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Toyo Kogyo, the Mazda-maker, is back in the black

By Takashi OkaStaff correspondent of The Christian Science Monitor / December 28, 1982

Hiroshima, Japan

''To me, the most important element in management is the human being,'' said Yoshiki Yamasaki, president of Toyo Kogyo, the world's ninth-largest automobile manufacturer (and third-largest in Japan).

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''You can have the best plans in the world, you can have the most marvelous equipment. But it is people that carry out the plans and use the equipment. Without willing workers, you have nothing. So the first essential is to treat people with consideration.''

Toyo Kogyo, which sells cars under the brand name of Mazda, has gained global fame as the only car manufacturer to successfully develop and commercialize the Wankel rotary engine (named after its German inventor, Felix Wankel).

It may be even better known for having almost gone bankrupt in the mid-1970s. But it has since risen, phoenix-like, through the collective teeth-gritting efforts of its employees and the wholehearted support of its main bank, Sumitomo.

Representatives of Sumitomo still sit on Toyo Kogyo's board of directors and play an active role in its management. Since November 1979, 24.44 percent of Toyo Kogyo's shares have been held by the Ford Motor Company of the United States, making Ford by far the company's largest single shareholder.

In Japan, a country which prizes homogeneity, such diversity on the board is rare. One of Mr. Yamasaki's chief tasks as president has been to have all Toyo Kogyo's 28,000 employees understand that top management is not some three-headed monster, but a group pulling together for the sole purpose of making Toyo Kogyo a better company.

Mr. Yamasaki, a 68-year-old engineer trained at what is now the engineering faculty of Hiroshima University, has worked all his life for Toyo Kogyo. Jujiro Matsuda of Hiroshima started the company as a cork factory in 1920. Mr. Yamasaki worked for three generations of the Matsuda family.

Toyo Kogyo has undergone a transition from being run by a family to being run by a group. What does that mean in Japan, where a person expects to be with one company for life and give it his entire loyalty?

''Well,'' said an insider, who has worked for Toyo Kogyo for 26 years and who today occupies an important executive position, ''an employee's loyalty is to his company as an organization. He will follow the leadership as long as it is successful. The third Matsuda generation was not successful. Of course, many employees felt sorry for the Matsudas. But everyone who heard Mr. Yamasaki's (December, 1977) speech as incoming president had no doubt times were desperate, the company's survival was at stake. He spoke of his determination to do his best and appealed to us to do likewise, and I think all the employees responded to the transparent sincerity of his appeal.''

The crisis of the mid-1970s cannot really be blamed on a single individual, although some employees talk of the third-generation Matsuda's tendency to resort to one-man decisions. It was a direct result of the 1973 oil shock, which came just as Toyo Kogyo, having staked its future on the Wankel rotary engine, seemed finally to have developed it into a commercially viable engine.

Toyo Kogyo bought the original Wankel technology from NSU-Wankel of West Germany in 1961. Toyo Kogyo was then making minicars, light trucks, and three-wheelers, and struggling to progress into the big leagues. When he heard from a German friend of the Wankel engine, Tsuneji Matsuda, the second Toyo Kogyo president, felt this was it - the rotary engine would establish a unique image for his company.

By 1967 Toyo Kogyo had put a rotary-powered car on the market, and in 1970 it began exporting them to the US. Powerful, but quiet and light, the rotary engine caught the imagination of the American public. Its only drawback was that in order to control emissions, it had to sacrifice fuel efficiency. When the oil crisis of 1973 hit unprepared Western nations, this drawback nearly proved fatal.

US sales plummeted, inventories bulged, and in the 1974-75 fiscal year, Toyo Kogyo suffered an operating loss of 17.3 billion yen ($72 million) and a net loss of 1.7 billion yen. That year sales turnover totaled $2.163 billion. Accumulated debts, long- and short-term, amounted to $1.559 billion.

This was when Sumitomo, Toyo Kogyo's main bank, stepped in. It called in the 62 banks and insurance companies that had supplied credit to Toyo Kogyo and assured them Sumitomo would stand by the company no matter what. It also assured them all creditors would share equally in future repayment of Toyo Kogyo's loans. It put key Sumitomo officials on Toyo Kogyo's board and replaced Kohemi Matsuda, who had succeeded his suddenly deceased father as president in November 1970, with Mr. Yamasaki. But Mr. Matsuda was not kicked out without ceremony. He was moved to the titular position of chairman of the board and then, in January 1980, to an advisory directorship.