HONSHU PAPER CO., LTD. History

Company History:

Honshu Paper Co., Ltd. is involved in conversion, manufacture, sales, and technical-consulting services for the paper and pulp industry on a worldwide basis. With raw materials supplied by its affiliates in Japan, New Guinea, Brazil, and Canada, Honshu participates in the sales of lumber, other forest products, reforestation services, and sawn timber. The company's Japanese paper mills produce in excess of 1.3 billion metric tons of various paper products annually. Honshu also owns many other manufacturing operations that among others include construction materials, plastics, paperboard and plastic packaging materials, chemical products, medicines, and packaging machinery. The company operates several warehouse facilities and is involved in civil engineering and construction. In the early 1990s Honshu maintained its headquarters in Tokyo, operated 14 domestic paper mills, maintained 25 shipping container divisions, and controlled more than 70 affiliated companies.

Honshu was established on August 1, 1949, as a result of the reorganization of the Oji Paper Company, a part of the Mitsui zaibatsu, one of Japan's oldest and largest business concerns. The original Oji Paper had been Japan's largest producer of paper and paper products. After Japan's surrender following World War II, the Allied occupation forces formed the Holding Company Liquidation Commission. It was the Allied powers intention to use the commission to dismantle the existing industrial zaibatsu that had for centuries held control of Japanese commerce. The plan was to create a new, democratic, capitalistic system that would replace the huge monopolies with smaller groups of Japanese businessmen and entrepreneurs. One of the results of the commission's actions was the breaking up of the original Oji Paper Company into three smaller businesses, Oji Paper Company, Jujo Paper Company, and Honshu Paper Company.

Upon its formation, Honshu was immediately faced with problems, the worst of which was an acute shortage of paper pulp. Most pulp had been imported, but after the war the Japanese paper industry lost control of the forests in Manchuria, Sakhalin, and Korea upon which the domestic industry had come to depend. The resulting shortage was seriously affecting Honshu's ability to manufacture paper products. Between 1945 and 1950 a boom in domestic pulp production helped to alleviate the company's immediate need for pulp, and Honshu and its competitors did quite well during this period. Some pulp companies paid dividends of 40%. It was obvious, however, that although Japan's land mass was covered by more than 70% forest lands, prolonged deforestation of the nation's timberlands would do irreparable long-term damage to what should remain a renewable resource. To stop the indiscriminate logging, the Allied powers established the Council for the Conservation of Natuaral Resources. Jun'ichero Kobayashi, a forestry expert and former vice president of Oji Paper, was brought in to head up the council. Kobayashi took advantage of postwar trade competition to create a new foreign source of pulp to feed Japan's paper mills. He proposed to the U.S. government the development of a Japanese company to harvest Alaskan timber, the Alaska Pulp Company. The U.S. government knew that if the United States refused to cooperate he could always turn to the Soviet Union and strike a deal that would permit Japan to exploit the vast Siberian forests. The United States was wary of any Japanese-Soviet business alliances, and eventually approval for the formation of Alaska Pulp, was given. After a great deal of trans-Pacific negotiation, Alaska Pulp was established in 1953, using an almost equal amount of Japanese and U.S. investment capital. Honshu was one of a large number of Japanese companies that participated in the funding of Alaska Pulp. The Alaska Pulp venture was one of the first large postwar overseas investments made by Japanese industry and helped to revitalize United States-Japanese business relations.

With the end of the Allied occupation in 1952, business opportunities for Honshu were plentiful. When Oji Paper had been reorganized, forming Honshu, Honshu had been given six paper mills, located in Edogawa, Iwabuchi, Fuji, Yodogawa, Nakutso, and Kumano. The company also took possession of a chemical plant in Nagoya. During the 1950s Honshu used some of the profits generated by its booming business to rebuild and modernize the existing mills.

Each of the three newly organized companies focused on a different part of the paper market. Oji Paper remained the largest producer of newsprint in Japan. Jujo Paper modified its mills and began to market paper for the printing trade. It set about to develop a variety of specialty paper products including paper for the burgeoning electronic-copying and information-transmission markets, as well as paper packaging products. Honshu began by concentrating on the paperboard and shipping-container market. Toward this end, Honshu built a new mill in Hokkaido that specialized in producing various products for the containerboard market. The Hokkaido mill started up in 1959.

The impressive postwar recovery of Japan's economy continued into the 1960s. Under the direction of the Ministry of International Trade and Industry, Honshu experienced market-driven growth. This growth resulted in the construction of another production and conversion facility, located in Fuji, opened in 1964. Three years later the company established Crestbrook Forest Industries Ltd., a Canadian joint venture with the Mitsubishi Corporation and a smaller Canadian company. Crestbrook's pulp mill, which was located in Canada in British Columbia, began operations in 1968. That same year Honshu, Oji Paper, and Jujo Paper tried to reverse the occupation actions of 1949 with a merger. The move was unsuccessful. The plan was terminated because of its potential infringement on Japanese antimonopoly statutes.

Honshu's research-and-development department closed out the 1960s with the registration of a series of patents for processes and machinery used in the production of a dry-laid non-woven paper-based fabric. Within two years of the development, Honshu sold exclusive U.S. manufacturing rights for the process to Johnson & Johnson after a series of negotiations with both Johnson & Johnson and Colgate-Palmolive Company. The sought-after fabric technology produced the fiber used in the manufacture of disposable baby diapers and other products.

The 1970s were a period of rapid growth and expansion for most Japanese industries. Honshu rode the crest of the wave with the establishment of JANT Pty. Ltd., a Papua New Guinea company formed to augment the company's wood-resources-development program. Honshu also expanded its production capabilities for plastic film used in packaging, with the opening of a new plant in Shiga in 1975.

The worldwide recession that took place in the early 1980s created a long, severe slump in the paper and pulp market. In an attempt to cope with the decline in profits and productivity, the three companies with roots in the old Oji Paper monopoly once more attempted to consolidate their operations. With the knowledge that a merger was not possible, the three paper-producing giants along with another Tokyo-based paper company, Kanzaki Paper Manufacturing Company, agreed in 1981 to sign a wide-ranging business agreement. The terms of the agreement established a joint venture for the purchase of raw materials and involved the pooling of the four companies' research-and-development activities.

As part of the agreement, the participating companies formed a liaison council. It consisted of one of each of the companies' vice presidents and was supported by several committees of specialists involved in raw materials, sales and, management. Many of the benefits of a merger were accomplished without the legal problem that an actual attempt at merger would have involved. In 1983, a short time after the agreement between the paper companies took place, Honshu merged with two other Japanese paper producers, Fukuoka Paper Co., Ltd. and Toshin Paper Co., Ltd. These acquisitions were followed in 1986 by a consolidation in which Honshu Paper Company merged with Honshu Container Co. Ltd.

Increased demand and a comparatively stable price structure had created the need for the company to increase its management and production efficiency. In 1989 Honshu's president, Yoshinobu Yonezawa, initiated several changes in the company's business approach. Yonezawa reorganized three of Honshu's paper mills, transfering some of the company's paper machines from their existing locations to other operating mills in an effort to increases efficiency. Part of Yonezawa's plan included the construction of a new mill at the company's Fuji location. Honshu was in the early 1990s in the process of building a new research-and-development complex in Tokyo. Yonezawa also liquidated two of Honshu's affiliated companies in 1988, Hokuyo Sangyo Co., Ltd. and Tsurusaki Pulp Co., Ltd.

Principal Subsidiaries: JANT Pty. Ltd. (NewGuinea); CFI (Canada).

Further Reading:

Roberts, John G., Mitsui: Three Centuries of Japanese Business, New York, Weatherhill, 1989.

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

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