Long-Term Policy

At this time of major change in the business environment, DENSO has created a long-term policy as a compass to indicate the future direction of its business operations.

Company Five-Year Plan January 1954

1. Purpose

In the current Japanese economic climate, exports are completely impossible because prices are comparatively high compared to Western countries, and if things continue as they are, Japan will face a serious catastrophe.

The pressing task to improve Japan’s economy is to make it possible to earn foreign currency through exports, but this will require raising the quality of goods to foreign standards and lowering their prices to the same level as foreign goods.

Japanese automobiles are a prime example of this, and it is here that we have focused our attention and formed a technological alliance with Bosch.

Reflecting on the past as we enter our first year with this objective in mind, we are keenly aware of the lack of planning in Japanese corporate management in general, and in our company in particular, although the instability of the Japanese economy is said to be to blame. Now, therefore, we want to bring together our company’s collective knowledge and make every effort to draw up a Five-Year Plan, with specific plans for production, equipment, funds, technology, sales, labor, and welfare, and to establish a guiding policy for company management.

Therefore, in addition to existing products for which a contract with Bosch has already been completed, the Five-Year Plan will include lamps, switches, radio shield parts, turn signals, and windshield wipers. Additional items will be planned separately at a later date, as a concrete detailed agreement with Bosch has yet to be signed.

2. General Policy

1. (1) Improvement of quality to international standards
2. (2) Expansion of sales and service network
3. (3) Improvement of standard accuracy of purchased materials and parts
4. (4) Renewal, expansion, and streamlining of machinery and equipment
5. (5) Administrative streamlining
6. (6) Improvement of factory environment and welfare facilities
7. (7) Improvement of employee quality and appropriate placement
8. (8) Partial implementation of two-shift system
9. (9) Implementation of quota system
10. (10) Reduction of expenses

3. Outline of Five-Year Plan

1. (A) Production plan
2. (B) Personnel plan
3. (C) Equipment plan
4. (D) Capital and financial plan

4. Conclusion

First Five-Year Plan August 1956

Based on the Act on Temporary Measures for the Promotion of the Machinery Industry, the government is in the process of formulating a basic plan for the rationalization of the auto parts industry on its own initiative. According to this, the automobile industry and other key machinery industries must be able to withstand foreign competition and grow as export industries, as well as meet domestic demand, of course, for Japan to meet its national economic needs in the future. As a solution, the aim is to (1) improve equipment, (2) raise technological standards, (3) integrate and streamline superfluous companies, and (4) pursue corporate reinforcement of the basic sector, in order to increase corporate strength and cultivate international competitiveness. One measure is to designate the auto parts industry as being covered by this law. With respect to the view of affiliates, the goal is to rationalize the automotive industry as a whole while correcting deficiencies in its overall production structure. This is so that the parts industry can acquire technology and management capabilities comparable to those of the parent company, which is the finished product industry, break away from its existing subordinate position as a subcontractor, and develop into an independent specialized manufacturer, achieving cost reduction and quality improvement through specialization and mass production by means of the social division of labor.

In implementing this rationalization basic Five-Year Plan, we expect to bring in strong policies and take various measures to modernize facilities, demarcate production areas, create specialized production systems, and improve technology.

1. 1. By the end of FY1960, we will rationalize product types, quality, and production costs, i.e., we will implement a 20% price reduction through concentrated production.
2. 2. Regarding required equipment types and funds, we will mediate funding for the equipment needed for modernization.
3. 3. We will conduct rationalization by improving production technology and efficiency, i.e., unifying standards, demarcating production areas, and improving raw material purchasing methods.

For this reason, we are further directing a rationalization cartel with the expectation of various rationalization effects, such as quality restrictions, quantity restrictions, technology restrictions, affiliate development, and joint purchases of raw materials. We are currently drafting our own detailed basic Five-Year Plan in accordance with this objective. The items in the plan are as follows.

1. 1．Production value
2. 2．Product types
3. 3．Equipment funding
4. 4．Personnel
5. 5．Establishment of new research sector

Second Five-Year Plan January 1961

Goals

1. (1) To achieve international quality and international prices by the end of 1963, and to export 10% of total production by 1965
2. (2) To increase domestic market share by 20% in 5 years
3. (3) To achieve high efficiency and high wages

Priority measures

1. (1) Incorporate scientific control methods into all aspects of management.
2. (2) Focus on R&D, strengthen and increase facilities and personnel.
3. (3) Actively pursue higher levels of productivity in production facilities.
4. (4) Develop and strengthen outsourcing plants.
5. (5) Expand sales organization and service network.
6. (6) Improve welfare facilities, work environment, human resources, and training so that employees can work comfortably and with a sense of fulfillment.

Commentary in DENSO JIHO

Japan’s automobile industry has made remarkable progress over the past few years, with annual production of four- and three-wheeled vehicles tripling from just 240,000 units in 1956 to 750,000 units in 1960, a truly astonishing development.

However, Japan still lags far behind the US and Western European countries. Taking passenger cars as an example, our production volume is only 1/35th that of the US and 1/3rd that of Italy, and prices are about 30% higher. Nevertheless, Japan’s rapid development is entirely the result of the government’s efforts to protect and foster the domestic auto industry by restricting automobile imports.

Since last spring, however, there has been a lot of talk about trade liberalization. While this is to some extent forced, it is the inevitable course of the global economy and something that Japan must do for its own greater development in the future. Therefore, in about three years, automobile imports will become unrestricted, and there is bound to be fierce competition between domestic and foreign cars.

(From DENSO JIHO, January 5, 1961)