Central Japan Railway Company

views updated

Central Japan Railway Company

JR Central Towers
1-1-4, Meieki,
Nakamura-ku, Nagoya, 450-6101
Japan
Telephone: +81-3-3274-9727
Fax: +81-3-5255-6780
Web site:http://www.jr-central.co.jp/

Public Company
Incorporated: 1987 as Central Japanese Railway Company
Employees: 23,564
Sales: ¥ 1.33 trillion (US$11.33 billion) (2001 est.)
Stock Exchange: Tokyo
Ticker Symbol: 9022
NAIC: 482111 Line-Haul Railroads; 721110 Hotels (except Casino Hotels) and Motels; 531120 Lessors of Nonresidential Buildings (except Miniwarehouses)

The Central Japan Railway Company is one of seven firms created as a result of the break-up of the Japanese National Railway (JNR), a state-controlled agency that maintained a near monopoly over all railway business in Japan from its inception in 1949 to its dissolution in 1987. Known as JR Central, or more commonly as JR Tokai (the region of the Japanese island, Honshu, where JR Central operates), the Central Japan Railway Company is built around its highly profitable Tokaido Shinkansen (bullet train) line, which connects metropolitan Tokyo with Osaka to the southwest and accounts for 80 percent of JR Tokai’s total revenue. The company has also expanded into varied enterprises, including real estate and hotel management.

701-1906: Establishment of the Tokaido Line and Government-Controlled Railway

The history of JR Tokai officially begins in 1987, but a more complete overview of the company includes a brief overview of the development of the rail industry in Japan. In 701 A.D., the Taiho Code divided Japan into five capital provinces connected by seven main roadways. The Tokaido was the main road connecting Edo (now Tokyo) to the old capital, Kyoto. By the start of the 17th century, known as the Edo Period, the Tokaido highway had become the most important road in Japan. The “53 stages of the Tokaido” became part of Japanese lore over subsequent centuries as the highway evolved into the 300-mile Tokaido railway line in 1889.

During the latter half of the 19th century, Japan began to fully embrace rail travel and freight transport. In 1870, construction of a national railway system began, and in 1872 the Emperor sat in attendance for the opening of Japan’s first steam-driven line between Tokyo and Yokohama. Passage of the Railway Nationalization Act of 1906 initiated an official state-run railway agency. This act allowed the Japanese government to purchase all the main railway lines that connected regions within Japan while leaving the feeder lines, lines that served local communities and their needs, to private enterprise. The government would maintain control of the main lines for the following 80 years.

1949-64: Japanese National Railway and the Birth of the Bullet Train

In 1949, the Japanese National Railway, a centralized agency designed to maintain all lines owned by the government, was established. It quickly became apparent that an upgrade in service was necessary during the era of high economic growth in the country during the 1950s. Increasing numbers of people needed to traverse the island of Honshu, specifically the area between Tokyo and Osaka. In 1956, the Tokaido Line Augmentation Survey Board was created as part of the JNR, and within two years, research and development of the bullet train (Shinkansen) began. The Shinkansen would almost immediately become the foundation of Japanese railway travel and, in many ways, of the entire Japanese economy.

October 1, 1964, stands as one of the most important dates in the socio-economic history of Japan during the latter half of the 20th century. On that day, the first Shinkansen line, the Tokaido, was completed. The event coincided with the start (two weeks later) of the Tokyo Olympic games, the first to be held in Asia. It would be 17 years before a comparable bullet-train system was completed anywhere else in the world.

1964-87: Massive Debt in the JNR

The following 20 years represented a period of extreme contrasts for JNR. The Shinkansen system was revolutionizing travel both in Japan and abroad and quickly became the most popular form of travel in the nation. The JNR, however, was not experiencing a corresponding economic boom. On the contrary, it was during this period that the agency began to accrue huge debts. The Japanese economy expanded sharply during the 1970s and with it a trend toward increased automobile ownership and air transport. This contributed to a decline in both passenger and freight railway business. According to Fumitoshi Mizutani, associate professor in the Graduate School of Business Administration at Kobe University, JNR controlled over half of all passenger and freight movement in Japan in 1955. By 1985, however, the company’s share of passenger travel fell by roughly 17 percent while their share of freight transport plummeted to barely 5 percent of total freight movement. Although JNR continued to innovate, rolling out the second generation of Shinkansen, the series 100, the company was spiraling deeply into debt.

JNR’s troubles had several contributing factors. The company struggled to maintain centralized control over railway operations on all four of Japan’s islands. A strong railway union which deeply mistrusted management, the bureaucracy of a public ownership system that made quick decision making impossible even for seemingly small affairs, and a lack of economic competition all added to economic woes and a gradual loss of public faith in the efficiency of JNR. Once the company’s debt began to accumulate, it grew exponentially. By the 1980s, the debt had risen to ¥37.1 trillion ($275 billion), and it was clear that a major overhaul was necessary.

1987-2000: Breakup of the JNR and Creation of the Central Japan Railway Company

The ceremonial end of the JNR is described by Paul Noguchi: “In a public ceremony at midnight on April 1, 1987, the president of the JNR, dressed in an engineer’s uniform, rode a C-56 steam locomotive into Tokyo and blew the whistle that signaled the end of the 115-year-old national railways. This ceremony marked the closing of the industry that was once regarded as the symbol and backbone of Japan’s modernization.” The JNR had been dissolved, and in its place stood seven new companies and two new government agencies. The Central Japan Railway Company (JR Tokai) was one of the three Honshu JR’s (along with JR East and JR West) and served the Tokai region of Honshu, connecting the northeast to the southwest. In addition, three new JR passenger companies were created, one for each of the smaller islands. One of the most significant developments was the creation of JR Freight, which removed the burden of freight transportation management from the passenger JRs, leaving them to focus predominantly on providing passenger services and solidifying their economic base by diversifying into other fields.

Perhaps the most significant development in the dissolution of JNR, however, was the creation of the Japan National Railway Settlement Corporation (JNRSC), a state agency that held all of the stock in the seven companies. The formation of the JNRSC attempted to address the public’s lack of faith in the JNR and the fear that no one would be interested to invest in the new companies. (As of 2001, the JNRSC controlled 39.5 percent of JR Tokai’s stock.) The JNRSC also inherited ¥25.5 trillion ($212.5 billion) of the JNR’s total ¥37.1 trillion ($275 billion) debt to allow each new company a relatively clean financial start. JR Tokai inherited roughly ¥2 trillion ($16.6 billion) of the debt. In addition, the Shinkansen Holding Corporation (SHC) was formed to maintain control of the highly profitable Shinkansen lines and lease them to the new companies. The Tokaido Shinkansen line was leased to JR Tokai, and, when the SHC was disbanded in 1991, JR Tokai purchased the line for ¥5.1 trillion ($42.5 billion). This price was significantly higher than any of the other Shinkansen lines, but with good reason: The Tokaido Shinkansen connected the Shinkansen lines of JR East to the lines of JR West and represented one of the most lucrative businesses in all of Japan.

The purchase of the Tokaido line also pushed JR Tokai into debt deeper than any of the other JR firms. In 1997, when the government amended its plans to liquidate JNR debt (which had grown by more than ¥2 trillion in 10 years) by making the JR firms shoulder a larger percentage of the whole, JR Tokai stood to suffer the most. Though the series 300 Shinkansen trains had lowered travel time (and thereby increased the potential number of passengers per day) and JR Tokai had diversified into dining services, a tour group company, and hotel and department store subsidiaries, the debt accumulated from JNR and the purchase of the Tokaido line continued to drain the company’s resources. Nonetheless, in 1994, JR Tokai began construction of what would become its home offices, the JR Central Towers building in Nagoya, the heart of the Tokai region. Upon its completion in 2000, the Towers stood as the largest building in Japan.

The following year marked a first for a JR firm, and one that JR Tokai would rather forget. A 17-year-old boy caught his fingers in an electronic train door at a station along the Tokaido line. No one noticed. As he tried to yank his fingers from the door, the train began to move and the boy was dragged off the platform to his death. In 2001, JR Tokai was found liable for damages and forced to pay almost ¥50 million ($400,000) to the boy’s parents. It was the first fatality for which a JR company was found liable in the 30-year history of the Shinkansen.

Company Perspectives:

The company strives to contribute to community development by adhering to sound management principles; provide modern, friendly, and reliable services; and establish a cheerful, fresh, and active corporate culture.

In 1997, JR Tokai became the third JR firm (following JRs East and West) to be listed on the Tokyo Stock Exchange. This year also marked the completion of the Yamanashi Linear Test Line, an 18.4-km (11.5-mile) track designed to assist in railway research. Two years later JR Tokai signed a franchise contract with Marriott International Inc., the United States hotel chain, to open a Marriott hotel in the Nagoya JR Central Towers.

In 1999 the 700 series of Shinkansen (known as Dr. Yellow) was completed. The 700 series was the first to explicitly focus on environmental concerns, such as the reduction of energy consumption by lowering air drag and a new system of regenerative brakes that recycle electrical power. Power consumption of the series 700 was almost 10 percent lower than that of the series 300.

The New Century

As the twentieth century ended, JR Tokai clearly had its sights set on the future. Primary among its goals was to clean up its debt. To this end, in 2000 JR Tokai and JR West sold their cumulative shares of Japan Telecom (10.2 percent of the total stock) to British cellular phone operator Vodafone Group PLC for ¥280 billion ($233.4 million). JR Tokai said it planned to apply its portion of these proceeds to debt relief.

Another significant development in 2000 was the opening of the JR Central Towers building, which comprised the central railway hub station in Nagoya, business offices, a Marriott hotel, and a department store. In its first day of business, nearly 230,000 customers visited JR Nagoya Takashimaya department store and spent ¥550 million ($4.6 million).

Also at this time, a new type of train was in development in Japan. Magnetic Levitation (Maglev) trains represented the successor technology to the Shinkansen trains. Although in the 1980s the debt of JNR forced Japan to drastically reduce its R&D budget and enabled France to develop the world’s fastest trains, the Maglev system represented a concerted attempt to return Japan to the top. Some observers have stated that the Dr. Yellow trains, and others like them in the world, represent the most advanced systems possible using traditional “wheels-on-tracks” technology. The new Maglev trains move beyond this system by utilizing magnets that lift the train off its tracks and thereby almost entirely eliminate friction between wheel and track.

At the dawn of the 21^st century, Central Japan Railway Company remained one of the most significant companies in Japan. It owned the Tokaido railway line, the most fabled transportation route in Japan. The company had evolved itself into a diversified organization with businesses that moved beyond rail transport to include real estate, department store, and hotel management. With the opening of the largest building in Japan, JR Central Towers, in 2000, the sale of significant holdings, and the development of new technologies, JR Tokai was aimed squarely at alleviating the debt accrued from the JNR and the purchase of the Tokaido Shinkansen railway line. As the company continued to establish itself as a powerful player in Japanese and international economic circles, it worked to solidify profit through both diversification and maintenance of some of Japan’s most important socioeconomic legacies.

Principal Subsidiaries

JR Central Building Co., Ltd.; Shinsho Technos Co. Ltd. (22%); JR Tokai Hotels Co., Ltd.; JR Tokai Takashimaya Co., Ltd.(59%); Shizuoka Terminal Hotel Co., Ltd. (77%); JR Tokai Bus Co., Ltd.; Shin Yokohama Station Development Co., Ltd.; Nagoya Terminal Building Co., Ltd. (51%); Tokai Kiosk Co., Ltd. (90%); J Diner Tokai Co., Ltd.; Passenger Service Co., Ltd.; JR Tokai Tours Co., Ltd. (70%); Nagoya Station Development Co., Ltd.; JR Tokai Construction Co., Ltd.; Chuo Liunen Supply Co., Ltd. (78%); Nippon Kikai Hosen Co., Ltd. (73%); JR Tokai Shoji Co., Ltd. (70%); Tokai Kotsu Kikai Co., Ltd. (51%); JR Tokai Agency Co., Ltd. (90%); JR Tokai Kansai Development Co., Ltd.

Principal Competitors

East Japan Railway Company; West Japan Railway Company; Keihin Electric Express Railway.

Key Dates:

1870:: Construction begins on Japan’s first railway line.
1881:: The Nippon Railway Company becomes Japan’s first private railway.
1889:: The three hundred mile long Tokaido line is constructed.
1906:: Japanese government passes the Railway Nationalization Act.
1949:: Japan National Railway (JNR) established.
1964:: The first high-speed “bullet train” line, the Tokaido Shinkansen, is completed between Tokyo and Osaka.
1987:: JNR, wracked with ¥37.1 trillion ($275 billion) in debt, privatizes into 7 companies, including Central Japan Railway (JR Tokai).
1991:: JR Tokai purchases Tokaido Shinkansen line for ¥5.1 trillion ($42.5 billion).
1992:: Company establishes JR Tokai Hotels Co., Ltd. Establishes JR Tokai Department Store Co., Ltd.
1994:: Company establishes JR Central Building Co. Ltd. and construction on JR Central Towers begins.
2000:: Nagoya JR Central Towers building opens as the largest building in Japan. Wholly owned real estate subsidiary established. Tokaido Shinkansen receives two awards for world technological achievements: the Electric Engineering Milestones prize, becoming the third Japanese winner of the prize; and the Landmarks in Mechanical Engineering award, the first Japanese winner.
2001:: JR Tokai pays almost ¥50 million ($400,000) after a Japanese court finds the company responsible in the 1995 death of a teen whose fingers were trapped in an automatic train door.