Hino Motors, Ltd. History

Company Perspectives:

Hino is fully committed to the creation of a better future for our communities, and for the people who live in them. By anticipating market needs, Hino is creating superior products which add value to everyone's life. We regard this as the foundation of Hino's activities. In this age of high technology, globalization, and advanced data communications, individual values are diversifying. We are dedicated to putting our customers first and maintaining our high standards of quality, and are making every effort to offer better products and services which not only satisfy customers, but harmonize well with both rural and urban areas. In these ways, Hino is using state-of-the-art technology to help develop global transportation solutions.

Company History:

Hino Motors, Ltd. is Japan's largest truck manufacturer and exporter--leading a field that includes Mitsubishi, Isuzu, and Nissan Diesel. Moreover, on a global scale, the company ranks third in production volume, following Daimler Benz AG and Navistar International Corp. Built on just a few product lines, such as medium- and heavy-duty trucks, buses, and specialty vehicles, Hino has maintained strong, steady growth, in both domestic and export sales. The company is an innovator in the area of environmentally friendly vehicles. Hino is also closely associated with the Toyota Motor Corporation, for whom it assembles light trucks and some recreational vehicles on a large scale. Toyota controls 16.4 percent of Hino's outstanding shares.

Early History

Founded in 1910 as part of the Tokyo Gas Industry Company, Hino Motors began as an unnamed division set up to build trucks for the burgeoning Japanese industrial economy. After turning out only a limited number of handmade vehicles, Tokyo Gas began mass production in 1918 with its TGE "A-Type" truck. The "A-Type" was popular and remained the company's primary model for many years.

As other automotive manufacturers were established in Japan, the Tokyo Gas concern remained a modest operation, dealing mainly in local niche markets. As the pace of industrialization increased during the 1930s, many other Japanese automobile companies consolidated their operations through complex mergers. These mergers were made necessary by the growing need to rationalize production by maximizing economies of scale. Such mergers also reduced the field of competitors.

A similar consolidation occurred at Tokyo Gas in 1937, when it combined its automotive division with two other companies, the Automobile Industry Company, Ltd. and Kyodo Kokusan K.K. The combined enterprise was given the new name Tokyo Automobile Industry Company.

By 1941 Japan's occupation of China had created vast new markets for industrial products. It had also prompted a strict and debilitating trade embargo from the United States. Rather than backing down when faced with this American pressure, the Japanese government continued a massive armament program that benefited many industrial companies, including Tokyo Automobile. That year, reflecting further specialization and consolidation in the industry, the company changed its name to the Diesel Motor Industry Company, Ltd.

In 1942, with Japan at war with the United States and Britain, Diesel Motor was split into two companies. The larger of the two retained the original company's name (and later became Isuzu Motors), and the smaller was reincorporated as the Hino Heavy Industry Company, Ltd.

Hino's suburban Tokyo facilities were spared from the effects of the war until its final week. On August 1, 1945, during a massive American bombing raid, a single incendiary bomb hit the Hino factory. Employees on the site doused each other with water before running into burning buildings to fight the fire; their efforts prevented the fire from spreading to the main production facility.

Rapid Postwar Recovery

By September, with the war over, the Hino plant had been converted into a military barracks for occupation forces. Plant director Shoji Okubo learned that, with Japan's railroads in ruins, the occupation authority had approved the construction of 1,500 trucks per month. He gathered what few employees remained and boldly laid out plans for the production of a new heavy truck, which he felt would be necessary for Japan's reconstruction.

Surprised by Okubo's grand plans for development in the midst of Tokyo's devastation, Hino employees called 300 fellow workers back from the rural towns to which they had moved to escape bombing. Able to muster only 16 designers, and lacking parts suppliers and subcontractors, Okubo nevertheless had soon developed a concept for a new truck. At 6.5 tons and seven meters in length, the Hino T10--20 exceeded all Japanese size regulations. However, Okubo protested that occupation trucks twice that size were running all over Japan, and he was able to effect a change in the law.

Before production could commence, the company had to secure financing. Hino's accountant Ryoichi Takada personally gave bank officers plant tours. Impressed by the facility's size and lack of damage, as well as by Takada's warm personality, bankers approved massive loans to Hino.

The company then established a national sales network and employed subcontractors, including Sawafuji Electric, Takebe Tekkosho, and Goto Gokin. Only a year after the war had ended, the first prototype rolled out of the factory and across Japan for a sales tour. Because it was equipped with a highly efficient diesel engine (and fuel was still strictly rationed), the T10--20 proved extremely popular. With the capacity to produce only 20 trucks per month, Hino was unable to keep pace with demand.

On the strength of the T10--20, Okubo laid plans for the development of a large diesel trailer bus. A prototype of the 96-passenger T11B--25 was completed in July 1947. Supported by a highly effective public relations campaign, orders for the bus exceeded sales projections and provided pressure to expand the plant.

Interestingly, Hino was initially denied entry into the bond market by the government's Bank of Japan, which argued that the automotive industry was speculative and had no future in Japan. During the intense effort to raise funds, Takada fell ill for several months with appendicitis, and Masashi Arakawa was left to appeal the company's case to the government, which he did successfully. The company began trading shares on over-the-counter markets on February 21, 1948, gaining a listing on the Tokyo Stock Exchange on May 16, 1949. Through successive share issues, Hino succeeded in quadrupling its capitalization.

In 1948, in an effort to improve customer service, Hino separated its marketing and engineering departments into two entities, the Hino Diesel Industry Company and Hino Diesel Sales. In May 1950, with only ten percent of the domestic market share for trucks, Hino rolled out its new seven-liter TH10, a ten-ton single cab truck. Perfectly suited to meet increased demands for road freight capacity, the TH10 nearly doubled Hino's market share in only one year.

Developing New Vehicles in the 1950s

The outbreak of the Korean War in June 1950 prompted the United Nations command to deplete Japan's stocks of gasoline-powered vehicles. Hino was persuaded by the government to help satisfy public demand for these vehicles by opening a new production line. This experience led Okubo to seriously consider production of an automobile of foreign design. Confident of the eventual emergence of an "automobile society" in Japan, Okubo was highly impressed by the utilitarian Volkswagen. As demand for foreign cars clearly was rising, Okubo put out the call for a foreign partner.

The call was answered by Renault, which proposed that Hino assemble its 4CV model in Japan. The partnership would prove ideal for Hino, which had hoped to build a strong export business on just such a car, but which had no experience in anything smaller than large diesel vehicles. The 4CV assembly plant went into operation in March of 1953. Intended as a family car, the 4CV soon became popular with taxi drivers, police, and the business community.

In December 1952 Hino introduced a new single-unit bus, the BD10/30 "Blue Ribbon," based on European designs featuring engines placed beneath the vehicle's floor. Sales volume increased steadily from 225 in 1952 to 1,385 in 1956.

During this time, Okubo was struck by the absence of Japanese heavy dump trucks on several large construction jobs. Concerned that Japan was being rebuilt with expensive foreign machinery, he ordered the development of a comparable dump truck that would cost half as much as foreign models.

After personally testing four different prototypes, Okubo settled on the 13.5-ton model ZG. He lobbied the Bank of Japan for a special bond issue to finance production. Again, he was forced to justify his case and succeeded only after convincing the examiner that Hino's trucks would prevent the loss of precious foreign exchange. The ZG later became the most popular construction dump truck in Japan. In an effort to downplay the diesel side of its business, Hino changed its name to Hino Motors, Ltd. in 1959.

In 1961, after 16 years as head of Hino, Shoji Okubo retired. He was succeeded by Masanobu Matsukata, who immediately encountered a series of currency- and trade-related economic shocks. Hino, however, was largely insulated from the effects of these shocks by broad demand for its products.

Beginning a Relationship with Toyota in the 1960s

Japanese demand for automobiles began to escalate in 1960, as massive nationwide highway projects were nearing completion. In addition, the government estimated that seven million of its country's licensed drivers did not own a car. It was this strong and little publicized domestic demand that prepared Hino and other manufacturers for expansion into export markets.

Matsukata knew that Hino would never become a leader in the automobile industry as long as it was relegated to building another company's designs. In 1961, with an eye toward abandoning the Renault model, Hino introduced its own design, the rear-engine Contessa 900, and began to study new mass production methods. The Contessa entered an extremely competitive market, proving to Matsukata that Hino was not yet prepared to go it alone.

During a tour of a Toyota plant, Matsukata noted that fewer Toyota workers were turning out a more varied product line than Hino. Consequently, he began a relationship with Toyota to adopt its methods and cooperate on the production of its new cars. In 1966, at the beginning of Japan's Izanagi economic boom, Hino formally linked its operations to Toyota. Having learned low cost pressing technology from Renault, Hino began producing parts for Toyota on a large scale.

Hino carefully studied the development of Japan's highway network, betting that highway freight traffic was bound to grow rapidly. The company then began development of larger eight-ton, and then ten- and 12-ton trucks, including the TC30 and KF series. In 1964, to shore up its product range, Hino introduced the smaller 3.5-ton KM series truck, known as the "Ranger."

In 1968, Hino held just over 17 percent of the Japanese truck market. That year, the company initiated Strategy V, an effort to increase its market share to 30 percent. Having achieved this level in 1971--collecting the Deming Prize in the process--Hino put forth another challenge, Strategy D, the aim of which was to increase market share to 35 percent. Hino also built several new facilities, including a new headquarters office and a car factory at Hamura.

Fuel-Efficiency in the 1970s

In the early 1970s, the Japanese economy was buffeted by two economic crises that directly affected Hino. The first, in 1971, stemmed from the American abandonment of the gold standard. Then in 1973, as the economy began to recover, the Arab oil embargo quadrupled the price of gasoline. In 1974, at the height of the crisis, Matsukata retired from Hino. He was succeeded by Masashi Arakawa, whose first action was to implement cost reduction policies and press for completion of a new, more fuel efficient engine.

The "Red" engine (named for the engine blocks, which were painted red) was a completely redesigned diesel engine with better fuel economy. Later models featured fuel injection systems based on designs from the German company MAN. Hino also developed a new micro mixing system that sharply reduced harmful emissions. Despite these efforts, however, Japan's truck market remained extremely weak.

Noting that Japanese trucks were already more efficient than many European and American models, and believing that Hino models would be considerably more competitive in foreign markets, Arakawa laid plans for a massive export program. The company established a sales network mainly in Southeast Asia and a parts depot in Europe and Latin America and set a goal of exporting 30,000 trucks.

During the export boom, Hino began assembling pickup trucks and compact cars for Toyota on a large scale. Having abandoned its own consumer designs, Hino experienced strong growth from its subcontractor arrangement with Toyota, particularly as its models gained popularity in Southeast Asia for their high quality and reliability. In 1977, building on its previous experience with buses, Hino began production of a new touring coach. Bus sales, however, remained only a small part of the company's business.

New Designs in the 1980s

To meet increased demand for its trucks, Hino opened a new production facility at Nitta in 1980. New market conditions dictated that Japanese manufacturers offer broader product lines with smaller production lots. In addition to higher fuel efficiency and lower maintenance, customers were also demanding more environmentally safe engines. These challenges to designers were met slowly through the introduction of electronic controls and systems in Hino vehicles. But the process of uniting micro-engineered electronics with the larger systems on massive trucks proved, at first, difficult.

These problems were generally resolved in time for the introduction of Hino's newest truck model, the Super Dolphin, in May 1981. This new truck featured a highly efficient EP100 engine, greatly improved aerodynamics, and a spring-suspended cab that afforded drivers a much smoother ride. While these features added to the price of the model, strong sales soon justified the improvements, and allowed Hino to surpass its export goal with 31,000 units.

In 1982, Hino manufactured its one millionth vehicle. The company also laid plans to establish new offices in Pakistan and the United States. Amid rising labor costs, and unable to move truck production offshore as quickly as automobile manufacturers, Hino opted to establish a kit assembly plant in Taiwan, in conjunction with Kuozui Motors.

Although domestic sales continued to suffer from the effects of another oil shock in 1979, losses were offset by strong sales in Thailand, China, and Saudi Arabia. For the first time, export sales exceeded domestic sales. Meanwhile, in 1983, Toshio Fukazawa replaced Arakawa as president of Hino Motors. After only a short tenure, Fukazawa was succeeded by Tomio Futami.

Beginning in 1986, the appreciating value of the yen--from ¥240 to ¥120 on the dollar--seriously damaged previously reliable export demand. New Japanese economic policies helped Hino to stimulate domestic demand and, finally, this market began to recover strongly.

Recognizing that drivers had gained a strong voice in recommending purchases, and that the public had grown concerned with the inherent ugliness of large diesel vehicles, Hino began to steer toward the development of more user-friendly, aesthetically appealing models. The effort to build a "beautiful truck" culminated with the introduction of the Super F series truck in July 1989.

Hino and Toyota in the 1990s

During the early 1990s, however, with the Japanese and American economies in recession and slower growth in Asian markets, Hino faced difficult times. Forced to implement another cost reduction strategy, the company nevertheless managed to avoid layoffs and the cancellation of new projects, including its S'Elega touring bus and a heavy-duty truck, the Super Dolphin PROFIA.

Strong business from Toyota also helped Hino's financial picture. Hino built 245,000 Hi-Lux pickup trucks for Toyota in 1991, and in the fall of 1992 the company began production of the Toyota T100 pickup truck, to be sold in the United States. Hino also built passenger cars for Toyota in the early 1990s, among them the Tercel and Corsa subcompacts.

The early and mid-1990s saw Hino move into the newly-opened economies of China and Vietnam. In 1993 the company entered into a joint venture, called Long Ri Bus, to manufacture and sell buses in China. Two years later Hino formed another Chinese joint venture--this one with the state-owned China National Heavy Duty Truck Corporation--which intended to start making heavy-duty truck engines in 1998; moreover, this venture had the potential of developing into entire truck production in the future.

In 1996 the government of Vietnam approved a joint venture, Hino Motors Vietnam Ltd., which was set up to build and sell medium-size trucks and buses in Vietnam. The new company was founded with Hino having a 51 percent stake, Vietnam-based Automobile Repairing Factory No. 1 with 33 percent, and Sumitomo Corp. with 16 percent. After first-year production of 200 vehicles, Hino Motors aimed to increase production to 1,000 units by the year 2000.

Hino's financial fortunes fluctuated in the mid-1990s as Japan failed to fully recover from its early 1990s recession, weakening demand in particular for large trucks which carried higher margins than smaller trucks did. Nonetheless, Hino received a boost in early 1997 when Toyota increased its stake in Hino to 16.4 percent and simultaneously turned over development and production of its two-ton trucks entirely to Hino. With production orders from Toyota continuing to grow, Hino faced the future with a strong alliance with one of the world's premier vehicle makers; the company also boasted a strong and growing international presence, which helped--and should continue to help&mdash⁄ield it from the fluctuations of the domestic economy.

Principal Subsidiaries: Thai Hino Industry Co., Ltd. (Thailand); Thai Hino Motor Sales, Ltd. (Thailand); Pilipinas Hino Inc. (Philippines); Hino Motors (Malaysia) Sdn. Bhd.; P.T. Hino Indonesia Manufacturing; Hino Motors Vietnam, Ltd. (51%); Kuozui Motors, Ltd. (Taiwan); Ho-Tai Motor Co., Ltd. (Taiwan); Long Ri Bus Corporation (China; 12.5%); Hinopak Motors Limited (Pakistan); Hino Motor Sales Australia Pty. Ltd.; Hino Diesel Trucks (U.S.A.), Inc.; Hino Engine Service (U.S.A.) Corporation; Hino Diesel Trucks (Canada) Ltd.; Hino Motors International (U.S.A.), Inc.; Hino Motors (Europe) N.V. (Belgium).

Further Reading:

• Dawkins, William, "Hino to Make Truck Engines in China," Financial Times, July 10, 1996, p. 28.
• Diem, William R., "Hino Electric/Diesel Engine Cuts Pollution, Adds MPG," Automotive News, December 14, 1992, p. 24.
• "Hello Hino: Challenge of the Times," Hino Forum, Vols. 84--88, Tokyo: Hino Motors, 1992.
• "Hino Today," Tokyo: Hino Motors, 1997.
• "Japan's Hino Motors Gets Vietnam Approval for Truck, Bus Venture," Wall Street Journal, June 24, 1996, p. A7.
• Nakamoto, Michiyo, "Weak Demand Hits Profits at Hino Motors," Financial Times, October 30, 1996, p. 30.
• "On the Road Again," Economist, November 26, 1988, p. 70.

Source: International Directory of Company Histories, Vol. 21. St. James Press, 1998.

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