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The Yazaki Corporation

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					                              The Yazaki Corporation
     IMD – Lombard Odier Darier Hentsch Distinguished Family Business Award 2007

                                  by Professor Kazuo Ichijo*

Yazaki Corporation, headquartered in Minato-ku, Tokyo (Japan), is a 100% privately
owned corporation with a diverse range of products in the global automotive and
environmental systems sectors. More recently, the company has begun to expand into
a third business sector, mainly in the areas of nursing care and environment-related
businesses. Above all, Yazaki is the world’s largest producer of automotive wiring
harnesses, with a market share of approximately 30% as of 2006.

Over the years, the automotive business has evolved into a global exchange of
knowledge, services and products. The Yazaki Group has achieved a significant global
presence with 169 companies and 410 business sites in 39 countries. It has production
facilities in the USA, Mexico, South America, Africa, Australia, Southeast Asia, India
and China as well as throughout Europe, which has developed into a major market
since 1980. Yazaki Corporation acts as the central hub of the Yazaki Group of
companies, which employ approximately 200,000 people worldwide. With an
integrated business system incorporating research and development, production, sales
and management, Yazaki is able to accommodate customer requests quickly and with
flexibility. For the fiscal year 2005-2006 (ended June 2006), the group registered
worldwide sales of ¥1,271.2 billion1 a year-on-year increase of approximately 11%.
As of June 2006, Yazaki’s capital amounted to ¥3.1915 billion.2

Since its founding, Yazaki has been owned and governed by the Yazaki family.
Currently, the family is the primary shareholder, and the company is governed by the
second generation of the family with the third playing important roles in the
company’s growing global business. Key executives include Yasuhiko Yazaki,
chairman; Shinji Yazaki, president; George Perry, president and chief executive
officer of Yazaki North America; Volker Heuzeroth, chief executive officer of Yazaki
Europe Limited; and third generation family members Riku Yazaki and Ko Yazaki,
both directors of Yazaki Corporation


1
    Approximately US$11 billion
2
    Approximately US$28 million
A Pioneer in Automotive Wire Harnesses

Yazaki’s operations date back to 1929 when, Sadami Yazaki began selling wire
harnesses for automobiles. Born in Nagano in 1909, Sadami Yazaki had been selling
electric wires for a trading company for five years before founding Mitsuya Electric
Wires in 1929 with his brother Yoshimi Yazaki to sell the automotive wire harnesses.

In 1935, due to changes in governmental regulations, Japanese companies, such as
Toyota and Nissan, were allowed to start automotive production in Japan. Soon after,
in 1939, Sadami Yazaki expanded the business to produce wiring harnesses, and two
years later, in 1941, Yazaki Electric Wire Industrial Co. Ltd. was established with
about 70 employees.

During World War II, Yazaki’s business suffered severe damage. Both its corporate
headquarters in Tokyo and its first plant were burned down. However, Yazaki quickly
resumed production and due to Japan’s remarkable post-war recovery, Yazaki received
an enormous number of orders for electric wires.


Bold Moves Drive Growth

In 1949, however, Sadami Yazaki made a bold and important strategic decision, which
ultimately resulted in the company becoming the global leader in the automotive wire
harness business. Anticipating the bright future of the automotive industry, he decided
that Yazaki would focus on the production of automotive wire harnesses and stop
production of general electric wire. As a result, Yazaki’s automotive wire harness
business began to grow rapidly. This growth intensified when the company started
producing copper in-house in 1957, enabling it to obtain sufficient amounts of the
material it needed to produce wire harnesses. With its vertically integrated value
chain, Yazaki became number one in the Japanese domestic wire harness market.
Continuous internal and external process improvements went on to make Yazaki a
first-class supplier on the world market. Later, Yazaki would resume the production of
electric wires since it was able to obtain sufficient copper from its in-house
production.


Diversification

In 1950, Yazaki started producing automotive meters and Yazaki Meter Company was
established. Yazaki then gradually diversified its business further in the automotive
sector, including products such as connectors, junction blocks and fiber optics.

The competence and technologies developed by the automotive meter business were
later used to develop meters and various types of other equipment for the city gas
industry. In 1974, Yazaki developed the world’s first solar-powered energy generation
system. Since then the company has developed and provided a large number of
products that support the supply and utilization of various energy sources, such as
electricity transmission cables, gas security systems, air-conditioning equipment and
solar powered systems. As a result, Yazaki began to provide safe and environmentally
friendly lives to society. These products are now integrated under the environmental
systems sector, the second biggest sector in the Yazaki Group.

Overseas Business Development

Over the years, the automotive business evolved into a global exchange of knowledge,
services and products. Yazaki began to meet the needs of the global market by
investing in research, which enabled it to offer new technological solutions, often
developed in-house.

In 1955, Yazaki established its first export division and began to grow its overseas
operations. In 1962, the company established its first overseas factory in Thailand. As
it has expanded into the global marketplace, Yazaki has always held “to be a good
neighbor” as a guiding principle. In carrying out this principle, Yazaki has endeavored
to manufacture products suited to the local economy and needed by the particular
geographic area in which they operate. In 1966, the American Yazaki Corporation was
formed in Chicago to cater to the North American automotive market. In 1972,
American Yazaki Corporation began the production of components for supplying a
major US automaker. The company went on to establish Yazaki Europe Limited in the
United Kingdom in 1980 as the first European location, and in 1986, the first
European production plant opened in Portugal.


The Second Generation Takes the Wheel

In August 1974, founder Sadami Yazaki died suddenly at the age of 64. His son,
Yasuhiko Yazaki, became the second president of Yazaki at the age of 33.

Yasuhiko Yazaki was born in 1941. After studying at Goethe University in Frankfurt,
he joined Yazaki Corporation in 1963. In 1967, he became a director and supported
his father by playing a key leadership role in the growing Yazaki Corporation. In
1971, he was named executive vice president.

When he succeeded his father, Yasuhiko Yazaki became president of five companies –
Yazaki Corporation; Yazaki Meter Co., Ltd.; Yazaki Parts Co., Ltd.; Yazaki Electric
Wire Co., Ltd. and Yazaki Resources Co., Ltd. He had not yet developed the charisma
his father had, and the management and governance of these five companies was an
enormous challenge for the young president. Additionally, in the wake of the 1973 oil
shock, Yazaki was faced with increasing material costs, unfavorable currency
exchange rates, and a global economy that was in a deep depression. The young
president, however, was not afraid of bold moves. To overcome the crisis facing
Yazaki, he sold off ¥20 billion in assets including the corporate headquarters. And he
was very quick to initiate appropriate countermeasures for turning Yazaki around.
Under the young president’s leadership, Yazaki was rescued from its crisis.

Yasuhiko Yazaki launched two strategic initiatives, which resulted in big successes for
the company. First, he grew Yazaki’s overseas operations more aggressively. As a
result, overseas sales grew from ¥4,546,778,000 in 1974 to ¥116,554,058,000 in 1990.
During the same period, overseas employees grew from 2,922 to 33,703. His second
initiative was to invest additional corporate resources into growing the solar-powered
energy business and the environmental systems sector, which had also become global
businesses. Yazaki’s performance improved because of these new growth initiatives.


Developing People for Rapid Global Growth

During 1991, the company’s American subsidiary celebrated its 25th anniversary. In
1997, American Yazaki Corporation was restructured as Yazaki North America and
major business units were established. Three years later, Yazaki Corporation
announced its intention to become the global leader in vehicle multimedia network
system integration for OEMs (original equipment manufacturers). In 1997, Tata
Autocomp Systems Limited signed a joint venture agreement with Yazaki for the
design and manufacture of wiring harnesses for passenger and commercial vehicles.
The same year, Yazakisa, located in Sakarya province, Turkey, started its operation, as
a joint venture between Yazaki with a 76% stake, and Turkey's Haci Omer Sabanci
Holding Corporation with a 24% share in the company. Also during 2000, Volvo Car
Corporation presented Yazaki Europe with the “Best Supplier” for 1999 award. A year
later, in 2001, Yazaki signed a joint-venture agreement with German-based Siemens,
through which it planned to leverage the resources and expertise of both companies,
to provide high-tech and complete electronic/electrical distribution systems. The joint
venture was established under the name S-Y Technologies, America, in October 2001.

As Yazaki’s overseas business continued to grow rapidly, Yasuhiko Yazaki recognized
the need to develop people. He launched a number of global human resource
development programs, including an “overseas adventure school” for all new
employees and a “global training program” for employees in overseas subsidiaries. In
addition, the educational support of the children of Yazaki employees was considered
to be very important, so Yazaki held annual “summer camps” for their employees’
children in Japan and overseas.


Social Responsibility: A Key Corporate Concern

Under Yasuhiko Yazaki’s leadership, the protection of the environment has been
assigned the status of a separate corporate goal at Yazaki. Although corporate social
responsibility (CSR) has only recently been listed on the corporate agenda, the
concept of CSR is not new for the company. Since Yazaki’s inception, it has remained
close to the tenets of its corporate vision: to become a company that is trusted and
respected by society; to operate on a “one for all and all for one” basis; and to be a
good neighbor. CSR is deeply rooted in the management of Yazaki. Adherence to this
mission insured that CSR was part of all management decisions at Yazaki, and this
tradition was maintained and strengthened by the new president.

Yazaki’s reputation for having environment-friendly operations and products is
supported by the fact that it built the world’s first solar-power based air conditioning,
heating and hot water supply system in 1974. Since then, it has been committed to
accepting its share of responsibility for the care and maintenance of natural life and
sustaining resources. Yazaki believes that economic success and ecological
accountability go hand-in-hand. Therefore, they strive daily to strike a balance among
the needs of their customers, the protection of the environment and the interests of
Yazaki.

In line with its corporate policy of social responsibility, Yazaki has recently
established a New Business Fields division to cultivate new business frontiers.
Currently, the company is expanding its activities in various businesses such as the
operation of nursing care, healthcare, environment-related businesses and recycling.
To show its strong commitment to social responsibility, Yazaki has also actively
disclosed environmental and other data annually since the release of the “2002
Environmental Report,” which contains information on the environmental activities of
the five Yazaki Group companies in Japan. Starting in 2003, information concerning
the social aspect of Yazaki’s activities were also added, and the report was renamed
the “Social & Environmental Report.” Through this publication, Yazaki makes every
possible effort to disclose information concerning how it fulfills its corporate social
responsibility with respect to both the social and environmental aspects of its
activities.


Handing Over the Presidential Keys

After more than 25 years as president of Yazaki Corporation and its three core group
companies, Yasuhiko Yazaki began to prepare to hand over the top management
position at Yazaki to his brother. In 2002, Yasuhiko Yazaki stepped down from as
president and his brother, Shinji Yazaki, became the third president of Yazaki
Corporation and its three core companies at the age of 55. Yasuhiko Yazaki would
remain chairman of the corporation, a role that he has held since 1991, mainly
working on matters relating to corporate social responsibility, overseas subsidiaries
and local communities. The new president would be responsible for growing Yazaki’s
business with a focus on QCD (quality, control and delivery).

Shinji Yazaki was born in 1947, and he joined Yazaki Corporation in 1968 after
graduating from the International Commerce Department of Hastings Continental
College. Since joining the company, Shinji Yazaki worked closely with his brother
Yasuhiko Yazaki, and together, through the teamwork of the Yazaki brothers, they
have turned Yazaki Corporation into one of the leading automotive suppliers in the
global automotive industry.

Shinji Yazaki believed that fully understanding Yazaki’s corporate vision and making
it a part of daily life would help to reinforce a sense of common goals and shared
values among employees. He felt that Yazaki’s corporate vision, which had been a
source of inspiration since its founding, should remain true to this day: to become a
company that is trusted and respected by society; to operate on a “one for all and all
for one” basis; and to be a good neighbor. Shinji Yazaki also felt that in an age in
which major changes are to be expected, Yazaki should not lose sight of the roots that
have held it up, straight and tall; those roots should be the Yazaki Vision, and they
should be the source of Yazaki’s values and philosophy. Based on this notion, the new
president published the Yazaki Corporate Policy and Fundamental Management
Policies.
                              Yazaki Corporate Policy

                         A corporation in step with the world
                          A corporation needed by society

                        Fundamental Management Policies

In order to bring he Corporate Policy to fruition, the Yazaki Group must act based
upon the following policies.

1. Through adoption of new ideas and continuous efforts, increase the company
   efficiency, and provide the greatest value to our customers worldwide.

2. Uphold the law, respect regional culture, and contribute to economic and social
   development.

3. Contribute to a prosperous future society through business focused on the
   environment and safety.

4. Conduct business openly and fairly, and aim for mutual coexistence.

5. Care for people, by creating a corporate culture that maximizes the capacity for
   individual and team-work, while sustaining people’s dreams.

Source: Yazaki Social & Environmental Report 2006

Shinji Yazaki also reevaluated Yazaki’s corporate activities in order to strengthen its
relations with stakeholders. One significant result was a more efficient system for the
dissemination of information to different stakeholders. The Yazaki website is updated
on a scheduled and timely basis, and regular meetings with different groups of
stakeholders are held. Shinji Yazaki believes that sharing information, regularly and
accurately, helps all stakeholders understand the company’s commitment to social
responsibility, and he will continue to promote bi-directional communication with all
who have a stake in the company.

The Yazaki family puts a high priority on keeping good relationships with its
stakeholders. Under the leadership of each of the three presidents, Yazaki has evolved
as a multicultural corporation while responding to the changes in the global
automotive industry. All three presidents considered the formation of relationships
based on mutual understanding and trust with all the stakeholders in Japan and
overseas as the single most important element in ensuring continuous business
development. Engaging in effective bilateral communication with each stakeholder
based on corporate policy and fundamental management policy is considered a part of
Yazaki’s corporate social responsibility.

The Yazaki Group has been holding stakeholder meetings since 2004 as means of
obtaining various opinions directly from its stakeholders. They use these opinions to
be a better company. Stakeholder meetings are a precious opportunity for
representatives of suppliers, local governments, environmental NPOs and local
residents to express their frank opinions and proposals and to deepen their
understanding of the Yazaki Group.
          Conceptual Diagram of Yazaki’s Stakeholders and Compliance




*EU ELV Directive: The EU ELV Directive is an EU legislation on recycling of end-
of-life vehicles which in principle bans the use of four substances – lead, mercury,
cadmium, and hexavalent chromium – in vehicles shipped or sold on the European
market from July 2003. Lead, mercury and hexavalent chromium content of less than
1,000 ppm and cadmium content of less than 100 ppm is permissible. Infringement
will result in heavy fines (with some exceptions).

**Kyoto Protocol: The Kyoto Protocol is the international agreement adopted at the
Third Session of the Conference of the Parties to the United Nations Framework
Convention on Climate Change (COP3). The Protocol imposes on parties an
obligation to reduce emissions of greenhouse gases, including carbon dioxide, a major
cause of global warming.

Source: Yazaki Social & Environmental Report 2006


Strengthening the Core Business

The improvement of Yazaki’s core automotive business was a key leadership mission
for the new president. His efforts were fruitful, and in 2002, GM honored Yazaki with
its “2001 Supplier of the Year” award. In September 2005, Yazaki was selected by
Ford as one its premium suppliers. The company also received DaimlerChrysler’s
“2005 Global Supplier Award” in recognition of its supply performance and product
quality.

Under Shinji Yazaki’s leadership, the company also revitalized its innovation
capabilities. With the North American market demanding more and more hybrid
vehicles, Yazaki bolstered its hybrid component sales in the region by launching the
production of high-voltage automotive products for hybrids and other vehicles in
January 2005. These products included inverters, battery packs, connection systems
for motors and other related products.


Increasing the Speed of Globalization

Although Yazaki Corporation’s overseas sales had moved upwards in the last few
years, the company was still over dependent on Japan for its sales. It had a close
business relationship with Toyota, and in fiscal 2004-2005, the company derived more
than 50% of its sales from Japan. Concerned that this overdependence might have a
negative impact on the company’s growth if, for example, there were a downturn in
domestic demand, Shinzi Yazaki intensified Yazaki’ overseas business growth.

In April 2005, Yazaki relocated some of its production from Japan to the US in order
to meet the growing demand for hybrid vehicles in North America. In September
2005, Yazaki Europe planned to build a facility in Bulgaria for the manufacture of
automotive electrical equipment. In December 2005, Yazaki announced its plans to
acquire a 25% stake in Hesto Harnesses (Pty) Ltd based in South Africa. The
transaction was valued at US$3.3m. Hest Harnesses was a leading supplier of
automotive wiring harnesses, which enjoyed a market share of 30% in its domestic
market as of December 2005. The company supplied its products to leading
automakers such as, Toyota, DaimlerChrysler and Ford. Thus, Yazaki was set to
benefit from the addition of Hesto Harnesses to its extensive portfolio of companies.
In January 2006, Yazaki North America accomplished the first and second phases of a
three-phase program to move its high-voltage manufacturing capabilities from Japan
to North America.


The Third Generation: On the Road to Leadership

At Yazaki, the third generation of the founding family is already playing important
roles in growing Yazaki globally. Yasuhiko Yazaki has two sons that represent the
third generation of the family – Riku Yazaki and Ko Yazaki.

Riku Yazaki was born in 1968, and he joined Yazaki Corporation in 1991 when he
graduated from Keio University in Tokyo. After working in several of the Yazaki
Group’s companies, he became a director of Yazaki Corporation in 1999. As a young
director, Riku Yazaki held numerous key management roles, including general
manager of Yazaki’s Corporate Planning Division, World Wide Strategy (WWS)
director for Yazaki Europe, director of Thai Yazaki Corporation, deputy plant manager
of Shimada Japan Factory-Yazaki Instrument Company and director of Yazaki EDS
Samoa, Ltd. In 2003, he was transferred to Yazaki North America Inc., the hub of
Yazaki’s business in the US. Currently as executive vice president of Yazaki North
America Inc., he is responsible for all aspects of the Components Business Unit,
including product design and development, quality assurance and cost maintenance of
components, such as connectors and terminals.

Ko Yazaki was born in 1971, and he joined Yazaki just after he graduated from Keio
University in Tokyo. Like his brother, he has held numerous key management roles at
Yazaki Corporation and its core group companies, such as Yazaki Electric Wire Co.,
Ltd. He was transferred to Yazaki Europe Limited in 2003, and as executive vice
president, he began to play an important role in growing Yazaki’s business in Europe.
In particular, as one of the key suppliers to Toyota, he took the lead in helping Toyota
launch Toyota Peugeot Citroen Automobiles, a joint venture between Toyota and PSA
to produce A-segment cars. In 2007, he was transferred back to Japan where he
became a director of Yazaki Corporation. As a young director, he has been assigned to
one of the key functions at Yazaki, namely logistics, and is expected to make
significant improvements to the logistics at Yazaki.

All of the family members have taken senior management positions while they were
young. In addition, all of them became directors of Yazaki Corporation in their
twenties or early thirties. They faced tough challenges in these key positions, and in
their efforts to overcome the challenges, they developed their management and
leadership capabilities.

Currently Yazaki has three core operating locations: Japan, the US and Europe. The
third generation of the Yazaki family is located overseas, where they have been asked
to take the lead in growing Yazaki’s business in these important markets. They report
directly to Shinji Yazaki, president of Yazaki Corporation and his brother chairman
Yasuhiko Yazaki, who has supported all of their business initiatives as a mentor,
brother and father.


Yazaki Family Tradition: Navigating with Consistency

Since its foundation, Yazaki’s corporate policy has been “a corporation in step with
the world” and “a corporation needed by society.” This unchanging pillar, espoused
by all three presidents of Yazaki, supports all of the business activities of the Yazaki
Group. Despite the many changes that society has undergone, Yazaki operates with a
uniform stance and code of conduct based on its corporate policy to fulfill its
responsibilities and mission as a manufacturer of high quality products. The three
presidents of Yazaki Corporation have all tried to create a multicultural corporation
that can develop with the rest of the world. And they have created a unique corporate
management and culture based on autonomy, equality and harmony. The third
generation of the Yazaki family, Riku Yazaki and Ko Yazaki, will also adhere to this
principle.


*Professor Kazuo Ichijo of IMD wrote this article based on Yazaki’s 2006 Social & Environmental
Report and his interviews with the Yazaki family.