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Friday, 9 May 2014

History of Toyota. Part 8 (1935-1948): Sales Systems Established

On August 9, 1935, the Cabinet adopted an order on the Establishment of the Automobile Industry. The order established a licensing system for the automotive industry and limited eligible licensees to corporations of which a majority of the shares were owned by Japanese citizens. As a result, Ford-Japan and GM-Japan found it difficult to continue business. The preamble of the order stated, "Nissan Motor Co., Ltd. and Toyoda Automatic Loom Works, Ltd. have large-scale plans to manufacture economy cars and are proceeding with those plans," making it highly likely that Nissan Motor and Toyoda Automatic Loom Works would be licensed.
It was under these circumstances that Shotaro Kamiya of GM-Japan wished to work for a domestic manufacturer and made a request to Director Tojiro Okamoto of Toyoda Boshoku-an acquaintance from his time at Mitsui & Co.'s Seattle Office and a fellow graduate from Nagoya Commercial High School-to approach Toyoda Automatic Loom Works on his behalf. Kamiya met with Managing Director Kiichiro, and a decision was made for him to join the company.

Kamiya began working for Toyoda Automatic Loom Works in October 1935 along with Shikanosuke Hanazaki and Seishi Kato, also former GM-Japan employees. The Sales Division was immediately set up and they began working on developing a sales organization for Toyota vehicles.
Kamiya was entrusted with the entire task of establishing automobile sales systems by Kiichiro and adopted a system based on GM-Japan's sales organization that set each prefecture as a unit and established dealers without any capital participation from the automaker. GM-Japan gave its tacit approval for Chevrolet dealers to switch their affiliation to domestic automakers, and as a result, Toyota's sales organization was made up largely of GM dealers and in particular Chevrolet dealers.

Tokyo Toyoda Motor Sales Co., Ltd. announces the Model DA bus chassis
On December 8, 1935, Hinode Motors2 held an event announcing the Model G1 truck as a "domestically-produced Toyoda vehicle" and began selling the truck with the body at a price of 3,200 yen for Nagoya delivery. Hinode Motors relinquished its sales rights concerning GM vehicles in November of that year and switched to selling Toyoda Automatic Loom Works vehicles, becoming the first Toyota dealer.
Tokyo Toyoda Motor Sales Co., Ltd.3 was established in December 1935 as the second Toyota dealer. The company opened its dealership and unveiled the DA bus chassis at the Mitsugashiwa Building in Yurakucho, the site at its headquarters, on January 19, 1936.
Later, a number of dealers were established including Kokusan Motors Co., Ltd.4 in Matsusaka City, Mie Prefecture in January 1936, Osaka Toyoda Motor Sales Co., Ltd.5 in March, Hiroshima Toyoda Sales Co., Ltd. in August, and Gifu Toyoda Motor Sales Co., Ltd. and Shizuoka Toyoda Sales Co., Ltd. in September. Over the course of about one year, seven Toyota dealers were launched.
In October 1936, the company name was changed from "Toyoda" to "Toyota" in conjunction with the adoption of the Toyota logo.

Sales Systems Established
Proposals for a logo to be used on Toyoda Automatic Loom Works Automotive Department-developed vehicles were solicited from employees of Toyoda companies in February 1934, prior to the start of prototype vehicle production. In April, 21 proposals from the more than 800 submitted were selected, but a final decision was not made.
Nighttime scene of the Tokyo Toyota Motor Co., Ltd. head office after relocation to Tamura-cho, Shiba-ku (with an illuminated Toyota logo)

Toyota's logo is established (Toyota News, No. 8)
The third issue of the Toyoda News, the newsletter of the Automotive Department, dated July 5, 1936, included a notice of the rules for submissions to the Toyoda logo contest. The first prize was 100 yen, the deadline for submissions was August 15, and notice of the contest was placed in leading newspapers. The October 10 eighth issue of the Toyota News announced the winning Toyota logo, selected from more than 27,000 submissions and announced that the product name would be changed from Toyoda to Toyota on the advice of industry leaders. The article used the new "Toyota" name exclusively, referring to a Toyota Gifu announcement, the Second Toyota Dealer Conference, and the Toyota nighttime patrol service.
During this period, the Toyota sales network was steadily expanding including the relinquishment of Ford sales rights by the automobile division of Gobankan (a dealer that was the predecessor to Sapporo Toyota Co., Ltd.) in the autumn of 1936 and its transformation to a Toyota dealer in June 1937. When Toyota Motor Co., Ltd. was established in August of that year, the sales network comprised 20 dealers: 18 domestic dealers and one dealer each in Korea and Taiwan. In Japan, Kochi Prefecture-based Shikoku Toyota Sales established a Tokushima branch and a Matsuyama branch, and Kanto Toyota Sales in Tochigi Prefecture established an Ibaraki branch and a Saitama branch, and as a result, Toyota had sales bases in 22 prefectures, covering nearly half the country.

Locations of Toyota Motor Co., Ltd. plants and dealers in July 1938
Many of the dealers sold both American cars and Toyota vehicles. GM dealers such as Shikoku Motors in Kochi Prefecture established Shikoku Toyota Sales, Nangoku Motors in Kagoshima Prefecture established Nanho Motors, Niigata Shokai in Niigata Prefecture established Niigata Toyota Motor Shokai, Kanto Motors in Tochigi Prefecture established Kanto Toyota Sales, and Kaneki Shoten in Hyogo Prefecture established Kobe Toyota Sales. Similarly, Yonawa Shokai, a Ford dealer in Kumamoto Prefecture, established Kumamoto Toyota Motor Sales.
In this way, the number of Toyota dealers in Japan increased from seven at the end of 1936 to 19 at the end of 1937, and 22 (in 26 prefectures) in July 1938, just one year after the establishment of Toyota Motor Co., Ltd., bringing the total to 24 including the dealers in Korea and Taiwan. The number of dealers continued to increase, reaching 30 at the end of 1938 and 37 at the end of 1939 with sales outlets located in 44 prefectures (including seven sales branches; there were no sales outlets in Oita, Miyazaki, or Okinawa), covering nearly the entire country. Overseas, five companies were established by 1941: Sakhalin Toyota Motor Sales Co., Ltd., Korea Motor Sales Co., Ltd., Seoul Toyota Motor Sales Co., Ltd., West Korea Toyota Motor Sales Co., Ltd., and Taiwan Kokusan Motor Co., Ltd.

In April 1939, Toyota Motor Co., Ltd. implemented its first capital increase, raising capital from 12 million yen to 30 million yen, and allocated 5,000 shares to 25 dealers. This dominant stance of dealers holding shares of the manufacturer was maintained until the reorganization of automobile sales structures in 1942.
When the Second World War spread to the Pacific in December 1941, the automobile sales industry was incorporated into the wartime controlled economy. Restrictions on the supply of motor vehicles and parts had been imposed in August 1940, but the Automobile Control Association was established on December 24, 1941 and a reorganization of automobile sales organizations was implemented. The Japan Automobile Distribution Company was established in July 1942, and prefectural automobile distribution companies were established as subsidiary organizations in November. The dealers that made up the Toyota sales network were incorporated into the local distribution companies and were successively dissolved.

Toyoda Kinyu Kaisha established
Toyoda Automatic Loom Works established Toyoda Kinyu Kaisha on October 31, 1936. The company, established following a proposal by Sales Manager Shotaro Kamiya, provided financing to persons who purchased vehicles on an installment plan. Initially, the company's financing was commonly used when horse-drawn cart companies with little capital made the transition to truck transport. In August 1940, however, when truck and bus production and sales were regulated and a distribution system was instituted, priority in motor vehicle supply was placed on military demand and private demand eligible for financing rapidly declined, and as a result, Toyoda Kinyu's business also tapered off.
Toyoda Kinyu acquired shares of Toyoda Steel Works, Ltd.1, which was established in March 1940, and of Toyoda Machine Works, Ltd.2, which was established in May 1941, and began to play the role of a holding company. In addition, Toyoda Boshoku merged with four other companies including Chuo Spinning & Weaving Company under a national policy in February 1942 to form Chuo Spinning Company, and in conjunction with this, Toyoda Kinyu purchased shares of Toyoda Boshoku Sho and Toyoda Automatic Loom Works owned by Toyoda Boshoku in order to maintain management of their shares.
Toyoda Kinyu's business as a holding company expanded, and in April 1942, the company was renamed Toyoda Sangyo Kaisha, Ltd. At that time, it owned shares of Toyoda Boshoku Sho, Toyoda Automatic Loom Works, Toyota Motor Co., Ltd., Toyoda Steel Works, Toyoda Machine Works, and other companies with a total value of 13 million yen.

In 1944, Toyoda Sangyo Kaisha acquired shares of Toyota Motor Co., Ltd. owned by Toyo Spinning. Toyo Spinning acquired a large number of Toyota Motor Co., Ltd. shares at the time of Toyota Motor Co., Ltd.'s first capital increase in April 1939 and its second capital increase in January 1943. Toyoda Sangyo Kaisha increased its capital from one million yen to 10 million yen in order to acquire 279,000 shares of Toyota Motor Co., Ltd. (23.25 percent of all issued shares)3 from Toyo Spinning and applied the proceeds to the share purchase.
In the post-war period, Toyoda Sangyo Kaisha established a trading division to handle various products manufactured by Toyota group companies in response to the shift to civilian demand. Among the products were bicycle air pumps, electric ranges, and electric heaters manufactured by Toyota Motor Co., Ltd., wood products (toolboxes, wooden pipes for spinning, dinner tables, and so forth) manufactured by Toyota Auto Body Co., Ltd., and manual flour grinders manufactured by Toyoda Machine Works.

Toyoda Sangyo Kaisha was designated as a holding company by the Holding Company Liquidation Commission in September 1947 and was ordered to dissolve. A decision was made to spin off the trading division and establish a new company, and Nisshin Tsusho Kaisha Ltd. (now Toyota Tsusho Corporation) was established on July 1, 1948.

Source: TOYOTA MOTOR CORPORATION 

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