My Personal History, Kagayaki Miyazaki19. The 1970s Recession

The oil shock that hit the world in the fall of 1973 had an immense impact on Japanese industry. Companies fell into the red as consumption slumped while material and labor costs soared. Everyone scrambled to downsize.
Asahi Kasei was no exception and our profits rapidly deteriorated. In the fiscal year ended March 1976, our ordinary income was minus 2.3 billion yen and there was no prospect of recovery. It was our first loss in the post-war period.
To overcome this predicament, we sold a lot of assets, mostly land and shares. Over three years this raised 20 billion yen. Without that, we wouldn’t have been able to keep paying dividends. We also reduced the workforce by nearly 30% during this period.
It may sound easy to say reduce the workforce, but it’s the most painful task that management has. We even had many employees say, “I’ll quit if that will help save the company” because they understood how bad our condition was. Sincerely grateful to each one of them, I told their managers to do all they could to look after them even after they left the company. The managers felt the same way. But the situation was more than could be overcome by individual companies rationalizing on their own. There was a need for the whole synthetic fiber industry to restructure.
In April 1977, in the midst of the synthetic fiber downturn, I once again became chairman of the Japan Chemical Fibers Association. My most pressing issue was the surplus of production capacity, because the excess plant facilities built up during the period of rapid growth was the fundamental problem.
We filed an application to form a depression cartel, but the newspapers reported a discrepancy between actual facility capacity and nominal figures. We had to retract the application and work to close the gap between actual and nominal capacity.
This turned out to be more difficult than I anticipated. There were heated arguments at the meetings we held among the presidents of the companies, but I kept trying to guide the discussion toward revising the figures to match reality without dwelling on the past. Eventually, the presidents began to trust one another and everyone finally revealed their actual capacity figures.
Company presidents talking to each other alone would raise suspicion of violating the Antimonopoly Act, so we asked a bureau director and a section chief from the Ministry of International Trade and Industry to observe our meetings. As we couldn’t afford to wait a long time for the depression cartel application to get approved, the bureau director in charge talked to the Minister of International Trade and Industry, who got the Prime Minister’s agreement, so we received the first recommendation to curtail operations in 12 years, since it happened to the iron and steel industry.
This changed everything. It was this recommendation that got us out of the synthetic fiber recession. Even now, I’m extremely grateful to that person. We reduced production by an average of 20% under the administrative guidance of the Ministry of International Trade and Industry starting in October 1977, and in April 1978 we switched to a depression cartel.
For structural reforms, we were designed as a structurally depressed industry according to the Law on Temporary Measures for Stabilization of Specified Depressed Industries, so we were able to scrap or suspend a little over 17% of our overall plant capacity. This went relatively smoothly due to the trust and cooperative mood among the company presidents. It was thanks to the earlier meetings of company presidents that we learned to trust each other.
Unfortunately, we I couldn’t reach agreement on Teijin President Shinzo Oya’s proposal for reorganizing the industry. Oya’s idea was to group the synthetic fiber sales functions into four pairs, namely Teijin–Unitika, Toray–Kuraray, Mitsubishi Rayon–Toyobo, and Asahi Kasei–Kanebo. Although the general idea made sense, the details were difficult to work out. In the end, only two joint-venture sales companies were established: Diafibers of Mitsubishi Rayon and Toyobo (acrylic fiber only), and Nippon Synthetic Fibers of Asahi Kasei and Kanebo.
Established in May 1978, Nippon Synthetic Fibers is only a joint sales company as a formality, since employees seconded from the two parent companies each sell their own products separately. But it still helps to promote group identity, even if not completely.
Though it hasn’t been easy, it is significant that the structural reforms were not just government-led but also through the industry’s own efforts. I think the fiber industry was able to do it because we often had to curtail our operations.