions to its U.S. production facilities exemplify Loom Works's future plans, which call for increased manufacturing and sales activities in the U.S. market.

Toyoda Automatic Loom Works owes its original emphasis to Sakichi Toyoda, a well-known Japanese inventor and entrepreneur who perfected Japan's first power-driven loom in 1897. During the next three decades Toyoda went on to acquire 84 patents while developing 35 loom models.

Prior to World War I, Toyoda was involved in the formation of a number of small thread-producing and textile-machinery factories and companies, but it was the war that helped firmly establish the beginning of the Toyoda empire by fueling an economic boom for spinning mills. Based on a factory he had built a few years earlier, Toyoda established Toyoda Spinning and Weaving, in 1918 to produce high-quality thread for the automatic loom he was developing. Three years later Toyoda established Toyoda Spinning and Weaving Works, in Shanghai.

In 1925 Toyoda perfected an automatic loom designed for mass production, and installed 320 automatic looms in a pilot plant in Nagoya. In 1926 he separated the loom-production department of Toyoda Spinning and Weaving and established Toyoda Automatic Loom Works in Kariya, Japan, to concentrate on the production of automatic looms.

Capitalized at ¥1 million, the new company soon became the main firm of the Toyoda family's enterprises. Toyoda's eldest son by adoption, Risaburo Toyoda, was named president, and Kiichiro Toyoda, Sakichi Toyoda's oldest natural son, was named managing director in charge of loom production. Sakichi Toyoda had been unable to make his natural son, Kiichiro, president of Loom Works and heir to the family's fortune because of Sakichi's adoption in 1915 of Risaburo, the husband of his oldest daughter and younger brother of Kazuo Kodama, who was head of the Mitsui Trading branch in Nagoya. Sakichi Toyoda had become indebted to Kazuo Kodama when Mistui Trading financed his 1914 move into cotton spinning.

In 1927 construction of a foundry, iron works, and woodwork shop near the Loom Works's headquarters was completed, and the company began production and sales of the Toyoda G-Type Automatic Loom. The new looms were sold for ¥630, or about three times the cost of conventional looms because one worker could operate 25 of the Toyoda looms at a time. Sales quickly took off as textile producers automated their operations in order to cut production costs.

Sakichi Toyoda had acquired both domestic and overseas patent rights for his automatic loom, and in 1929 he agreed to sell all of those rights excluding those for Japan, China, and the United States. The Platt Brothers of Great Britain, the world's largest manufacturer of spinning and weaving machinery, purchased the patents for ¥100,000, worth about ¥1 million in Japan. Sakichi Toyoda then gave the entire sum to his son Kiichiro to invest in automobile research. Sakichi Toyoda died a year after he sold his automatic loom patents, leaving his goal of producing automobiles in the hands of Kiichiro Toyoda.

Kiichiro Toyoda, a mechanical engineer who had studied at the University of Tokyo, handled most of the initial engineering work on the study of automobiles. In 1930, he set aside a corner of the Loom Works plant for his research and began working on the development of a small gasoline engine. Kiichiro Toyoda was also instrumental in the development of several new products that Loom Works began manufacturing that year, including high-draft spinning frames, a carding machine, and other machines used in raw textile spinning processes.

In 1931 Loom Works began buying and testing engine components made by foreign producers, while seeking domestic firms that could copy parts. Risaburo Toyoda initially viewed the investment in automobile research as risky, but Kiichiro Toyoda maintained enough power in the company to establish a Loom Works automobile division in 1933. Kiichiro Toyoda began recruiting Japanese automobile experts, and later that year the automobile division purchased a new Chevrolet car and began disassembling it to analyze the vehicle's components. By the end of 1933, Kiichiro Toyoda's staff completed a prototype motorcycle engine.

In 1934 Kiichiro Toyoda convinced stockholders to raise the capitalization of the company to ¥3 million and add automobile and steel manufacturing to the businesses included in Loom Works articles of incorporation. Soon afterwards, the company began construction of a pilot automobile plant and steel mill within the Loom Works's compound.

With increased funding, automobile research and production activities were stepped up in 1934. The company's engine-casting specialist, Suda Takatoshi, was dispatched to the United States to study automobile factories, materials, and the manufacturing of components. By the end of the year, Loom Works had developed the Model A-1 engine, its first prototype automobile engine.

In May 1935 Loom Works completed its first prototype passenger car, the Model A1, comprised of a Chrysler body and many parts from Ford and Chevrolet automobiles. About the same time, the Japanese government began to firm up particulars of the pending Bill Concerning the Manufacture of Motor Vehicles, which was being designed to promote domestic production of automobiles. Kiichiro Toyoda learned that the bill would place an emphasis on the production of trucks, and Loom Works quickly began trial development of trucks. Full-scale production of motor vehicles was initiated in July 1935, and the following month stockholders agreed to double the company's capitalization to ¥6 million to help fund increased automobile activities. In September the prototype Model G1 truck was completed. Loom Works established an automobile sales department in 1935, and hired Shotaro Kamiya, a former executive at General Motors's Japan subsidiary, to head up the sales efforts.

In 1936 the Bill Concerning the Manufacture of Motor Vehicles became law, and Loom Works was licensed as one of two automobile-production companies in Japan. Construction of a new automobile-assembly plant on land near the Loom Works's facilities was completed in May 1936 and included an electronics department, which later became Nippondenso Company. That same year officials changed the name of its automobile from Toyoda to Toyota, believing the new name was easier to pronounce and would generate greater advertising appeal.

By the end of 1936 Loom Works's automobile products included the Model AA passenger car; and open-top version of the Model AA called the AB Phaeton; the Model GA truck, which was an improved version of the G1; and the Model DA bus chassis.

Once the 1936 automobile industry law was approved, Risaburo Toyoda threw his support behind the company's automobile operations, believing the venture could be profitable. Construction of an automobile plant in Koromo followed, but working capital was short. In March 1937 Loom Works's stockholders agreed to separate the automobile division and form the Toyota Motor Corporation, (TMC) in a move to attract additional investors. Risaburo Toyoda was named TMC president, and Kiichiro Toyoda was named executive vice president.

After Japan entered World War II in 1938, Loom Works manufactured parts for TMC for a brief period. Later that year, Loom Works, as other Japanese industries, came under government control, and it began performing ordnance work for the military. In 1939 Loom Works expanded its steel works plant and then began construction of a new steel mill. The following year the steel division was separated from Loom Works, and Toyoda Steel Works, now Aichi Steel Works, was established. Loom Works transferred all its steel equipment and facilities to the new company as an investment.

In 1941 Risaburo Toyoda became chairman of TMC, and Kiichiro Toyoda was named president. By that time TMC had become the nucleus of the Toyota Group, and Kiichiro Toyoda set up a planning council to serve as a liaison group between TMC, Toyoda Steel Works, and Toyoda Machine Works--a machinery-producing factory developed by Toyota in 1937 and spun off as an independent company earlier in 1941. In 1944 Loom Works established a plant in Obu to manufacture castings for automotive parts, including compressor cylinders, cylinder blocks, and crankshafts.

Following World War II Loom Works began taking parts orders from TMC to fill the gap left by ordnance work. Loom Works's textile business began picking up after a 1947 restoration policy put a rush on cotton-spinning-machinery orders, and about this same time the company abandoned its parts work for TMC.

Risaburo Toyoda became Loom Works's first chairman in 1948, and Taizo Ishida was named president. Ishida had served Loom Works as a managing director and the company's first representative on the TMC planning council. In 1949 Loom Works went public and listed its stock on the Tokyo, Nogoya, and Osaka stock exchanges.

While business blossomed for Loom Works in the early postwar years, a cut-off of Reconstruction Finance Bank loans in 1949 and growing recessionary conditions in the automobile industry had edged TMC ever-closer to the brink of bankruptcy during the same span. In 1950 TMC announced it would reduce personnel by a third, and a two-month strike ensued. The labor dispute was resolved after Kiichiro Toyoda and other top executives agreed to take responsibility for the automaker's financial plight, and voluntary resignations from laborers followed.

Taizo Ishida agreed to replace Kiichiro Toyoda as TMC president, while maintaining similar duties at Loom Works. While Ishida knew little about automobile production at the time, he realized that Loom Works's future was closely tied to that of TMC, while Toyota Group members recognized that Ishida had been successful in rebuilding Loom Works after World War II.

Ishida initially agreed to serve as TMC president only temporarily, with Kiichiro Toyoda expected to resume his former post once the automaker's financial position had improved; but in 1952 Kiichiro Toyoda died, and Ishida agreed to remain as chief executive of TMC to carry out Kiichiro Toyoda's program of small-car development. That same year Risaburo Toyoda died, leaving Loom Works without a chairman for the next 17 years.

In 1952 Loom Works began manufacturing engines and stamping dies for Toyota automobiles. In 1953, the company established a new plant in Kyowa to manufacture engines and assemble vehicles for Toyota. That same year, on the recommendation of TMC Managing Director Eiji Toyoda, Loom Works initiated the development of forklift vehicles.

In 1955 Loom Works completed its first prototype forklift, a one-ton machine powered by a Type-S engine. The following year the company began manufacturing forklifts, and Toyota Motor Sales Company, formed in 1950 as a sales affiliate for TMC, announced it would market the new forklift and sell the product under the brand name Toyota Forklift.

In 1960 Loom Works began manufacturing automobile air conditioner compressors. That same year, the company established a forklift assembly line at its Kyowa plant and expanded its product line there to include 11 types of forklifts, as well as towing tractors and shovel loaders. Toyota Motor Sales (TMS) began appointing Toyota forklift dealers exclusively to handle industrial vehicles in 1961. By the end of the year Loom Works had climbed to number one in the domestic forklift market. In 1966 Loom Works secured its first major overseas forklift contract, a 188-machine order from the Singapore Port Authority.

Loom Works opened a plant in Nagakusa for the assembly of small commercial vehicles in 1967. In the same year the company began looking outside the Toyota Group for technical collaborations that could improve its fiber machinery and looms; it entered into an agreement with Rieter Machine Works, of Switzerland, for the production of manmade-fiber machinery. The following year Loom Works produced its first open-end spinning machine. In 1968 the Loom Works agreed to a technical tie-in for loom development with Ruti Machinery Works, of Switzerland. In 1969 Ishida was named chairman, a post that had been vacant since the death of Risaburo Toyoda, and Keiji Gonda was named president.

In 1970 Loom Works opened its 84-acre Takahama plant. With a capacity to produce 30,000 units a year, it was the largest factory in the world exclusively devoted to the production of industrial vehicles. In 1971 Loom Works and Sulzer Brothers, of Switzerland, formed the joint venture Toyoda-Sulzer Company, to produce shuttleless projectile looms. That same year, Loom Works joined with George Fischer, Ltd., in a technical tie-in for the production of foundry equipment.

The management of Loom Works returned to the Toyoda family in 1973, when Yoshitoshi Toyoda, nephew of Sakichi Toyoda, replaced Gonda as president. Increased Toyota Group involvement with Loom Works activities followed, and that same year TMS established an overseas industrial-vehicle department, further strengthening marketing efforts of Loom Works-produced industrial vehicles. TMC and Loom Works established the joint venture Toyoda Industrial Trucks U.S.A., in 1974, to manufacture and sell industrial trucks in the United States

By 1975 Loom Works's cumulative production of industrial vehicles had reached 200,000 and the cumulative production of commercial vehicles had reached 500,000. Loom Works began manufacturing compressors for Chrysler and Ford in 1977, and within a year cumulative production of compressors had topped five million units.

In 1978 Loom Works began manufacturing shuttleless rapier looms and also began making the Starlet passenger car for TMC. Sales of open-end spinning machines also got a boost in 1979 when the Chinese government agreed to purchase 10,000 machines in a contract worth about ¥1.6 billion. Between 1977 and 1980, overseas production and marketing activities, as well as increased consignments from TMC, helped push Loom Works's net sales from ¥140.5 billion to ¥208.4 billion while net profits rose from ¥5.6 billion to ¥9.8 billion.

In 1980 Loom Works began manufacturing quieter air-jet looms, known as JA models, in a new facility built on the premises of its main Kariya plant. That same year the company established its first U.S. subsidiary, Toyoda Textile Machinery. Based in Charlotte, North Carolina, the subsidiary was formed to promote sales of the new air-jet looms in the U.S. market.

In a 1980 move to strengthen the sales system of industrial vehicles, Loom Works and TMC each purchased 20% of Tomen Transportgerate, a German company involved in import and sale of Toyota industrial vehicles. Following the 1982 merger of TMC and TMS, Toyota engineers began working in product development at Loom Works, where sales of industrial vehicles had been sluggish since the oil crises of the 1970s. In 1982 Loom Works opened its Hekinan plant and began manufacturing a new diesel engine, which was developed with the assistance of TMC earlier that year.

While sales continued to rise, Loom Works's profits slipped in 1982 and were sluggish in 1983, due in part to increased fixed costs and a decrease in Toyota automobile consignments. In 1984 Toyota Industrial Trucks, U.S.A. merged with TMS, strengthening the joint venture's sales capacity by adding new staff and managerial resources. The product line was further diversified to include such construction vehicles as a skid steer loader.

Increased sales of industrial vehicles and a continuous rise in compressor exports, including 750,000 compressors per year going to Ford, helped Loom Works's profit rise above ¥10 billion in 1985. In 1985 Loom Works founded an electronics division at its Kyowa plant, for long-term research-and-development activities beyond the scope of other divisions. That same year the company developed an automatic guided vehicle (AGV) equipped with a microcomputer, and then installed the AGV, along with industrial robots, at its forklift-producing Takahama plant as part of a new, flexible manufacturing system. In recognition of its efforts to improve quality on a company- wide basis, a year later Loom Works received the prestigious Deming Award for quality control.

In 1986 Loom Works's profits leaped by nearly ¥2 billion. The following year, Loom Works was one of seven Japanese forklift manufacturers to be fined a dumping penalty by the U.S. Commerce Department. In 1987, profits dipped because of rapid appreciation of the yen, and remained sluggish the following year. In response to that appreciation, and to avoid further dumping penalties, Loom Works and TMC in 1988 chose Columbus, Indiana, as a site to establish their joint venture, Toyota Industrial Equipment Manufacturing. Loom Works received 80% ownership in the forklift manufacturing corporation.

In 1988 Loom Works's cumulative production of compressors topped 40 million units, with three-quarters of those units manufactured the six previous years. After securing compressor business with General Motors, in 1989 Loom Works and Nippondenso Company, another Toyota Group member, established the 50-50 joint venture, Michigan Automotive Compressor, Inc. The new company was set up in Jackson, Michigan, for the manufacture of compressors and magnetic clutches. That same year Gentaro Tsuji was named chairman, filling a position that had been vacant for 15 years.

Beefed-up production of textile machinery, industrial vehicles, and compressors helped profits rebound in 1989 to a new high of ¥12.9 billion. Loom Works closed the decade with vehicle assembly representing 42% of sales, while the manufacture of industrial vehicles and compressors each accounted for nearly one-quarter of all sales. The manufacture of engines accounted for 15% of all revenues, and textile machinery contributed nearly 10% of revenues.

Loom Works's goals call for increased overseas production and sales efforts, including local production of compressors and industrial vehicles in the United States. In 1990 both Michigan Automotive Compressor and Toyota Industrial Equipment Manufacturing began production in accordance with those goals. The company planned research-and-development activities in electronics, in a move to improve factory efficiency and existing products.

Principal Subsidiaries: Michigan Automotive Compressor, Inc. (U.S.A., 50%); Toyoda Industrial Equipment Manufacturing, Inc. (U.S.A., 80&percnt); Toyoda Textile Machinery, Inc. (U.S.A.); Tomen Transportgerate GmbH (Germany, 20%).

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Further Reference

Kamiya, Shotaro, My Life With Toyota, Toyota City, Toyota Motor Sales Company Ltd., 1976.Cusumano, Michael A., The Japanese Automobile Industry: Technology and Management at Nissan and Toyota, Cambridge, The Council on East Asian Studies, Harvard University, 1985.Toyoda, Eiji, Toyota: Fifty Years In Motion, Tokyo, Toyota Motor Company, 1987.Toyota: A History of the First 50 Years, Toyota City, Toyota Motor Corporation, 1988.

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