Toray Industries, Inc. Business Information, Profile, and History
History of Toray Industries, Inc.
Toray Industries, Inc.'s main fields of operations are general materials, consisting of textiles and compound materials; advanced end products, consisting of pharmaceuticals, medical equipment and electronics; and services relating to fashion and information. The company is focusing on pharmaceuticals, medical equipment, and electronics as businesses that will support its growth in the medium to long term, investing more than 5 % of sales in research and development.
Toray began as a fiber manufacturer. In the first half of the 1920s, two large rayon manufacturing companies--Teikoku Jinzo Kenshi Ltd. (Teikoku Jinken) and Asahi Kenshoku Ltd.-and two smaller companies occupied almost half of the Japanese rayon market, with the other half filled by imported products, mostly from Britain. Courtaulds Limited was the largest British supplier, and the Japanese trading house Mitsui Bussan Ltd. had been an exclusive agent for Courtaulds since 1919.
Rayon yarn was a substitute for raw silk, one of the most important goods Mitsui Bussan handled at that time. Mitsui Bussan was very interested in the future potential of rayon yarn and became aware of Courtaulds's good business record. In addition, the Japanese government was planning a tariff revision, and a rise in the import tariff for rayon yarn was anticipated. In 1923 Mitsui Bussan began to examine the world rayon industry with a view to importing technology, but attempts to contract licensing with Courtaulds and Du Pont were unsuccessful. In 1925 a director of Mitsui Bussan in London reported to headquarters that Mitsui Bussan should buy equipment from a rayon machine manufacturer that would send chemical and machine engineers to Japan. Mitsui Bussan decided to adopt this method of importing technology and established Toyo Rayon Company Ltd. (Toyo Rayon) in 1926. A wholly owned subsidiary, its capital amounted to ¥10 million. In August 1927 Toyo Rayon began to produce rayon yarn at its Shiga plant. Mitsui Bussan asked the German company Oskar Kohorn & Company to establish the plant, teach Toyo Rayon employees to operate the equipment, and send engineers and skilled workers to Mitsui Bussan. Moreover, Mitsui Bussan sent a chemical engineer, who had carried out research on viscose at the University of Tokyo and had joined Mitsui Bussan, to Oskar Kohorn & Co. in order to learn the technology on the shop floor.
Toyo Rayon made profits in the first half of 1928 but retained all the profit inside the company until the latter half of 1931. Toyo Rayon began to pay dividends in the first half of 1932 and from 1933 to 1935 its profits grew rapidly. The profit to sales ratio amounted to about 20% during this period. Toyo Rayon thus became one of Japan's largest rayon manufacturing companies, next to Teikoku Jinken, by the outbreak of the Sino-Japanese War.
During World War II, Toyo Rayon's rayon production capacity decreased significantly as a result of mergers in the rayon industry, which occurred five times at the insistence of the government after October 1941, and as a result of the removal and destruction of equipment, to allow scrapped iron to be used as raw material for weapons. Toyo Rayon's rayon filament production decreased from a peak of 18,200 tons in 1937 to only 345 tons in 1945, and its rayon staple production from a peak of 12,422 tons in 1941 to 1,840 tons in 1945. After 1943 the company was forced to convert to wartime production. Part of the Shiga plant produced torpedoes and torpedo heads for the Japanese Navy, and part of the Aichi plant produced tanks for airplanes. Toyo Rayon established Sanyo Yushi (Oils and Fats) Ltd. as a joint venture with Mitsui Bussan and produced a high-grade lubricating oil for airplanes. It bought the Rakuto plant from Kyoto Sarashi Senko, which bleached and dyed textiles, mainly silks, and named it Yamashina Denki Kojo (Electric Machinery Plant). This plant produced electric and communication machinery for the Japanese Navy.
Nevertheless, Toyo Rayon developed a new product during this period that would be responsible for much of World War II. Asahiko Karashima, a president of Toyo Rayon, realized the importance of innovation in the industry and thought that Toyo Rayon should enter the field of new textiles. When Du Pont succeeded in the development of nylon 66 in 1938, he ordered branches of Mitsui Bussan in the United States to collect information on nylon and to send it, together with samples of nylon stockings, to Toyo Rayon's research institute in Japan. In 1939 Toyo Rayon succeeded in analyzing and synthesizing nylon 66 and in spinning it into yarn in both dry and molten form. It also succeeded in developing nylon 6 independently and in spinning multifilament yarn from nylon in 1941. Toyo Rayon established experimental equipment for industrial use that produced 10 kilograms of nylon per day by the end of 1942 and sold its product, named Amilan, as fishing yarn. This plant too was converted to wartime production. Toyo Rayon produced nylon chips in the plant and supplied them to the navy as raw material for electrical insulation in airplanes.
After World War II, war production stopped and employees who had been enlisted in the army returned to the company. Materials and chemicals for rayon production were in short supply, however, and, restoration of equipment was forbidden immediately after the war by the Allied powers. Toyo Rayon therefore had to undertake conversion work of wartime production facilities for civilian industries other than the rayon industry. It conducted many kinds of business, including manufacturing and repairing railroad passenger and freight wagons, and pot motors and spinning pumps for rayon manufacture. It also produced penicillin, and made ice, salt, and fertilizers and insecticides, utilizing byproducts of nylon production for the latter.
Toyo Rayon's rayon production increased rapidly after the General Headquarters of the Allied Powers permitted Japan to raise its rayon production capacity to 150,000 tons per year on April 4, 1947. Its production volume of rayon yarn increased rapidly from 570 tons in 1946 to 17,305 tons in 1957, and its production of rayon staple, fibers which are spun to make yarn, rose from 1,159 tons in 1946 to 28,560 tons in 1956. The level of rayon yarn production in 1957, the company's postwar peak, was a little lower than the peak level before and during the war, 18,200 tons, while the production level for rayon staple in 1953 already surpassed its 1942 wartime peak of 12,422 tons. The rayon staple production level in 1956, a postwar peak, was more than twice as high as the 1942 level. Profitability was high during this period of recovery, particularly during the Korean War boom period. These profits enabled Toyo Rayon to begin nylon production.
Toyo Rayon planned to change from equipment that produced 1.05 tons of nylon resin, a raw material of rayon yarn, and 0.06 tons of nylon filament for fishing line per day, to equipment which produced one ton of nylon filament per day in the Shiga plant in June 1949, and it established a new plan to construct both equipment which produced five tons of nylon filament per day and equipment which produced caprolactam, a raw material of nylon, corresponding to the volume of nylon in October 1949. This plan was launched in response to the government's promotion of a synthetic fiber industry in Japan, and came into effect in 1949. Needless to say, Toyo Rayon's experience of nylon production during World War II enabled it to respond actively to government policy. It was, however, necessary for Toyo Rayon to tie up with Du Pont, which had a nylon patent network all over the world. Shigeki Tashiro, who had become the president of Toyo Rayon in 1945 but had retired because of the Allied powers' purging of leading Japanese industrialists and had later negotiated with the Allied occupation authorities as a spokesman for the Japanese chemical fiber industry, pointed out to Toyo Rayon's management that Toyo Rayon risked accusations of infringing Du Pont's patent rights if the Japanese company exported nylon products in the future. He advised Toyo Rayon to tie up with Du Pont in order to avoid such a possibility. Toyo Rayon's production method differed from Du Pont's as the Allies knew, but Tashiro's fears were based on the fact that Du Pont had a worldwide patent network not only for the nylon production method but for nylon and nylon product manufacturing equipment. In autumn 1948 Toyo Rayon approached a representative of Du Pont's Far East Section to enquire about the possibility of importing nylon production technology, but received no response.
Toyo Rayon had to import the necessary technology in time for the implementation of a full-scale industrial production plan for nylon in the latter half of 1949. Tashiro therefore asked a manager of Mitsui Bussan's New York branch, where Tashiro himself had once worked, to contact Du Pont. This time, Du Pont replied, demanding that Toyo Rayon pay 3% of nylon sales as a royalty for use of the patent for 15 years, with $3 million payable in advance. This sum was equivalent to ¥108 billion, which far exceeded Toyo Rayon's capital, ¥759 million yen at that time. Tashiro had become chairman of Toyo Rayon's board of directors in March 1950 and was very much surprised by Du Pont's terms at first, but calculated that if the advance payment became ¥500 million yen per year, Toyo Rayon could pay it in two years without great difficulty. He succeeded in persuading Du Pont to agree to these conditions. The technology import contract for nylon was formally signed in June 1951.
At first Toyo Rayon experienced difficulties in its nylon business, even after it had overcome the problems of the nylon production process, as it had no experience in spinning, weaving, knitting, dyeing, or printing nylon. However, these problems were largely resolved by 1953. Toyo Rayon monopolized the nylon market until Nihon Rayon began full operation of its nylon production facilities in December 1956. Even after that, the Japanese nylon industry consisted of only two companies until 1963 when a few latecomers entered the industry. At first, nylon was mainly used for fishing nets, but its uses were extended to women's blouses, knitted underwear, seamless stockings, and tire-cord for use in car tires. In 1959, Toyo Rayon organized spinners, knitters, weavers, dyers, and printers into production teams, and also organized manufacturers of secondary products, trading companies, and wholesalers into sales teams, assisting them technically and financially. In 1951 it organized retailers who stocked clothing made from Toyo Rayon's nylon into the Toray Circle, assisting their research in shop management, educating employees about Toray products, advertisement of new merchandise, and the display of goods. Toyo Rayon's nylon business was highly profitable, and its profits exceeded the combined profits of the other six Japanese chemical fiber manufacturing companies between the first half of 1958 and the first half of 1962--at that time the company adopted the half-yearly accounting system.
In January 1957 Toyo Rayon imported polyester production technology from the United Kingdom's Imperial Chemical Industries (I.C.I.) together with rival company Teikoku Jinken, a pioneer in the Japanese chemical fiber industry. I.C.I. sold Toyo Rayon and Teikoku Jinken the exclusive rights to use its patent in Japan, in return for ¥1.15 million payable in advance by installments. Until September 16, 1968 5.25% of sales was payable for production less than 10 million pounds (lb) per year, and 3% of sales for production that surpassed 10 million lb per year in the case of products other than photograph films. Toyo Rayon and Teikoku Jinken monopolized the polyester market until 1964, when several latecomers entered the market. Toyo Rayon started a prize-contest for product brand names jointly with Teikoku Jinken, which resulted in the name of "Tetoron" for polyester fiber. The two companies advertised Tetoron jointly. Previous experience in dealing with synthetic fibers and in joint technology import and successful joint marketing with Teikoku Jinken enabled Toyo Rayon to minimize difficulties in starting up its Tetoron business. Tetoron made a significant contribution to Toyo Rayon's profits during this period.
In September 1958 Toyo Rayon established a pilot plant for acrylic fibers at its central research institute and constructed equipment which produced 3 tons of acrylic fibers per day at its Nagoya plant. In 1954 it constructed equipment which produced 15 tons of acrylic fibers at the Ehime plant. Acrylic fibers found a market in sweaters, undershirts, stockings, and fabrics. Toyo Rayon's acrylic fiber production was based on its own technology. In the middle of the 1960s the company grew to become the third largest general synthetic fiber manufacturer in the world, next to Du Pont and Monsanto Chemical Co. in the United States.
Rayon was the most important product in terms of sales up to 1954, when it contributed 54.7% and nylon contributed 45.2%. In 1955 nylon sales surpassed those of rayon, contributing 60.0% while rayon contributed 40%. In 1960 Tetoron sales surpassed rayon sales when nylon contributed 57.3% of sales, Tetoron 24.3%, and rayon 18.5%. Tetoron sales surpassed nylon and became Toyo Rayon's largest-selling product in 1965, when Tetoron's share was 43.8%, nylon's 43.6%, and rayon's only 2.3%, with Toraylon (an acrylic fiber)'s share at 4.3%, plastics' at 4.1%, and Piren (a polypropylene textile)'s at 2.0%. In 1973, when the first oil crisis occurred, Toray's sales breakdown was as follows: Tetoron 39.5%, nylon 27.9%, plastics 10.9%, Toraylon 8.5%, rayon 0.9% and others 2.4%. In the first half of 1973, Toray still ranked first in terms of profit after tax among the seven Japanese chemical fiber manufacturing companies, although the difference in profits diminished between Toray and Teijin (as Teikoku Jinken became known in 1962), which ranked second. Tetoron sales grew faster than nylon, and competition, especially in the nylon and Tetoron businesses, intensified after latecomers entered these industries aggressively. These factors caused Toray's comparative decline in the synthetic fiber industry, especially in comparison with Teijin.
Toray made several important changes in the 1960s and 1970s. Firstly, it ceased rayon production, withdrawing from rayon yarn production in 1963 and decreasing the scale of its rayon staple production from 102.6 tons to 40 tons per day in 1968. Rayon staple was used for mixed spinning with Tetoron. Toray ceased rayon staple production in May 1975.
Secondly, Toyo Rayon resumed production of raw materials for synthetic fibers. In 1969 it established the Kawasaki plant which produced 135,000 tons of cyclohexane, a raw material for nylon; 73,000 tons of paraxylene, and 100,000 tons of orthoxylene--the raw materials for polyester--per year. It cooperated with Nihon Sekiyu Kagaku (Japan Petro-Chemical Ltd.), which produced BTX (benzene, toluene, and xylene) from naphtha and supplied it to Toyo Rayon. Toyo Rayon in turn produced raw materials for nylon and Tetoron from BTX. In 1971 Toray established the Tokai branch factory of the Nagoya plant, which produced 125 tons of lactam and 50 tons of terephthalic acid--the raw materials for nylon and Tetoron-per day. In 1970, it established a joint venture with Mitsui Toatsu Kagaku Ltd., named Toyo Chemics, which produced acrylonitrile. Toray thus established a system whereby it could supply its own raw materials for the three major synthetic fibers it produced, and moved toward becoming a general chemical manufacturing company.
Thirdly, it developed new high value-added products and diversified into the non-textile field. In the former category, it established in April 1971 a department to explore possible ventures outside the textiles industry, and successfully marketed an artificial suede named Ecsaine and a carbon fiber named Torayca in 1970 and 1971 respectively. In the nontextiles field Toray established a plastics department, and nylon resin, polyester film, ABS resin, and polypropylene film sold well. In particular, Toray's polyester film became popular for use in magnetic tape for tape recorders, chips for Fuji Shashin Film Ltd. (photographic film), and wrapping materials. In January 1970 Toyo Rayon renamed itself Toray Industries, Inc., as a result of these changes.
After the 1973 oil crisis, Toray's business performance deteriorated and its operating profits fell into the red for the second half of 1974, and at its financial year end in 1975 and 1977. Toray endeavored to rationalize production, and reduced its work force from 19,108 in 1975 to 10,000 after 1987. It continued to develop and sell new high value-added products outside the textile fields. The ratio of non-textiles to total sales increased from 22.4% in 1975 to 44.7% in 1990. Among nontextiles, the ratio of chemicals, including plastics, increased from 20% to 34.1% and the ratio of new businesses and others not elsewhere classified, including carbon fiber, increased from 2.4% to 10.6% during the same period. It also reexamined investment in and loans to related companies, and the ratio of investment and loans to total assets decreased from 26.1% in 1977 to around 20% after 1986. As a result of these efforts, Toray's post-tax profits to sales ratio returned to almost the same level as during Japan's rapid economic growth period from 1966 to 1974.
Toray's global network includes nearly 60 overseas subsidiaries and affiliates, notably in Southeast Asia, where its first overseas fiber production facilities were established, and in the United States, where Toray Plastics (America), Inc. (TPA) produces polyester and polypropylene films. In France, Toray received the active support of the French government when it formed Société des Fibres de Carbone S.A. for the transfer of PAN-based carbon fiber technology to France. In April 1991 Toray formulated a long-term business plan: to increase its consolidated sales to ¥2 trillion by the year 2000 and to become a general chemicals group.
Principal Subsidiaries: Toray Monofilament; Toyo Tire Cord; Ogaki Boseki (98.24%); Toyo Seisen; Marusa (61.85%); Toray Textile; Inami Textile; Ichimura Sangyo (85%); Maruwa Orimono; Toray Ireeve; Toray Kimono Hanmbai; Doray Diplo-mode; Sun-rich Mode (66.67%); Toray PEF Products; Toyo Plastic Seiko (66.67%); Toyo Metallizing (66.67%); Toray Gosei Film; Toray Thiokol (85%); Showa Kogyo; Toray Living (86.8%); Toray Kensetsu; Toray Engineering (99.9%); Toray Precision; Toray Medical; Eastern Viva; Toray Enterprise; Toray Research Center; Toyo Unyu; Toray System Center; Toray Sports Center; Toray International; P.T. Indonesia Toray Synthetics (64.65%); Penfibre Sdn. Berhad (Malaysia); Penfabric Sdn. Berhad (Malaysia); Woodard Textile Mills Sdn. Berhad (Malaysia); Pentley Sdn. Berhad (Malaysia); Pentex Sdn. Berhad (Malaysia); TAL Knits Limited (Hong Kong, 70%); Taltex Limited (Hong Kong); Taltex (Singapore) Pte. Ltd. (Singapore); Nan Sing Dyeing Works Ltd. (Hong Kong); Union Fabric Ltd. (Hong Kong); P.T. Easterntex (Indonesia, 80%); P.T. Acryl Textile Mills (Indonesia, 57.5%); Toray Textiles Europe Ltd. (U.K.); Toray Plastics (Malaysia) Sdn. Berhad (Malaysia); Toray Plastics (America), Inc. (U.S.A.); Filk S.A. (France, 70%); Société des Fibres de Carbone S.A. (France); Toray Industries (Singapore) Pt. Ltd. (Singapore); Toray Industries (H.K.) Ltd. (Hong Kong); Toray Europe Ltd. (U.K.); Toray Industries (America), Inc. (U.S.A.).
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