Reference

Announced in January 1952 by President Torao Hayashi

1. I believe we should establish a scientific approach to our administrative work. It is time to study and act upon questions such as whether our administrative work, which has been streamlined to a minimum, is being used as accurate data in management policy, whether that administrative work is being done efficiently, and whether the resulting data is being sorted and stored efficiently.
2. The largest expenses are related to the improvement and upgrading of facilities with the goal of rationalizing production. We are pleased to see improvements from a year ago as a result of the rather drastic plans implemented during the ongoing period of special demand, and hope to see even more efficient operations. Going forward, it should be possible to take a scientific approach and produce in a rational manner with high efficiency and low cost, so that employees can earn high wages.
3. We will improve welfare facilities as much as possible, from the standpoint of hygiene and safety, as well as from the standpoint of family life, since employees cannot carry out production far from their home.
4. I believe there was something worth seeing in our research into materials linked to production. Such research requires considerable manpower and expense, and the automotive industry is based primarily on technological research. I hope that the parties involved are deeply aware of this fact and conduct their work with practical aspects in mind and with confidence in their research results. New products require careful and thorough consideration, followed by hard work to produce something that will fully satisfy our customers. Designers should strive to research and create products that are one step ahead of the times, by modestly yet boldly drawing on the experience and knowledge of their superiors, preventing mistakes before they happen, creating excellent designs, and keeping an eye on processing and inspections at the production site.
5. I hope the following points will be taken into consideration at the production site. I would like our previously improved machinery and equipment to be further refined and put to use to improve quality and save man-hours. On this point, I hope our company will continue to apply appropriate incentive methods to raise the level of our technology. We have spent considerable money and effort on improving our conveyance equipment, the utilization of which will, I hope, be targeted solely at eliminating unnecessary effort and wasted manpower. This should help in quality and quantity control, and hopefully efforts will show up in the numbers, as in daily production and daily inventory. Although the use of compensation machinery remains far from sufficient, I hope that it continues to be fully maintained and that efforts are made to improve its accuracy.
6. Quality control and production control are critical issues and extremely difficult to manage. This year I want us to identify any specific issues, begin specific research for this purpose, and set up and implement appropriate measures.
7. The allowance for materials, accounting for 60% of monthly expenses, has a significant impact on management, so I want the company to handle price increases or decreases cautiously, taking into consideration our credibility and our relationships with our partner factories. Also, being independent, we are now in competition, even though we are delivering to Toyota Motor Corporation. I want our sales force to work as a guide for production and technology, keeping an eye on customers' criticisms and demands, with service-backed selling and market judgment.

（1）NIPPONDENSO will acquire Japanese manufacturing and distribution rights for the following Robert Bosch products.

(a) Contracted items

Generators (including current-voltage regulators and cutouts), starting motors (including switches), power distributors, spark plug rings, high-voltage magnetos, radio shielded parts for the above, headlights and switchboards (including various small lights such as taillights, fog lights, and parking lights), turn signals (including switches), electric alarms, diesel engine glow plugs, hot-water heaters for vehicles, inspection and repair tools, instruments, and equipment required for automotive electrical equipment.

(b) Patent license and scope

Robert Bosch patents and utility models necessary for the manufacture of contracted items and their pending applications.

(c) Import and export

NIPPONDENSO will be able to freely export its contracted items (1) to the entire world with respect to Japanese-made vehicles, including those items assembled in the vehicles and their spares, and (2) to any country where no Robert Bosch patents or licensees exist with respect to foreign-made vehicles. NIPPONDENSO will also be allowed to sell imported Robert Bosch products in Japan.

(d) Technology licensing and guidance

Besides the right to use the contract patents, all technologies owned by Robert Bosch (all technologies for design, manufacturing methods, building, machine planning, inspection, etc.) will be licensed to NIPPONDENSO. Two engineers from Robert Bosch will be sent to NIPPONDENSO. In addition, three NIPPONDENSO engineers will receive training at Robert Bosch for six months.

（2）Payment

(a)

NIPPONDENSO will pay Robert Bosch an upfront payment of 40 million yen in addition to a certain percentage of royalties. (With this upfront payment, Robert Bosch will acquire 800,000 new shares of NIPPONDENSO's increased capital.)

(b)

NIPPONDENSO will use the “DENSO” mark on its products, but will also add a separate “Licensed by Bosch” mark.

（3）Term

The term shall be 10 years, with automatic annual extensions unless either party to the contract requests termination.

*Links: Reference Materials Long-Term Policy Company Five-Year Plan

*Links: Reference Materials Long-Term Policy Second Five-Year Plan

The Five Main Principles of Toyoda are a written statement of the ideas of Sakichi Toyoda, and were first released on October 30, 1935, the fifth anniversary of Sakichi's death.

• - Always be faithful to your duties, thereby contributing to the Company and to the overall good.
• - Always be studious and creative, striving to stay ahead of the times.
• - Always be practical and avoid frivolousness.
• - Always strive to build a homelike atmosphere at work that is warm and friendly.
• - Always have respect for spiritual matters, and remember to be grateful at all times.

“Upon Establishing DENSO Creed” Torao Hayashi, President

More than six years have passed since our company became independent in December 1949, and we have now reached the stage where we are recognized by others in the Japanese automotive industry as a separate entity.

While many problems remain ahead, I believe we can solve them through our own conviction and hard work, and I hope we can gradually reach an ideal state in future.

As of March 1, we had a total of 1,450 employees under the level of director. Breaking this down by year of hire, we had 854 employees as of April 1951 and 927 as of April 1952, an increase of 73 employees. As of April 1953, there were 1009, an increase of 182; as of April 1954, there were 1369, an increase of 260; in April 1955, there were 1,220, a decrease of 149; and in February 1956, there were 1,452, an increase of 232. This April, the number of employees is expected to increase by 198 to 1,620.

As we can see, of our 1,650 employees, the ratio of those who have been with us since before April 1951 and those who joined since then is almost exactly 50-50. In other words, about half of our 1,600-plus workers have been with us for less than four years. Especially this year, the number of young workers is expected to increase by 392, nearly 400, meaning that about 25% of our 1,600 workers will be just starting their careers.

Those already with us in 1951, that is, 50% of the current workforce, faced the pain of our birth as an independent company and the major recession the following year. The serious concerns and struggles as we implemented the measures to rebuild the company was an unforgettable and valuable experience, and remains fresh in the memory of those deeply involved. However, as the saying goes, “danger past, God forgotten,” and tension and excitement do not last long, fading with age. So the 50% of employees who have joined us since then probably feel that the company let them in just because it was busy, without knowing enough about what was going on at the time. They may simply think that the company has somehow become profitable.

That is where the key issue lies. When we reflect on the present, in both public and private life, we find that many of the causes of negligence and poor performance, whether large or small, are not absolutely inevitable, but rather stem from a lax mindset.

Toyoda's businesses gradually developed from the end of the Taisho era and into the Showa era, and by 1939, the foundations for the spinning, weaving, automobile, rayon, steelmaking, and industrial machinery businesses had been laid and the business spirit led by Sakichi Toyoda was taking shape in those various fields. At that time, the following five principles were formulated as a business creed that would permeate all levels of Toyoda and serve as a management model, setting the standards for how Toyoda employees should act so as to form a corporate culture that could be proudly held up to the world.

• 1. Always be faithful to your duties, thereby contributing to the Company and to the overall good.
• 2. Always be studious and creative, striving to stay ahead of the times.
• 3. Always be practical and avoid frivolousness.
• 4. Always strive to build a homelike atmosphere at work that is warm and friendly.
• 5. Always have respect for spiritual matters, and remember to be grateful at all times.

The meanings of some of the words in these five principles are not widely used in today's society, and could even be considered strange. That is, while some of the original Japanese words in the first and fourth principles may indeed seem militaristic in tone, their spirit is not necessarily inappropriate for the present day. Benefiting the nation and its people through the development of industry is important in every era. In addition, it is not that the household system has disappeared in today's Japan, but rather that we have moved from a patriarch-centered way of thinking to a society with order and clarity based on the equal rights of each family member. In this sense, it is not wrong to consider the company as a new big family. For this reason, the ideas of these five principles as a business creed are still applicable at a time when people think deeply about the spirit behind them.

However, although procedures remain unchanged, their expression and application must be appropriate to changing times and social progress. For example, the truth of Buddhism is an eternal, unchanging, and profound heavenly truth, but today, with orthodox Buddhism in a slump, so-called new religions that have adopted incomplete doctrines or mere parts of Buddhism should take up ideas and forms that are adapted to today's social conditions and that will prepare them for the future. In the same sense, our business creed should be considered as the specific fundamental policy of our company.

From this perspective, I asked via our directors and managers for a range of proposals for a business creed as the main policy of NIPPONDENSO, and received more than 100 suggestions. Having examined them in detail and grouped together those with a similar meaning, they can be roughly classified as follows.

• - Everyone in the company, regardless of rank position, should work together in harmony to develop the company and its employees.
• - We should honor loyalty and take our responsibilities seriously, as well as remain conscientious in both public and private life in order to earn the highest level of social credibility.
• - We should commit to research, constantly creating things that are new and ahead of the times. Improve productivity through ingenuity and effort. Make things that are good quality and affordable.
• - We should reject extravagance and ostentation, while maintaining a spirit of diligence, modesty, and integrity.
• - We should serve the nation and society, respond to consumer trust, make a social contribution through production, and serve customers with sincerity.

While the suggestions can be put into these five groups, upon further consideration, I think they can be divided into two categories: external policies that state what the company should do for customers and society, and instructive policies that show exactly how to implement the external policies. Keeping these in mind while trying to make them as understandable as possible, and based on my own long experience of following guidance, Toyoda having directly received honors related to its business for three generations, I have selected the following four policies as our business creed.

The Deming Prize was established in 1951 by the Union of Japanese Scientists and Engineers to honor the achievements in Japan of W. E. Deming, a professor at New York University and a world authority on quality control. Dr. Deming taught quality control using statistical methods to Japanese companies from 1948 to 1950. This prompted the introduction of quality control into Japanese companies, leading to a dramatic improvement in the quality of their products.

There are three types of Deming Prize: the Deming Prize, the Deming Application Prize, and the Deming Application Prize for Small Companies, and we were aiming for the Deming Application Prize.

In the Deming Application Prize, the first objective of quality control is “to provide products that satisfy customers,” and companies are judged, either through statistical methods or empirically, on how well they conduct their business operations toward this objective. Receiving the prestigious Deming Prize was an important opportunity for our company to increase its credibility in society.

By this point, however, more than two dozen leading companies, including three steelmakers, Yawata Steel and Fuji Steel (which merged to form Nippon Steel), and Kawasaki Steel, had received the Deming Application Prize. It was therefore a very courageous decision for us to set the goal of being audited as early as 1959.

Tokyo Office, August 19

• Masao Goto, Cabinet Statistics Bureau (Chief Examiner)
• Koichi Aiba, Agency of Industrial Science and Technology
• Hiroshi Matsumoto, KDD

Headquarter Plant, September 18-20

• Ikuo Kusaba, Professor, Tokyo Institute of Technology (Chief Examiner)
• Kaoru Ishikawa, Professor, The University of Tokyo
• Tetsuichi Asaka, Professor, The University of Tokyo
• Rintaro Muramatsu, Professor, Waseda University
• Hiroshi Tomizawa, Professor, Keio University
• Takeshi Suzuki, Professor, Tokai University
• Okizo Kamio, Associate Professor, Yokohama National University
• Shuji Hayashi, Associate Professor, The University of Tokyo
• Shizuo Senju, Assistant Professor, Keio University
• Kunio Isobe, NTT

Osaka Office, September 27

• Kaoru Ishikawa, Professor, The University of Tokyo (Chief Examiner)
• Shoichi Shimizu, Professor, Kyoto University
• Takehiko Matsuda, Professor, Tokyo Institute of Technology

1. Tokyo Office, August 19

President Hayashi:

(1) History of company, (2) Company policy, (3) Approach to QC

Senior Executive Director Iwatsuki:

(1) Outline of products and business partners, (2) Company organization

Executive Director Shirai:

(1) Chronology of QC, (2) Characteristics of our QC, (3) Role of Tokyo Office in QC organization and activities

Director Nakamura:

(1) Outline of Tokyo Office, (2) Position of Tokyo Office in QC, (3) Organization and division of duties, (4) Tokyo Office Director policy, (5) Overall effectiveness, (6) Future plans

Manager, Sales Section, Tokyo Office:

(1) Organization and division of duties, (2) Duties - information gathering and meeting bodies, (3) Working examples

Manager, Technical Section, Tokyo Office:

(1) Outline of Technical Section, (2) Collection of quality information, (3) Operation of Technical Section

Assistant Manager, Technical Section, Engineering Department, Tokyo Office:

(1) Standardization of products

Assistant Manager, Services, Engineering Department, Tokyo Office:

(1) Information gathering

2-1. Headquarter Plant, September 18

President Hayashi:

(1) History and outline of company, (2) Company policy, (3) Approach to QC

Senior Executive Director Iwatsuki:

(1) Overview of products and business partners, (2) Organization and management (3) Long-term management policy, (4) Conclusion

Executive Director Shirai:

(1) Chronology of QC activities, (2) System of QC, (3) Features of QC, (4) Effects of QC, (5) Future plans

General Manager, Planning and Administration Department:

(1) Organization and division of duties in planning and administration, (2) Specific examples of assistance and support duties

Director, Sales Division:

(1) Market research

Director, Technical Division 1:

(1) Product design

Director, Engineering Division:

(1) Production control

Director, Procurement Division:

(1) Outsourcing management

2-2. Headquarter Plant, September 19

Director, Production Engineering Division:

(1) Process design and equipment engineering management

Director, Manufacturing Division:

(1) Manufacturing process control

Deputy Director of Inspection:

(1) Inspection

Production site examination:

Electrical Equipment Section 1, Electrical Equipment Section 3, Electrical Equipment Section 4,
Injection Pumps, Automatic Machinery Section, Heat Treatment Section, Press Section, Electrical Equipment Section 5, Molding Section

2-3. Headquarter Plant, September 20

Production site examination:

Plug Business Unit, Surface Treatment Section, Radiator Section, External Inspection Section, Maintenance Department, Engine Department, Endurance Inspection, Research Division

Presentation of case studies:

State of efforts from dynamo design to practical use

3. Osaka Office, September 27

Senior Executive Director Iwatsuki:

(1) Company outline, (2) Business creed and five-year plan, (3) Chronology of QC and policy on quality

Executive Director Imura:

(1) Sales function

Director, Osaka Office:

(1) About the Osaka Office

*Links: Reference Materials Long-Term Policy DENSO Principles for Open System

*Links: Reference Materials Long-Term Policy New DENSO Principles for Open System