Mitsubishi Corporation History

Company History:

Appearing on everything from automobiles to agricultural goods, the Mitsubishi Corporation's three diamond logo has become one of the most familiar symbols in the world. Mitsubishi Group companies are represented in virtually every country in the world, and the company has had a dominant presence in the development of eastern Asia since the 1870s. The firm is characterized as a keiretsu (banking conglomerate), a family of businesses linked through Japanese history and tradition, as well as cross-shareholdings, interlocking directorates, and personal contacts. This scheme provides Mitsubishi affiliates with common and well-known brand names, access to credit, and protection from hostile takeover. The Mitsubishi keiretsu is organized around Mitsubishi Corporation, the largest diversified trading company in the world; Mitsubishi Bank, Japan's fourth largest city bank; and Mitsubishi Heavy Industries, Japan's largest manufacturer of heavy machinery. The Mitsubishi guruupu, or group, includes such well-known affiliates as: Nikon Corp., Mitsubishi Motors, and Mitsubishi Estate Co.

Mitsubishi is the family business of the House of Iwasaki. Its founder, Yataro Iwasaki, was born in 1834, a peasant who purchased samurai status with the help of relatives. Despite his rural heritage, Iwasaki developed contacts with a number of urban administrators in the Tosa prefecture (or fiefdom). Later, as a Tosa official and member of the administrative class, Iwasaki established a number of personal relationships with influential politicians whose assistance and favoritism would later prove indispensable.

After the restoration of the Meiji emperor in 1868, the new government initiated a national program of industrial modernization. It established and operated several model corporations which were later sold to private investors. At this time, however, the only private interests with enough money to purchase these corporations were established companies run by Japan's richest families. Family companies such as Mitsui, Sumitomo, and Yasuda greatly expanded their financial interests when they took control of the government companies.

Yataro Iwasaki, however, was not from a rich family. Nevertheless, in 1870, during the first years of the Meiji government, he was able to purchase Tsukumo Shokai, the official Tosa shipping company. In 1873 he changed its name to Mitsubishi, which is Japanese for "three diamonds." Iwasaki was dedicated to an occupation as a merchant and to making Japanese shipping companies competitive with the large foreign lines.

Mitsubishi's greatest supporter in government, the Finance Minister Shigenobu Okuma, was a close friend of Iwasaki. He lobbied on behalf of Mitsubishi, designating the company for numerous subsidies and privileges. When the Japanese government launched a punitive military expedition against the island of Formosa (Taiwan) in 1874, Okuma saw to it that Mitsubishi was chosen to provide the ships. The government later offered direct subsidies to Mitsubishi Shokai (company) to ensure that Japan remained competitive in world shipping. With the active support and protection of the government, Mitsubishi, like Mitsui, Sumitomo and Yasuda, evolved into a zaibatsu (literally a "money clique").

By 1877, 80 percent of Japanese maritime traffic was controlled by the Mitsubishi Shokai. Iwasaki, however, had incurred some political and professional disfavor as a result of his privileged influence in government and trading practices. On numerous occasions Iwasaki was personally attacked in newspapers for his unscrupulous business practices. The other zaibatsu, particularly Mitsui, relied heavily on Mitsubishi for shipping and suffered greatly from its monopoly prices. Customers shipping freight on Shokai boats were obliged to use Mitsubishi warehouses and insure their goods with the Mitsubishi Maritime Insurance Company.

In 1880 Mitsui supported the creation of a rival shipping company called Tokyo Fuhansen. Within a year Mitsubishi had succeeded in driving Fuhansen out of business. However, after Count Okuma died in 1881, his political opponents joined Iwasaki's competitors with the common goal of breaking the Mitsubishi shipping monopoly. The following year Fuhansen was reorganized, merged with several other smaller shipping companies, and renamed Kyodo Unyu (United Transport). Kaoru Inoue, a political enemy of Okuma and close friend of Mitsui's Takashi Masuda, convinced the government to invest heavily in Kyodo Unyu. Thereafter, Mitsubishi and Kyodo Unyu engaged in an extremely costly and intense competition which drained both companies of virtually all their resources.

During the battle with Kyodo Unyu, Mitsubishi attempted to consolidate its operations by securing a guaranteed source of fuel. In 1881 the company purchased the Takashima coal mine. Iwasaki also sent representatives to the northern island of Hokkaido to investigate its potential for coal mining. After gaining control of coal resources, Iwasaki turned his attention to gaining control of a ship supplier. Iwasaki reminded the government that the Russians had just completed a naval base at Vladivostok, while Japan's major shipyard at Nagasaki was barely able to handle minor repairs. Mitsubishi won a contract to lease and later purchase the bankrupt Nagasaki Shipyard from the government.

By 1885 the battle for supremacy in Japanese shipping was deadlocked. That year the director of Kyodo Unyu, Eiichi Shibusawa, invited the government to impose a regulatory monopoly on shipping. Suddenly it was learned that Yataro Iwasaki had acquired a controlling interest in Kyodo Unyu. In what may have been the world's first hostile takeover, Iwasaki secretly purchased a majority of his competitor's stock. He consolidated both companies into the Nihon Yusen Kaisha, or Japan Shipping Company, and denied managerial roles to both Masuda and Shibusawa who were stunned by their defeat. However, Iwasaki was unable to savor his victory; he died shortly afterward.

Iwasaki's associates, all of whom were samurai, were unable to assert themselves as independent managers until after Iwasaki died. Despite the fact that Mitsubishi was organized as a company, Iwasaki operated it as a family concern and exercised authoritarian control. His younger brother, Yanosuki Iwasaki, assumed the leadership of Mitsubishi Shokai and NYK in 1886.

The following year the Mitsubishi Shipbuilding Company became the first Japanese concern to manufacture a ship made of steel and equipped with a boiler. Japanese production of "black ships" for transportation and the military propelled Japan into a higher class of naval power. The major shipping companies, NYK and OSK (Osaka Shosen Kaisha), expanded their routes to China and Korea, and by 1899 to Europe, North America, India, and Australia.

NYK was a major beneficiary of the Sino-Japanese War (1894-1895), which opened several ports in continental Asia to increased Japanese trade. Like many of the other zaibatsu, Mitsubishi participated in Japan's colonization of Korea, Manchuria, and Taiwan. Mitsubishi, however, was primarily involved in establishing shipping links and developing an infrastructure in the colonial territories.

In 1893 Yanosuke Iwasaki initiated a reorganization of Mitsubishi and changed its name to Mitsubishi Goshi Kaisha. Three years later he diversified the company's operations by purchasing the Sado gold mine and Ikuno silver mine. He also purchased and developed a 110 acre swamp which later became some of the most expensive property in the Tokyo business district.

Koyata Iwasaki (who replaced Yanosuke as head of the company in 1916) continued the diversification program. Between 1917 and 1919 Mitsubishi established internal divisions for banking, mining, real estate, shipbuilding, and trading. As a victor in World War I, Japan was legitimized as a major world power with great influence in the Pacific. But this legitimization was owed to the zaibatsu (and not least Mitsubishi), which had built Japan into what it was.

In 1918 Mitsubishi was incorporated as a joint-stock company (totally owned by the Iwasaki family). At that time Mitsubishi Shoji Kaisha (Trading Company) was established as a separate business entity. Between 1917 and 1921 several more of the company's divisions were made independent public companies in order to attract investor capital. Mitsubishi Shipbuilding (later Mitsubishi Heavy Industries) was created in 1917, Mitsubishi Bank in 1919, and Mitsubishi Electric in 1921.

In the ensuing decade, nationalist political terrorists gained influence in the military and government. Political assassinations claimed the lives of many moderate and leftist figures. In 1932 terrorists murdered Takuma Dan, head of Mitsubishi's chief rival, Mitsui. Many of the zaibatsu tempered their growth during this period to avoid becoming targets of the militarists, who had seized power in Japan.

The militarists envisioned a regional economic regime for eastern Asia called the Greater East Asia Co-Prosperity Sphere. As part of this scheme, Japan would be responsible for industry and management, China for agriculture, Manchuria and Korea for mining and forestry, Indonesia for oil, and the Philippines for fishing. For this reason, the zaibatsu were essential partners to the militarists. They alone had the resources and expertise to implement such an ambitious development strategy. Mitsubishi in particular was involved in the most important fields: shipping, shipbuilding, mining, heavy manufacturing, electrical generation, warehousing, and trading.

After the Japanese invasion of China in 1937 Mitsubishi was required to provide the military and occupation forces with warships, aircraft, vehicles, weapons, and provisions. When Japan invaded the rest of eastern Asia and bombed Pearl Harbor in 1941, the uneasy partnership between the zaibatsu and the militarists became more important. Companies such as Mitsubishi continued to search for profit. They also comprised the military/industrial complex which perpetuated Japan's ability to make war.

While Mitsubishi Shipbuilding turned out warships, the aircraft division of Mitsubishi Heavy Industries manufactured over 18,000 warplanes, the most important of which was the "Zero." The simple technology of the Zero made it possible for thousands to be built quickly. Its vast numbers and ability to climb and accelerate made it one of the most formidable weapons of the war.

In 1945 Japan surrendered to American forces, which during the previous year had destroyed Japan's major cities, and with them Japan's major factories. What remained of Mitsubishi was left in ruins. The American occupation forces under General Douglas MacArthur formulated an industrial plan for the reconstruction of Japan which included the implementation of American-style anti-monopoly laws. As a result of the legislation, the zaibatsu were outlawed and use of their prewar logos was banned. Mitsubishi was divided into 139 independent companies. In addition, severe restrictions prevented the companies from coordinating business strategies and setting up cross ownership of stock.

The communist revolution in China during 1949 and the Korean War (1950-1952) significantly increased the strategic value of Japan as an industrial power and American ally. Many of the punitive laws imposed on Japan by the occupation authority were lifted. Subsequent legislation in Japan weakened the effect of the anti-monopoly laws. Starting in 1950 several of the former Mitsubishi zaibatsu companies had been allowed to reassemble. The surviving core of company interests readapted the Mitsubishi Shoji Kaisha name and the triple diamond logo. In 1953 the Mitsubishi Bank (called the Chiyoda Bank during the occupation) started to use its old name and began to coordinate the various former Mitsubishi companies. In 1954 Mitsubishi Shoji merged with three of its former component companies and started to re-establish its worldwide trading network.

A number of associated companies were created during the 1950s, including the Mitsubishi Gas Chemical Company and the Mitsubishi Petrochemical Company. The company's most important foreign associate, the Mitsubishi International Corporation (MIC), was established in the United States in 1954. MIC carefully observed industrial and consumer trends in the United States and played an important part in the formation of Mitsubishi's long-term international planning. MIC also served as a training ground for international representatives of Mitsubishi.

Japan's Ministry of International Trade and Industry (MITI) played an active role in maintaining a healthy balance of monopolistic competition between the new zaibatsu, Mitsui, Mitsubishi, Sumitomo and others. MITI is responsible for the excellent coordination of resources, planning and development which allowed Japanese companies to grow and perform successfully in the postwar period. With the new zaibatsu as its instrument, MITI prepared Japan for several decades of export-led growth.

As a result of the direction provided by MITI, Mitsubishi anticipated Japan's increasing demand for various mineral commodities. In the 1960's Royal Dutch Shell discovered a large deposit of natural gas in the sultanate of Brunei. At the time, demand for natural gas was increasing rapidly in Japan. Mitsubishi participated with the government of Brunei and Royal Dutch Shell in developing a system whereby natural gas can be compressed into a refrigerated liquid and shipped in specially designed tankers.

Next Mitsubishi turned its attention to the untapped mineral potential of Australia and Papua New Guinea. The company formed a subsidiary called Mitsubishi Australia to participate in a large coal mining project at Bowen Basin in Queensland. Beginning in 1971 raw materials were shipped from Australia to Japan where they were used to produce iron and steel.

In 1969 Mitsubishi helped to create a forestry company called Balikpapan Forest Industries at Sotek, Indonesia. In 1973 Mitsubishi formed a joint venture with the Mexican government to produce salt in Baja California, and with the Kenyan government to develop the tourist industry in that country. In the late 1970's Mitsubishi established a joint marketing agreement with the Chrysler Corporation to sell cars in the United States built by the Mitsubishi Motor Company.

In 1971 Mitsubishi Shoji Kaisha changed its name to Mitsubishi Corporation, an Anglicized name intended to reflect the company's growing internationalization. By this time, however, the amalgamation of the prewar Mitsubishi combine had ceased. Top level managers in the associated Mitsubishi companies were reluctant to give up their independence (and possibly their jobs) by placing themselves under the direction of other managers. Consequently there are nearly thirty independent Mitsubishi companies whose directors belong to a monthly meeting group called the Kinyo-kai (Second Friday Conference) where their business strategies are formulated.

The keiretsu organizational scheme emerged from Mitsubishi's growth (and that of other Japanese conglomerates), which was accompanied by an accumulation of debt. Majority holdings of virtually all affiliates are maintained within the keiretsu, thereby preventing hostile takeover when share prices of a given member slip dangerously low. For example, when affiliate Akai Electric Co. encountered financial problems in the early 1980s, Mitsubishi Bank bailed it out. When Mitsubishi Heavy Industries' shipbuilding business slowed mid-decade, some of its employees were placed with other "three diamond" affiliates. The keiretsu also prevented Kuwait Petroleum Corp.'s threatened takeover of Mitsubishi Oil in 1984.

Takeo Kondo was named president of Mitsubishi in June of 1986. That year, after 18 years as Japan's leading trading firm, Mitsubishi fell to fifth place. A few months after assuming the corporation's leadership, Kondo presented a plan for reorganizing and reviewing its operations. In November, however, Kondo suddenly died. He was replaced by Shinroku Morohashi, a vice-president whom Kondo had charged to implement the restructuring plan. The "K-plan," as it became known, involved the divestiture of unprofitable operations, reorganization of staff, entry into newer, more promising fields such as high technology, and the introduction of more efficient administrative techniques.

Aggressive international acquisitions by Mitsubishi affiliates grabbed headlines in the late 1980s and helped it expand from its base in heavy industry. In 1985, for example, Mitsubishi Motors increased its cooperation with Chrysler Corp. through the creation of Diamond-Star Motors. In 1989 and 1990, Mitsubishi Estate Co. acquired a controlling interest in Rockefeller Center at a cost of nearly $1 billion. Around the same time, Mitsubishi Corp. boosted its chemicals interests with a controlling stake in Aristech Chemical Corp. of Pittsburgh. Other high-profile purchases included Eastman Kodak's Verbatim and California's Pebble Beach golf course. In 1990, the company's Mitsubishi Motors moved to form a joint venture with German automaker Daimler-Benz and acquired one-third of Netherlands-based Volvo the following year.

The group's fortunes, as well as the Japanese economy, declined in the late 1980s and early 1990s. Falling demand in Mitsubishi Corporation's vital fuels segment combined with a "strong-yen recession." In addition, many Japanese companies ceased to rely on the trading services provided by sogo shosha, or general trading companies like Mitsubishi Corp. In many cases they found it more cost effective to develop their own international networks. These factors combined to effect a steady revenue descent--from ¥19.73 trillion in 1991 to ¥17.28 trillion in 1994.

The 1992 appointment of British-born and Harvard-educated Minoru "Ben" Makihara as president of Mitsubishi Corp. was viewed by some observers as an attempt to improve the Japanese business's poor reputation in the United States. Perhaps not coincidentally, however, Makihara's father worked for Mitsubishi in London, and his wife was a great-granddaughter of the keiretsu's founder.

In the mid-1990s, operations of the Mitsubishi Corporation were divided into the following groups: metals (37 percent of annual revenues), machinery (including Information Systems and Services) (24.7 percent), foods (12.7 percent), fuels (11.4 percent), chemicals (7.3 percent), and textiles and general merchandise (6.9 percent). About 40 percent of its annual sales were made overseas.

Principal Subsidiaries: Asahi Glass Co., Ltd.; Dai Nippon Toryo Co., Ltd.; DC card Co., Ltd.; The Meiji Mutual Life Insurance Company; Mitsubishi Aluminum Co., Ltd.; Mitsubishi Atomic Power Industries, Inc.; The Mitsubishi Bank, Ltd.; Mitsubishi Cable Industries, Ltd.; Mitsubishi Construction Co., Ltd.; Mitsubishi Corporation; Mitsubsishi Electric Corporation; Mitsubishi Estate Co., Ltd.; Mitsubishi Gas Chemical Company, Inc.; Mitsubishi Heavy Industries, Ltd.; Mitsubishi Heavy Industries Air-Conditioning and Refrigeration Systems Corporation; Mitsubishi Kakoki Kaisha, Ltd.; Mitsubishi Kasei Corporation; Mitsubishi Liquified Petroleum Gas Co., Ltd.; Mitsubishi Materials Corporation; Mitsubishi Motors Corporation; Mitsubishi Nuclear Fuel Company, Ltd.; Mitsubishi Office Machinery Co., Ltd.; Mitsubishi Oil Co., Ltd.; Mitsubishi Ore Transport Co., Ltd.; Mitsubishi Paper Mills Limited; Mitsubishi Petrochemical Co., Ltd.; Mitsubishi Petroleum Development Co., Ltd.; Mitsubishi Plastics Industries Limited; Mitsubishi Precision Co., Ltd.; Mitsubishi Rayon Co., Ltd.; Mitsubishi Research Institute, Inc.; Mitsubishi Shindoh Co., Ltd.; Mitsubishi Space Software Co., Ltd.; Mitsubishi Steel Mfg. Co., Ltd.; The Mitsubishi Trust and Banking Corporation; Mitsubishi Warehouse & Transportation Co., Ltd.; Nikon Corporation; Nippon Yusen Kabushiki Kaisha; Shin Caterpillar Mitsubishi Ltd.; The Tokio Marine and Fire Insurance Co., Ltd.; Toyo Engineering Works, Ltd.

Further Reading:

• Neff, Robert, "Mighty Mitsubishi Is on the Move," Business Week, September 24, 1990, pp. 98-107.
• Neff, Robert, "The Harvard Man in Mitsubishi's Corner Office," Business Week, March 23, 1992, p. 50.
• Wray, William D., Mitsubishi and the N.Y.K. 1870-1914: Business Strategy in the Japanese Shipping Industry, Boston: Harvard University Press, 1984.

Source: International Directory of Company Histories, Vol. 12. St. James Press, 1996.