Paloma Industries Ltd. History

Company Perspectives:

Ever since our founding in 1911, Paloma has consistently continued to maintain an unflinching stance about one thing: providing our clientele with products that put priority on safety above all else. No matter how sophisticated or easy to use it may be, we believe that only true technology is also furnished with safety. People make mistakes. That's precisely why it's Paloma's unchanging corporate mission to adopt this stance in our quest for responsible technology. As a manufacturer, we must engage in product development that is grounded in good conscience as we actively strive to ensure safety. For this reason, we have always placed safety before cost and productivity. We have established our own stringent standards for safety and tackled safety measures before all else. We have brought into the world such innovations as flame-failure safety devices for portable gas cooking stoves and oxygen depletion safety shut-off devices for gas water heaters. In this way and others, we're seizing the initiative to enlighten the entire industry about safety. In bringing reliance and comfort into people's daily lives, Paloma's reliable and safe technology makes no compromise. The form and specs of our products are an eloquent testimonial to this.

Key Dates:

1911:

Saburo Kobayashi founds the company to produce gas-powered appliances in Nagoya.

1931:

The company name becomes Kobayashi Factory.

1933:

Son Shin Kobayashi takes over as head of the company.

1938:

A second factory is constructed in Nagoya.

1952:

The Paloma brand name is launched.

1964:

The company name is changed to Paloma Industries.

1973:

Paloma Industries Inc. is established in Chicago.

1988:

Paloma acquires Rheem Manufacturing Co. in the United States.

1993:

Paloma opens a new factory in Hokkaido.

1994:

Rheem adds a new production facility in Arkansas.

1998:

Paloma opens a new complex in Tokyo.

2002:

Paloma and Rheem acquire the Australia, New Zealand, and China water heater operations from Southcorp Holdings.

2004:

Paloma reports sales of ¥240 billion ($2 billion).

Company History:

Paloma Industries Ltd. is one of the world's leading producers of gas-powered water heaters, boilers, and other appliances. Based in Nagoya, Japan, Paloma has pioneered energy-efficient water heater designs, including the "tankless" water heater, which, because it provides instantaneous hot water, does not require large water tanks. Paloma produces a variety of appliances, primarily for the domestic market, including gas cooking stoves, gas rice cookers, gas space heaters, and bath heating systems, as well as swimming pool heating systems. The company also manufactures air conditioners for the residential market and appliances for industrial and commercial use, as well as road heating systems for public works and other projects. Since the late 1980s, Paloma also has been a force on the international heating market, through its acquisition of the United States' Rheem Manufacturing Company, based in New York, and one of the global central heating and cooling leaders. Paloma also has been acquiring other members of the Rheem licensing group, including Rheem operations in Canada, Mexico, and Singapore, and, since 2002, in Australia and New Zealand. In addition to Rheem, Paloma's international operations include Raypak in the United States and Canada. Paloma Industries is a private company, controlled by the founding Kobayashi family and led by President Toshihiro Kobayashi. In 2004 the company's sales topped ¥240 billion ($2 billion).

Founding a Gas Appliance Leader in the Early 20th Century

Paloma Industries had its start in Nagoya shortly after the dawn of the 20th century. Gas-powered lighting systems had been in use in Japan since being introduced in Osaka in the early 1870s. By the close of the century, most of Japan's major cities had been outfitted with gas-lighting and gas distribution networks, and in 1906 Nagoya, too, opened its gas grid. The new utility provided an opportunity for a new range of business and appliances beyond lighting fixtures.

In 1911, Saburo Kobayashi founded a company for the production of gas-powered appliances, launching a line of water heaters and room heaters. In 1931, the company changed its name to Kobayashi Factory, and in 1933, the next generation of the Kobayashi family, in the form of Shin Kobayashi, took over as head of the company. By 1938, the company had outgrown its original site and added a new production plant in Nagoya, in Mizuho Ku. Soon after, however, Japan's entry into World War II forced the company to suspend production.

Kobayashi resumed production in 1945 almost directly following the end of the war. The company began an effort to expand its production in the postwar period, widening its range and adopting a new brand name, Paloma, in 1952. The company now extended its sales beyond the Nagoya region, quickly developing the Paloma name into a nationally known gas appliance brand. During this period Kobayashi expanded its line of appliances, adding stoves in the early 1950s and, in 1958, a new generation of gas rice cookers.

By the early 1960s, the Paloma brand had become quite well known in Japan, and the company decided to establish a dedicated, independent company, Paloma Industrial Corporation, in 1964. That company later developed into the flagship of what became known as the Paloma Group. In 1968, Paloma added a second factory, in Fukuoka. The company had by then earned recognition for the innovation and quality of its products, winning, for example, a design award from the Ministry of Trade and Industry, for a newly launched gas rice cooker in 1972.

International Growth in the 1980s

Paloma entered the international market in the early 1970s, launching a subsidiary in the United States, in Chicago, in 1973 in order to introduce its gas water heaters to the U.S. market. The company remained an innovator in the field, particularly in the development of safety devices and energy efficiency technologies for its gas-powered appliances. In 1977 the company launched a new system for preventing incomplete combustion in its water heaters. The company marked another industry first in 1985 with the début of a pulsating combustion unit that provided greater fuel efficiency. The company then adapted its pulse technology to a line of boilers in 1986.

Despite its presence in the United States for more than a decade, the majority of Paloma's sales remained in Japan into the late 1980s. The company began to make headway into the United States toward the middle of the decade, with its line of instantaneous water heaters. Also known as tankless water heaters, this water heating system eliminated the need for large boilers, which, because they continuously heated water in a reservoir, were not very fuel-efficient. Paloma's instantaneous system provided hot water only at the rate it was being used.

In the late 1980s, Paloma found a new means for expanding its international presence. In 1988, the company agreed to pay more than $770 million to acquire Rheem Manufacturing Co., based in New York. The purchase gave Paloma control of one of the U.S. market's top producers of central heating and cooling systems. Rheem also produced water heaters, boilers, and steam boilers, with total company sales of more than $800 million.

Rheem was founded in California in the mid-1920s by brothers Donald and Richard Rheem. The Rheems originally operated a galvanizing plant in San Francisco, producing oil drums and other containers. In the early 1930s, Rheem opened a new plant in Los Angeles, producing water heaters. Rheem quickly became a national brand name, with sales across the United States. The company also turned to the international market early on. In 1939 Rheem formed a 50-50 joint venture with Australia's BHP, setting up a factory in Waterloo.

Rheem expanded its product range in the 1940s and 1950s, adding oil furnaces, air conditioners, and space heaters. The company continued to seek new markets, establishing subsidiaries in Chile and Singapore in the 1970s. By then, however, Rheem had sold off parts of its global network, including its share of its Australia operations, to BHP in 1973. Rheem Australia later was acquired by South Australian Brewing Holdings (later known as Southcorp Limited) in 1988.

Global Network in the New Century

Back at home, Paloma continued to build up its domestic operations. In 1988, the company opened its research and development laboratory in Sapporo. The company began building a new factory, in Hokkaido Noboribetsu, which was completed in 1993. The company also began building a new headquarters, which was finished in 1995. Then, in 1998, the company expanded into the Tokyo area with the construction of the Paloma Plaza building in Minato-ku. Leading the company now was a new generation of the founding family, represented by Toshihiro Kobayashi.

Rheem also expanded as part of the Paloma group, opening a new production facility in Arkansas in 1994. The company added Raypac, based in California, a maker of heating systems for swimming pools and spas. In 2002, Rheem returned to Australia, buying back Rheem Australia Ltd., as well as Rheem New Zealand, from Southcorp Holdings. The total purchase price was reported at AUD 540 million. The purchase also gave Paloma control of Hotstream, a manufacturer of water heaters in China, marking Paloma's entry into that market. With sales of more than ¥240 billion ($2 billion), Paloma had established a solid position as one of the world's leading manufacturers of water heaters and related appliances. As it turned to the future, the company remained controlled by the founding Kobayashi family.

Principal Subsidiaries: Paloma Industries, Inc. (U.S.A.); Rheem (Australia); Rheem (New Zealand); Rheem Mamufacturing Company (Singapore) Pte Ltd.; Rheem Manufacturing Company (U.S.A.).

Principal Competitors: John Thompson Boilers; Cochrane Engineering Private Ltd.; Wolseley PLC; TUTCO Inc.; Hitachi Chemical Company Ltd.; ThyssenKrupp Services AG; Alstom Power Sweden AB; Behr GmbH und Company KG; Blue Circle Industries PLC; Lennox International Inc.

Further Reading:

• "Efficient Technology to Private Label Tankless Water Heater," Plumbing & Mechanical, October 2004, p. 26.
• Furukawa, Tsukasa, and Michael C. Gabriele, "Paloma Plans to Purchase Rheem Mfg.," Metalworking News, April 4, 1988, p. 5.
• "Japanese Giant Warms to Heater Deal," Australian Financial Review, December 4, 2001.
• "Paloma Industries Tankless Gas Water Heater," PM Engineer, September 2003, p. 62.
• "Rheem Buys Back WH Business Down Under," Reeves Journal, February 2002, p. 55.
• "Water Heaters Sold," Australasian Business Intelligence, February 5, 2002.

Source: International Directory of Company Histories, Vol. 71. St. James Press, 2005.

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