Chief of Japan’s Minebea Runs Firm the American Way

Takami Takahashi, 56, is an executive who has won a reputation here as a business “heretic.” But he says he doesn’t mind the pressure he gets from tradition-minded Japanese businessmen and from society in general to drop his nonconformist ways.

“The more pressure I get, the more and more we grow. There is no problem,” he said recently.

Takahashi is president of Minebea Co., which, when he joined it in 1959, was a tiny maker of miniature ball bearings with only $96,000 in annual sales and 55 employees. Today, Minebea is an international conglomerate with revenue of more than $700 million and 25,500 employees.

Rapid growth is not unusual in Japanese business, but the way it has been achieved in this case is: Takahashi enlarged Minebea in part by using that most un-Japanese of all business practices, the corporate takeover. The Japanese, who prefer to work by consensus, find something unsavory about such aggressive business behavior.

Takahashi, however, says he has done so many takeovers that he has lost exact count--there have been more than 24 in Japan alone.

So when an American-British partnership in late October gave notice that it intended to take over Minebea in what would be the first hostile takeover attempt from abroad, observers noted that Takahashi was having his own controversial methods turned against him.

Also noted was the fact that a champion of rapid growth, a figure considered radical and flamboyant by his peers, has been targeted by a Los Angeles businessman with a similar image: Charles W. Knapp, chairman of Trafalgar Holdings, which formed the partnership with Glen International Financial Service Co. of London.

Knapp was chairman of Financial Corp. of America, then based in Los Angeles, which under his guidance grew into the nation’s largest savings and loan holding company. But he was forced to resign in August, 1984, by banking regulators who felt that FCA’s lending policies were reckless.

Takahashi insists that the takeover threat has not changed his thinking. He remains convinced, he says, that his American-like methods of management are the path of the future for Japan.

“For a long time, the Minebea management has predicted that a takeover bid would be made in Japan and that, ultimately, this phenomenon would help revitalize the economy. This view has not changed,” he says.

Three years ago, he says, he drew up a list of 36 Japanese companies that he targeted for mergers and takeovers and declared Minebea’s intention to buy them one after another.

Giants such as “Sony and Matsushita,” he adds with a grin, “are not among them, however.” At least not yet.

Minebea--a Japanized-contraction of the English words, “miniature bearings,” which the firm adopted as its name in 1981--was being described as a “Japanese-style conglomerate” as far back as 1975. It also was about that time that newspapers began describing Takahashi as having adopted the “American style of rationality.”

In Japan, that is not a compliment.

Dislike Practice

One of Takahashi’s own executives acknowledges that conservative business circles still believe that his practice of buying up other companies is akin to a bull rampaging in a china shop or, in Japanese terms, like “stomping into other people’s tatami (straw mat) inner chambers while wearing one’s shoes.”

To Takahashi, however, takeovers seem immensely logical: “There is no risk or failure in takeover bids. There is only success or non-success. We make an offer, and if it doesn’t satisfy the buyer, then the game is even. Investment in new manufacturing facilities is even more risky in a low economic growth period like today.”

Takahashi has staged his takeovers by buying shares or convertible bonds in targeted firms --usually small companies in financial trouble. Establishing himself as the leading stockholder, he then joins the board of the targeted firm and finally persuades the owners to sell out, often in exchange for Minebea stock.

Initially, Minebea raised funds for its takeovers by issuing new stock at prices prevailing on the market, instead of at par value, as many Japanese companies still do. In the last eight years, the company issued $600 million in warrants and convertible bonds on foreign markets to finance takeovers, Takahashi says.

“This is now the problem,” he says, referring to the Trafalgar-Glen takeover attempt. When Trafalgar and Glen went public with their intention to take over Minebea, Glen claimed it had already bought enough warrants and convertible bonds to control about 30% of Minebea’s shares.

Has No Regrets

Takahashi has since moved to dilute that stake with a new issue of convertible debentures, although in a statement last week asking why no formal tender has yet been made, he commented on “the absence of any evidence” that Trafalgar and Glen actually hold the Minebea securities they claim to have. Nevertheless, he expresses no regrets about the way his methods may have given Trafalgar and Glen an opening.

“Big, old-fashioned Japanese companies cannot raise money in Europe,” he says proudly.

Still, in last week’s statement, Takahashi tacitly acknowledged that such financing methods are considered radical and alien by conservative Japanese business standards.

“Japanese investors simply will not find attractive an offer of unrated bonds of dubious value in exchange for Minebea shares,” he maintained. “A hostile takeover bid in Japan is not likely to generate the interest of securities dealers because they do not have experience with handling hostile takeover bids.”

Saying that Trafalgar and Glen had selected the “wrong company at the wrong time” for their bid, he added that “unlike the United States, procedures for a public tender offer takeover bid have not evolved in Japan. This complicates and increases the risk inherent in international takeover attempts.”

Takeovers are not Takahashi’s only deviation from Japanese-style management. Nearly all traditional methods have been thrown out the window to hear him tell it, both in a talk to the Foreign Correspondents Club here and in interviews that he has given over the years.

Whereas most major Japanese business executives talk about “contributing to society,” Takahashi professes no altruistic motives.

Eager to Win

“I was always eager to win. The reason I entered business was not to contribute to other people but to win for myself,” he says.

Takahashi says he could have been happy engaging in any kind of business, including raising hogs, which he claims he once actually did consider. As if to prove his point, he says furniture has become one of Minebea’s fastest-growing items.

On Japan’s traditional seniority system, Takahashi says: “I do not believe in it. I tell my workers that the young and talented have an equal chance with senior, experienced workers to be given a responsible position.”

He also has won a nickname as a “talent scout,” for the un-Japanese practice of raiding other companies to hire specialists for his firms. Minebea, for example, “scouted” 25 semiconductor experts from foreign and Japanese firms for its new division, NMB Semiconductor Co.

Nor are decisions at Minebea made in the traditional up-from-below style favored in Japan.

“They say my way of doing things is a dictatorship. It may well be so, but I try hard to let my workers know why and how I make my decisions. . . . I frequently write memos to convey my intentions, ideas, reports and various information throughout the company. It is essential to let the employees be aware of the intention of the management side. Without it, the company will not function smoothly,” he says.

Likes American Way

Waiting for decisions to rise from the bottom “is no good. The American way is better,” he adds.

“People in the lower echelons of a company make lower salaries. Lower-salaried people cannot come up with good ideas.” Relying upon them to do so, he declares, “is an evasion of responsibility by Japanese management.”

Takahashi, however, says he does give his plant managers “great freedom” to make operational decisions.

He also gives his workers some unusual opportunities. About a fourth of the 1,000 workers at Minebea’s bearing factory in the resort city of Karuizawa have been dispatched to the firm’s overseas factories for work experience.

“I think there is no other company in Japan which has dispatched this many blue-collared workers overseas,” Takahashi says.

Minebea is also unusual in employing more foreigners than Japanese: 11,500 vs. 9,000, according to Hiroharu Katogi, manager of the company’s planning department. Minebea subsidiaries in the United States employ 4,000 workers, with another 3,500 on the payroll in Singapore and 4,000 in Thailand.

“Most Japanese businessmen think that only Japanese are good workers. But there are good people everywhere--not just Japanese,” Takahashi said. “If you make clear the principles of management you want workers to follow, it doesn’t make any difference whether you build a plant in Hokkaido or in Singapore.”

Executive Is Extrovert

An extrovert in a nation where understatement and self-effacing modesty are still the social standard, Takahashi continually punctuated his remarks at the correspondents club with gestures, the lack of which is a hallmark of the Japanese style of public speaking. His appearance was more a performance than a speech.

Takahashi, however, does share at least two points in common with many post-World War II Japanese entrepreneurs. Asked by Japanese interviewers about his hobbies, he replied: “Work--hard work.”

And like many other executives, Takahashi got his ideas and the machinery for modern production techniques from the United States. His firm, then called Nippon Miniature Bearing Corp., also initially obtained its biggest market from the United States.

“If you make a good product, Americans will buy it, even if the producer is a small company. That isn’t true in Japan,” said Katogi, the planning manager.

Takahashi says he had learned “many things” from the United States since his first trip there in 1962. But he criticizes American executives for spending too much of their energy on “increasing capital efficiency and in business planning.”

“American management (no longer) knows how to make a good product,” he says.

A company does that, he says, by dispatching “professional floor engineers and technicians” to its factories. And “with good products manufactured at low cost, not much business planning is necessary. The money just comes in naturally,” he says.

A graduate of Keio University’s business school who later quit a job with a large Japanese textile firm to go to work for a company that his father was then president of, Takahashi’s background offers no hint of the heresy which has marked his career.

Looming Problems

But his experiences have led him to identify what he sees as a looming problem for Japanese business. Profits in Japan’s export industries, he says, will all but vanish “within the next three to five years” because of rising wages and other costs. Diversification and overseas production, he says, are the only salvation.

It is a lesson reflected in the growth of Minebea. Installing the latest American equipment in its Karuizawa factory, Minebea started mass production of precision miniature bearings in 1963 and, with a boost from Vietnam War procurement, exports to the United States took off.

At one point, Minebea shipped 95% of its production to the United States--so much so that it found itself facing, first, a dumping charge (which was not pursued), then a threat from the U.S. Defense Department to halt purchases of foreign-made ball bearings.

Those developments convinced him that he would have to start manufacturing in the United States and to diversify in order to reduce his company’s vulnerability to market fluctuations for a single product, he says.

In 1971, Takahashi bought out the U.S. branch of a Swedish ball bearing maker, SKF, and established a U.S. subsidiary, NMB Corp. Investments in manufacturing followed in Singapore in 1973 and Thailand in 1982. A Minebea subsidiary also owns a factory in Taiwan.

Minebea now sells miniature bearings to 6,000 companies in the United States, including Boeing, Lockheed and McDonnell Douglas, and claims to lead all companies in the world in miniature bearing sales.

Went Into Electronics

Today, however, only 30% of Minebea’s business comes from the manufacture of its initial product. Electronic devices, accounting for 40% of sales, now top the firm’s product lines.

Acquisitions, and some new investments of its own, have added products ranging from furniture to music boxes to the latest in semiconductors. And since Trafalgar-Glen came on the scene, Takahashi also has said he will buy an apparel and jewelry retailer, Kanemori.

Although many Japanese corporations export more than half of their production, Minebea is one of the few that generates more sales from products manufactured overseas than from production in Japan. Next year, the firm expects its imports to exceed its exports from Japan, too, according to planning manager Katogi.

Ten years ago, Minebea exported to the United States 76% of its ball bearing production from Japan, Takahashi says.

“Today, our (ball bearing) exports to the United States amount to only 1% of our production in Japan, and 93% of our sales of bearings in Japan comes from our plants in Singapore and Thailand,” he says.

The firm, along with its subsidiaries, which include 10 companies and 11 factories in the United States, recorded sales of $713.6 million in its last business year, which ended Sept. 30. Its operating profit of $37.2 million for the year was more than double its sales five years ago.

Of the 10 U.S. subsidiaries, five are in California: NMB (USA) Inc., NMB Corp., NMB Air Corp., and Universal Magnetics in Chatsworth and Hi-Tek Corp. in Garden Grove.

Integrated Plants

Takahashi says all of Minebea’s overseas factories are integrated plants which procure raw materials locally, unlike most other Japanese firms’ knockdown assembly plants, which he called “show-window factories” that merely assemble parts made mostly in Japan.

He says that it was his promises to renovate the ailing New Hampshire Ball Bearings Inc. that persuaded a battery of U.S. Justice Department antitrust lawyers and Pentagon officials to approve his purchase of the firm this year after an eight-month investigation. He paid $110 million and is already investing $50 million in a new plant there to make high-tech bearings, he says.

The most surprising move the firm has made recently in Japan came not in a takeover but in one of the few new factory investments Minebea has made.

In April, 1984, Minebea said it had bought technology from three foreign semiconductor firms and was establishing a new subsidiary, NMB Semiconductor Co., to enter the manufacturing and sales of very large scale integrated circuits. Joined by Japanese venture capital firms and banks, Minebea constructed a new factory in Chiba prefecture (state) for $146 million.

Early last month, it became the eighth Japanese firm to begin production, at a reported rate of 6 million units a year, of 256 kilobit dynamic random access memory chips--chips with storage for 256,000 characters of information. Minebea also said it would begin producing state-of-the-art 1-million-character chips early next year.

Takahashi explains his move by saying that semiconductors might replace bearings in small motors, which Minebea also makes, within the next 10 years. And, with typical audacity, he dismisses as trivial the technological challenges that his new subsidiary is expected to face.

Didn’t Hesitate

In a newspaper interview, he said that he had no fear of jumping into semiconductors at the 256-kilobit level without experience in making 16-kilobit or 64-kilobit chips because mass production of precision bearings is more difficult than mass production of semiconductors.

“There has been too much propaganda that high-level, advanced technology makes the manufacture of very large-scale integrated circuits difficult and that investments eat up money,” he said. “From our position, the very fact that many large enterprises like Hitachi and Toshiba are engaged in it was one reason why we concluded that the manufacture of semiconductors is not all that difficult.”