Strengthening business and creating new strategies

Led by the United States, world trade expanded rapidly in the 1960s. The increasing openness of world trade drew the attention of energetic, ambitious Japanese automotive industry professionals. The global market was where they wanted to be.

To be part of that global market,DENSO developed two goals.The first was to further develop and assure the quality of DENSO products.The second goal was one that would forever alter the face of the company.That goal was to export DENSO—not just its products, but the company as a whole—to the most competitive and technically advanced member of the growing global economy: the shores of the United States.

Coming to America

In the spring of 1964, an American businessman named Norm Owen stopped in unexpectedly at the DENSO office in Tokyo run by Moriji Nakamura,managing director.Owen was from Los Angeles and worked for the McCulloch Co., which manufactured cultivators. Owen had read about a button-controlled starter-generator being used by a motorcycle manufacturer in Japan, and he wanted it for a McCulloch outboard engine. Nakamura and Owen discussed the possibilities,and soon Akira “Andy” Kataoka, one of the team members who had designed the starter generator, was dispatched to Los Angeles, Calif., becoming the first DENSO associate to work in the United States.

When he was not engaged at McCulloch, Kataoka was seeking out other customers. Through hard work and networking, Kataoka met, among others, Gordon Millar, president of the John Deere Co.’s Technical Center, with whom DENSO would establish a business relationship.

Armed with a special zeal and working out of a hotel room, Kataoka was succeeding in spreading information about DENSO’s products
and philosophy.This was an exciting and courageous endeavor. DENSO was so very young,compared to the well-established U.S. firms, and Kataoka himself knew very little about the United States. Though it was too heady a time for reflection, Kataoka’s arrival in Los Angeles had signaled the first steps toward the eventual establishment of DENSO International America, Inc.

Establishing the first U.S. sales office

Back in Japan, Eizo Imura, managing director of marketing, was making plans.He felt that the sales expansion of the automobile air conditioner in Japan had peaked and that the next step was to promote the DENSO air conditioner in overseas markets.

The first step, he told associates being sent abroad to seek business, was to promote air conditioner sales in the dealer-option market and then the OEM markets. After that, DENSO would establish mass production in marketable countries, obtain materials locally and improve competitiveness.

“You are the pioneers,” Imura said. “I am counting on you.”

In 1961, DENSO’s President Hayashi had announced the five-year plan, with one of the first goals to export abroad 10 percent of total production by 1965.The sales managers and export staff had given their best. Kataoka’s trip had been successful. But there were limits to promotion of sales through business trips and written correspondence. Everyone knew what was needed:an overseas sales office.

Under the aegis of now-Chairman Hayashi, President Tatsuo Iwatsuki, Shirai and Imura, DENSO did just that—establishing the first overseas sales office in the United States and becoming the first major Japanese automobile components manufacturer to do so.It was a decision typical of DENSO’s courage and pioneering spirit.

In March 1966, DENSO set up a sales office in Chicago and a subsidiary office in Los Angeles. Takashi Koyama, Masato Chiba and Takashi Okabe were sent to the Chicago office. Satoru Takemoto joined Kataoka in the Los Angeles office. The newly arrived associates experienced what Kataoka had experienced. This was a boom time for the U.S. economy. Industries across the continent’s vast expanse were experiencing rapid growth. The United States, a young country with immigrants from all over the world sharing a pioneering spirit, was enjoying the great prospects of the “American Dream.” It was a singularly unique time. Interstate highways were connecting the states like a huge web. Stores dubbed “supermarkets” were springing up all over.

Now there were five DENSO associates in the United States.The North American operation rested on their backs.

The growing American market

In 1970, the American automobile industry was meeting an annual demand of approximately 10 million vehicles, and things were beginning to open up for foreign manufacturers. It was in this market environment in March 1971, that DENSO founded DENSO Sales California (DSCA) in Hawthorne, Calif., a suburb of Los Angeles. The company was launched with a base capital of U.S. $100,000, and Eizo Imura was installed as president. At its inception, the company was staffed by 12 associates, including four Americans.

The company’s initial objective was to promote sales of car air conditioners as options in Japanese-made vehicles.The air conditioners, designed specifically for each vehicle model, used high-performance, high efficiency technology. But DENSO’s product recognition was low in the United States. It took a great deal of sales expertise, not to mention tact, on the part of DENSO sales staff to deliver the appropriate message.

The company’s second objective was to expand sales of service parts, such as spark plugs. DSCA set its sights on that market while compiling information on product improvement.

Eventually, some of the functions of the Chicago sales office were transferred to Detroit. In addition to securing a contract to supply alternators to Ford Motor Company, DENSO began to produce successful sales results through other automobile manufacturers. In May 1975, DENSO closed its sales office in Chicago and established DENSO Sales Detroit, now the sales division of DENSO International America, Inc.

The late 1960s and early 1970s saw the continued growth of global trade, spurred in part in the automobile manufacturing sector by lowered Japanese import tariffs on passenger automobiles and the liberalized importing of engines and parts in 1971. But the boom times were about to end.

The going gets tough

In August 1971, the United States, suffering from a worsening balance of payments problem, announced economic policies that would profoundly affect foreign currencies. Because of continued economic instability, in February 1973, governments worldwide were forced to begin trading on a free-floating exchange system, instead of the fixed exchange rate model. For example, up to that date, the dollar to yen exchange had been U.S.$1 to 360 yen—and it had been at that ratio for more than 25 years. Exchange rates became unstable, and many countries suffered serious economic woes, most particularly inflation and impaired growth.

To make matters worse, in October 1973, reacting to renewed conflict in the Middle East, oil-producing nations announced massive price increases for crude oil, while at the same time significantly reducing oil production. As expected, the economies of the buyer nations suffered severely. Gas prices spiraled higher and higher. Unemployment rates rose. “Recession” became the operative word in the vocabulary of economic analysts.The first so-called “ oil crisis” had arrived.

If it was bad news in the United States, where car owners were limited to purchasing gasoline on even or odd days, it was much worse in Japan which relied almost entirely on imported oil.

While Japanese households were inconvenienced by a lack of daily necessities, businesses suffered. Fuel and other raw materials were in short supply. Eventually, inflation took over, with wholesale prices increasing an almost incomprehensible 31 percent in one year.

But even during the harshest economic conditions of oil shock, DENSO moved courageously forward. It was during this time that DENSO instituted its domestic mass production system and created overseas companies that would foster expansion into other overseas companies. It was during these difficult times that DENSO pioneered the internationalization of manufacturing. To paraphrase an old saying: When the going got tough, the tough kept going.

DENSO's business strategies

From the mid-1960s on, consumers began to demand greater and greater performance and functionality from cars. But those demands had not been met with current technology. DENSO’s engineers recognized this and the engineering division pushed for the rapid development of electronics technology.

At the same time, DENSO launched research on semiconductors, and in 1968, the Integrated Circuit (IC) Laboratory was established. Both the electronics revolution and the in-house IC production were superb innovations that became part of DENSO’s winning business strategy.

The second element of strategy involved upgrading domestic sales and service and developing a more aggressive marketing approach. DENSO’s original plan, dating back to its inception, was to create sales offices in Tokyo and Osaka, Japan, and to expand the domestic market.

As auto sales grew, so did the aftermarket, whose main characteristic was the wide variety of add-on systems, desired by consumers—intermittent windshield wipers, motorized antennas, warning lamps and light control platforms (which automatically activated headlights when entering a tunnel). DENSO used the popularity of its aftermarket systems to convince car manufacturers to purchase the systems as OEM products.

The fourth element of DENSO’s strategy was the construction of large-scale manufacturing plants based on long-term predictions for auto demand. From these plants would flow high-quality, low-cost products. From them would come a manufacturing model of cost reduction through mass production—and an increasing share in the domestic market.

Large-scale manufacturing plants and long-term perspective

In the mid-1960s, DENSO acquired a 13-million square-foot property in a hilly area of Nishio City in Aichi Prefecture. The plans for the site were ambitious—seven factory buildings, each with more than 350,00 square feet of space.

But concerns abounded, one in particular, can we maintain, at such a vast production facility, the high standards of product reliability and quality? The answer was DENSO could—and would.

DENSO began work on implementing a high-tech mass production line at the Nishio Plant. Implementation was not easy. Development teams worked around the clock. The production and manufacturing divisions streamlined the processes, then streamlined them again and again, until the highest levels of quality and efficiency were achieved.

This was especially noteworthy because DENSO was able to drastically expand its production capabilities and production during the so-called “oil crisis.” It was but another testament to DENSO’s unwavering, clear, long-term vision: to compete on the global stage.

Soon, DENSO acquired land for additional plant expansion, this time in the Takatana district of Anjo, a city located near Kariya. Now the foundation was in place. With three large manufacturing plants in Anjo, Nishio and Takatana and with the Ikeda and Hiroshima plants and headquarters, DENSO truly was ready to go global.