The genesis of a company: DENSO's first 50 years

On Dec. 16, 1949, in the midst of one of the most chaotic periods in Japan's economic history, DENSO was born in Kariya City in Japan. And that is where this story begins.

The beginning

In 1949, Japan's economy was still suffering greatly from the devastation wrought by World War II. Industrial production had recovered to only about one-third of its pre-war levels and inflation was staggering.

Paradoxically, it was the weak state of the Japanese economy that gave birth to DENSO. In the late 1940s, Toyota Motor Corporation's electrical equipment department ran into difficulties.The department, whose main product was electrical equipment for automobiles, was facing serious competition from numerous manufacturers.Worse, the government deflationary policy had brought economic growth to a standstill, seriously affecting auto sales.The woes of that department were beginning to cause Toyota to list like an unstable freighter. Something had to be done to keep the ship righted.

In April 1949,Toyota took action. It submitted to the government a restructuring and reorganization plan.The strategy was for Toyota to spin the electrical equipment department off into a separate and independent company. And that is just what Toyota did.

Thus, DENSO was established on Dec. 16, 1949.Torao Hayashi was appointed the company's first president and CEO.Takaichi Suzuki,Tatsuo Iwatsuki and Takeaki Shirai were named directors. The company had an initial capital of 15 million yen and 1,445 associates.

It also faced numerous difficult challenges.

Hayashi, a longtime and well-known manager of Toyota's spinning division, had little experience in electrical equipment and knew nothing of the division's financial situation. According to company legend, Hayashi accepted the position offered by Toyota President Kiichiro Toyoda by saying,"It is sometimes easier to manage when we don't know anything about the field. It can't be so bad, because after all, we all are involved in Toyota-related business."

Hayashi soon learned it was that bad - and perhaps even worse."After taking over, I realized that the company owed nearly 140 million yen to corporate headquarters," Hayashi said."I naturally assumed that this debt could be paid back after the new company began to turn a profit. However, President Toyoda held a very different opinion about the restructuring - and the debt.He told me to never forget that the 140 million yen was a loan to DENSO and not a handout.His statement reflected the harsh reality of the situation."

Nor could this new company use "Toyota" in its name, trading on the automobile maker's storied reputation.

This may seem a bit harsh, as if Kiichiro Toyoda had first separated from, then completely disowned the company. But his vision of the auto industry framework was for component manufacturers to exist independently from vehicle manufacturers in order to better handle and provide specific and distinctive parts.

Hayashi understood this better than most. He later said,"President Toyoda's words served as unforgettable encouragement. I thank him for sharpening our resolve."

When it came time to choose a name, NIPPONDENSO, literally translated as Japan Electrical Equipment, was selected over such possibilities as Aichi DENSO, Kariya DENSO or Tokai DENSO, any of which might have limited its vision and scope to the local region.

Now the company had leadership and a name. What it didn't have was enough money or enough work.

Starting from zero: Trial and error

Regular production contracts were needed from companies other than Toyota's main plant in Toyota City, and Tatsuo Iwatsuki took the burden to secure new customers upon his back - literally.

Company Director Iwatsuki knew that success came down to teamwork. If that meant slinging DENSO products across his broad shoulders and carrying them to the customer, he would do just that - and he did. Iwatsuki would stuff numerous DENSO products, from starters to regulators to horns, into a backpack strapped across his back, and travel six hours by night train and bus from Kariya to the suburbs of Osaka, to exhibit DENSO products to potential clients. He not only made sales, he began to develop loyal relationships as well.

It was a time of adaptation in other ways too.Three-wheeled trucks, not four-wheeled passenger vehicles, were the most abundant means of short-distance transportation in Japan during post-war recovery.Tires and electrical equipment were always in short supply. DENSO recognized the possibilities and toiled continuously to win a share of the three-wheeler market. DENSO also courted and became a supplier to motorcycle manufacturers. Although the three-wheeled vehicles disappeared in the late 1970s, that contract proved a real breakthrough.

Slowly but surely, the range of DENSO's products widened and the size of its market grew.Things were getting better.

Improving worldwide technical standards

In the early days, DENSO's technical manufacturing standards remained far behind those in the United States and Europe - as much as 10 years behind.Torao Hayashi knew that Japan needed to acquire technological and manufacturing methods that met international standards. At the same time, the company was struggling for its very life.

In May 1952, Hayashi made a courageous decision. After sending Takeaki Shirai and Takaichi Suzuki to the United States to study the American automobile and electric equipment industries, Hayashi made his move. He announced that DENSO would import 160 million yen worth of various new machines.The decision was mind-boggling; the investment was staggering.The company capital was worth only 90 million yen.Hayashi was taking out a mortgage on the future of the company. He felt he had no choice.The decision, however precarious, was necessary for global survival.

DENSO also was beginning to spread its wings to another part of the globe. Robert Bosch GmbH,an electrical components maker in Germany, was seeking technical partnerships with overseas companies.In May 1953, DENSO and Bosch reached an agreement to work together.

The beginning for DENSO had been difficult, if not almost disastrous. At any point along the way, hopes easily could have given way to despair. But amid inflation and recession, debt and deficit and hard times for all,Torao Hayashi and DENSO associates had shown fortitude and foresight.

They had survived and succeeded. And they had not only created a company, they had given birth to that company's spirit.

Marketing begins

In business it is important to note that curiosity about and interest in technological innovation is one thing. Demand for it is quite another. Neither curiosity nor interest drive manufacturing. Demand drives manufacturing. DENSO needed to create demand.

DENSO's approach to marketing its automobile heater was simple, but ingenious. (In the early 1950s, auto heaters were aftermarket luxury items.)

DENSO's sales people decided to target taxi companies for one simple reason: DENSO sales associates knew that warm, cozy taxis would attract more passengers.They also knew that those passengers would want that same warm, cozy feeling in their own cars. And they were right. It was not long before auto heater sales increased. DENSO soon was selling out its entire heater inventory.This was really a "hot" prospect. Next came the "cool"down. But only figuratively.

Soon, drivers wanted to be kept cool during the heat and humidity of the summer.

DENSO had plans to meet that need through the design of a car cooler unit. Where that would end up was an example of not only hard work, but fortuitous thinking.

DENSO Engineer Yasunobu Ishibashi traveled abroad to study the car cooler market and broaden DENSO's perspective on technology. By May 1957, Ishibashi and his associates had completed the first steps to developing DENSO's car air-conditioning technology, which would eventually provide a system that continues today as one of DENSO's hallmark products. He and his engineers developed an original trunk-type unit that fanned cold air into the interior of an automobile from the rear of the car.

It wasn't long before manufacturers and consumers were clamoring for DENSO air conditioners. Indeed, by using the slogan "Cool Air of the Alps," DENSO soon was selling out its inventory.The inventory now included a dashboard air conditioner, which fanned cool air from the dashboard of the car.

But this was not a one-product era. DENSO, always on the lookout for another product niche and always with a nose for taking a lead in product development and manufacturing, targeted spark plugs too.

This effort produced a different hurdle - one tangled in red tape.Through its technical affiliation with Bosch, DENSO had developed its own spark-plug technology. But government regulations at that time restricted newcomers into some industries, and DENSO was unable to obtain government approval for its new, cooperative venture. But showing enthusiasm and persistence in this challenge too, DENSO finally received government authorization to establish a new company, Aichi DENSO, in concert with the chemicals and ceramics company.The formation of this new company allowed DENSO to create a technological link between spark plugs and other electrical components.

New research and development

From the latter half of the 1950s to the start of the 1960s, the economic picture in Japan began to brighten.Correspondingly, DENSO was pouring its energy into research and development (R&D).

New R&D products included electric meters (or instrument clusters, as they are now called) and alternators. DENSO had developed a modular unit that included both the speedometer and tachometer.The tachometer was a mechanical device driven by a cable that transferred the rotation of the engine to a magnet, that in turn, drove the meter. Malfunctions were commonplace, so DENSO engineers replaced the cable with an electrical wire, developing the first electrical tachometer. At the same time, DENSO improved the speedometer, making it partially electric as well.

DENSO's alternator was another groundbreaking product.Through extensive R&D, DENSO was able to reduce the size and weight and improve the heat resistance in its alternator. Over time, the development and production of the alternator of that era became the genesis for today's DENSO alternators, still among our most renowned products.

The landscape had changed - and along with it, the view. Now, as it would be for a ship sailing across the ocean, different sights were coming into focus.

The next steps

The alluring image of the United States came into clearer focus when a new, youthful president took office in 1961. John F. Kennedy's inauguration speech and his famous words, "Ask not what your country can do for you; ask what you can do for your country," caught the attention and imagination of many young DENSO associates. A fervid interest in the United States was suddenly sparked.Within a short time, a new, invigorated era of overseas involvement would begin.

The second installment of "Proud past, strong future" will appear in the fall issue of Vision.