DAIDO STEEL CO., LTD. History

Company History:

Daido Steel Co., Ltd. is the world's largest maker of specialty steel. In addition to its wide variety of alloyed and treated steels, Daido makes semifinished and finished products for the automotive and construction fields and is one of Japan's leading suppliers of heavy equipment for the metallurgical industry. Daido has not suffered as badly as some of Japan's steelmakers from the industry's prolonged recession, dating back to the oil crisis of 1973, because its specialty products are less easily duplicated elsewhere by cheaper competitors. Daido has nevertheless felt the impact of the shrinking steel market and hopes to shift an ever greater proportion of its production to high-tech steels, the so-called new materials area, and industrial machinery.

Daido Steel has its origin in Japan's electric-light industry. Like most other technological innovations, the electric light came late to Japan, and it was not until the early part of the 20th century that any substantial portion of the country had electricity. In the city of Nagoya, on the east coast of Honshu, electric illumination was pioneered by Nagoya Electric Light Co. Nagoya Electric Light soon was involved deeply in the manufacture and finishing of steel rods for use in wires and various electrical applications. In 1916 Nagoya Electric Light spun off its steel-production division as a freestanding corporation, named Denki Seikosho. Encouraged by the booming World War I economy, Denki Seikosho quickly expanded its production to include not only wire rod but a variety of alloy and tool steels.

In 1921, a similar divestment was undertaken by a local supplier of electric power, Daido Electric Power Co., Ltd. Daido Electric Power's steel division was made independent and renamed Daido Steel Co., Ltd., with its main plant at Tsukiji near Nagoya. Daido Steel and Denki Seikosho briefly competed for the limited available business in wire rod and specialty steel, but in 1922 they agreed to merge as Daido Electric Steel Co., Ltd. As a maker of specialty steel products, Daido Electric Steel's growth would necessarily be limited for some time by the rather primitive state of Japan's industrial economy, which was then still far behind the leading Western nations. In particular, Japan remained in the 1920s a net importer of iron and steel, which meant that its automotive, construction, and shipping industries were relatively undeveloped, a condition that in turn tended to limit the range of applications for specialty steels.

The Japanese industrial base, however, soon was given a tremendous stimulus by the country's increasing preparations for war in China. During the Great Depression Japanese ultra-nationalists mapped out a plan for Asian domination that called for greatly increased production of all heavy-industrial products, especially weaponry and the various modes of transport. Daido Electric Steel's specialty steels played an important role in such products, which typically demand greater strength, corrosion resistance, and temperature stability than more common steel applications. Daido Electric Steel's fortunes thus improved with Japan's increasing militarism; a steady stream of orders for crankshafts, hardened steel, fuel nozzles, shell casings, and other special steels drove up company revenue and eventually forced the construction of a major new plant at nearby Hoshizaki. The new facility was completed in 1937, the year in which Japan initiated full-scale hostilities with China. In 1938 the company dropped "Electric" from its name to become Daido Steel Co., Ltd.

With the country's rapid descent into World War II, Daido Steel, like other important industrial organizations in Japan, was placed under the command of the armed forces, its production schedule largely set by the needs of the war administration. Capacity was stretched by the endless demand for weaponry, a situation made all the more difficult by the scarcity of workers and chronic shortages of scrap iron and petroleum. Scrap iron is the single most important raw material used in the production of specialty steels, and prewar Japan had been heavily dependent on foreign sources of scrap, buying much from the United States. With the coming of war, this supply was no longer available, and Daido Steel was often faced with critical shortages of its primary base material. Company sales nevertheless reached all-time highs in the war years.

After the war, Allied occupation forces were anxious to break Japan's industrial might, and ordered the dissolution of the zaibatsu, or conglomerates, and of many of the leading independent corporations. Among the latter was Daido Steel, which in 1950 was whittled down in size and given the name of New Daido Steel Co., Ltd. New Daido Steel comprised six of the former company's eleven plants, two of the others having become independent corporations and the remaining three closed altogether. Like most other Japanese companies, New Daido Steel began the postwar period with severely damaged assets, uncertain raw material supplies, worker shortages, and depleted capital funds; but, also in common with the bulk of Japanese industry, New Daido Steel managed not only to survive the postwar chaos but also to lay the foundation of its growth in the following decades.

With government assistance and coordination, Japan's steel industry rebuilt its shattered plants and embarked on a new era of peacetime productivity, centered around the automobile and shipbuilding industries. In a sense, Japan's defeat in World War II proved to be a boon to its economic future, giving the country's engineers and planners a chance to redesign its industrial base from the ground up, incorporating the latest in Western technology and production methods. In addition, Japanese steelmakers could rely on the domestic market for unlimited sales, as Japan leaped from a state of semifeudalism to a modern economy. Buildings, bridges, subways, ships and automobiles, radios, and computers were to be built. Most of these products require steel, and much of the steel would be special steel. New Daido Steel was well positioned to take advantage of Japan's economic advance, and the company grew at a prodigious pace.

To keep up with increasing demand, Daido Steel--the name was again changed in 1953--participated in a number of mergers in the 1950s. In 1952 Daido Steel Co., Ltd. added a new plant in Takakura. In 1955 it merged with Shinriken Kogyo, which had plants at Hirai and Oji, and in 1957 Daido Steel acquired Tokyo Steel Works Co, Ltd., a division of Nissan Motors. The latter move was indicative of Daido's increasing business with the Japanese automobile industry, then beginning its own rise to world leadership. Automakers use special steel in a number of ways, not only for many engine and frame parts but also indirectly, as the source to the tool and die works needed for basic fabrication. For years, Daido Steel has itself manufactured a variety of auto parts as well as supplying the super-hard steels needed for cutting and shaping such parts.

In the 1960s Japan's economy entered its period of most spectacular growth, averaging 10% yearly gains in its gross national product. Japanese steel did considerably better, however, expanding at the rate of 25% annually. In 1962, Daido Steel opened yet another new plant, this one a steel strip facility at the Nagoya headquarters; and in the following year it made allowance for the increasing use of stainless steel by absorbing Shimura Kako's stainless steel division. In 1964 Daido Steel merged again, combining with Kanto Steel Co., Ltd. to form the largest supplies of specialty steel in Japan. It was a period of rapid innovation in metallurgy, and Daido Steel's technical sophistication made the company a natural supplier to the latest developments in the space, auto, and electronic steel markets. Its technical orientation would prove invaluable for Daido Steel in the coming era of decline and fragmentation in the Japanese steel industry.

The collapse of the Japanese steel industry, beginning in 1974, had several causes. Most fundamental was the maturing of Japan's own economy, which no longer needed the tremendous capacity built up by the nations's steelmakers. Mature economies do not use as much steel as those still adding basic infrastructure. Fresh competition appeared in the form of Third World countries such as South Korea and Brazil. The last, and most spectacular reason was the worldwide decline in industrial production following the 1973 oil crisis. The latter was especially hard on Japan's shipping industry, built largely around the need for huge oil tankers, and the collapse of shipbuilding intensified the weakness in steel, which in turn hurt the prospects of Daido Steel and the specialty steel market.

Daido Steel, however, suffered less severely than the big manufacturers of commodity steel. Daido Steel's precision crafting of special steels was less vulnerable to competitors such as South Korea, and while the other Japanese steelmakers hurried to develop value-added products, Daido Steel was already firmly established in that niche. The post-1973 slump was nevertheless painful for Daido Steel, and in 1976 the company took a major step toward shoring up its market position when it acquired two of the other largest specialty steelmakers in Japan, Tokushu Seiko, Ltd. and Japan Special Steel Co., Ltd. The new company controlled about 30% of the Japanese market and would be less vulnerable to the price wars then racking the industry. Although the merger was subjected to some scrutiny by the Japanese Fair Trade Commission, Daido Steel was permitted to carry out its amalgamation.

Since the 1976 merger, Daido Steel has pared considerably its employee ranks, shedding more than one-third of its workers between 1986 and 1990 alone. If the general trend among Japanese industrial concerns is toward higher value-added products, Daido Steel might be said to have reached the ultra-value market with such developments as its 1977 nonmagnetic support beams for the latest super trains, or its current crop of high-alloy electronic components and stainless steel powder products. While the bulk of Daido's sales are still shipped in the form of standard rollings--bars and wire rod--it has made clear its intention to steer toward the more demanding and profitable area of new materials, and has also developed a strong machine-fabricating division. Although not yet a force in the export markets, in 1988 Daido announced a joint venture in Ohio with CSC Industries, Inc., and has since bought one-third of the latter's stock. Finally, Daido enjoys the indirect but very powerful support of Nippon Steel Company the world's largest steel manufacturer and for many years a close collaborator with Daido. In 1991 Nippon Steel owned over 10% of Daido's stock, and the two companies are frequent joint-venture partners.

Principal Subsidiaries: Daido Kogyo, Ltd. (67.5%); Fuji Valve Company, Ltd. (55%), Daido Life Service Company, Ltd.; Daido Machinery, Ltd. (93.9%); Daido Stainless Steel Company, Ltd.; Shin Mitsuboshi Shoko Company, Ltd.; Tokushu Spring Industry Company, Ltd.; Daido Service Center Company, Ltd.; Shimomura Tokushu Seiko Company, Ltd. (59.5%); Daido Shizai Service Company, Ltd.; Daido Genryo Service Company, Ltd.; Maruta Industry Company, Ltd.(55%).

Further Reading:

This is Daido Steel, Nagoya, Daido Steel Co, Ltd. [n.d.].

Source: International Directory of Company Histories, Vol. 4. St. James Press, 1991.

Directory of Sample Business Plans Directory of Company Histories Contact Us Advertise