Mitsubishi Chemical Corporation

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Mitsubishi Chemical Corporation

5-2, Marunouchi 2-chome
Chiyoda-ku, Tokyo 100-0005
Japan
Telephone: (03) 3283-6111
Fax: (03) 3283-5874
Web site: http://www.m-kagaku.co.jp

Public Company
Incorporateci: 1950
Employees: 38,617
Sales: ¥1.78 trillion ($13.4 billion) (2002)
Stock Exchanges: Tokyo
Ticker Symbol: 4010
NAIC: 325110 Petrochemical Manufacturing; 325412 Pharmaceutical Preparation Manufacturing; 325211 Plastics Material and Resin Manufacturing; 325998 All Other Miscellaneous Chemical Product and Preparation Manufacturing

Mitsubishi Chemical Corporation (MCC) was formed by the 1994 merger of Mitsubishi Kasei Corp. and Mitsubishi Petrochemical Co. As Japan’s largest chemical concern, MCC and its network of subsidiaries manufacture petrochemicals, pharmaceuticals, functional materials and plastic-based products, specialty chemicals, carbon, and chemicals and products used in the electronics industry. The company began restructuring in the late 1990s due in part to weakness in the Japanese economy and is focused on streamlining operations and cutting costs in order to restore profitability.

Early History

The Mitsubishi industrial empire was founded by Yátaro Iwasaki late in the 19th century and expanded rapidly into general trading and a variety of industrial occupations. So great was its influence that it became known as a zaibatsu, or “money clique.” As Mitsubishi grew, it purchased factories from bankrupt or failing companies and established new divisions to operate them.

Nippon Tar was founded by Mitsubishi in 1934 to take over the operations of the Makiyama coking factory in northern Kyushu. Makiyama, which had been in existence since 1897, was modernized and reorganized. Renamed the Kurosaki plant, it later became Nippon Tar’s primary facility for coke and coke products, fertilizer, and ammonia products. In 1936, the company’s name was changed to Nippon Chemical Industries.

The following year, Japan became involved in military hostilities in China. By the end of 1941, Japan was at war with the United States and Great Britain. Chemical production was essential to the industries which manufactured ships, aircraft, and weapons. Nippon Chemical, by its association with Mitsubishi (famous for its deadly Zero fighter plant), was intimately involved in the Japanese war effort.

Japan surrendered to Allied powers in the late summer of 1945 and was placed under the administrative authority of an Allied military commander. The occupation authority enacted a series of industrial reorganization laws which included stringent anti-monopoly laws. The financial empires of the zaibatsu, principally Mitsui, Sumitomo, and Mitsubishi, were divided into thousands of independent companies.

When Nippon Chemical was separated from Mitsubishi in 1950, its glass making and rayon divisions were reestablished as separate companies called Asahi Glass and Shinko Rayon (later called Mitsubishi Rayon). The “new” Nippon Chemical Industries, a public limited company, was established in June of 1950.

In 1950, Japan was still recovering from the destruction and ruin caused during the war. Ironically, Japanese industries encountered a period of extreme growth later that year as the result of another war. The same month that Nippon Chemical resumed its operations, communist forces from North Korea invaded South Korea. Japan was used as a staging base for United Nations forces which were sent to Korea to repel the attack. As a result of their proximity to the battle, Japanese companies, including Nippon Chemical, were contracted to furnish a variety of provisions and supplies.

Nippon Chemical Changes Its Name in 1952

In 1952, the company’s polyvinyl chloride (PVC) division was turned over to a company called Monsanto Chemical Industries (eventually known as Mitsubishi Monsanto), a joint venture created by Nippon Chemical and Monsanto of the United States. Later that year, Nippon Chemical changed its name to Mitsubishi Chemical Industries Ltd. (or MCI), reflecting the company’s growing ties with companies formerly associated with the Mitsubishi zaibatsu.

When an armistice was signed in Korea in 1952, many supply contracts with Japanese companies were canceled. Japan experienced a serious recession which forced hundreds of companies to merge in order to survive. In 1953, Mitsubishi Chemical absorbed the Toho Chemical company, later called the Yok-kaichi plant, which produced ethyl hexanol and synthetic rubber and textile products. With additional resources and improving market conditions, Mitsubishi Chemical began to expand at a faster rate. The company established a carbide division and laid the groundwork for a petrochemical division.

By the end of the decade, Mitsubishi Chemical derived 38 percent of its revenues from coke, gas, and tar production. The rest of the company’s operations consisted of agricultural chemical products (29 percent of revenues), organic chemical products (12 percent), sundries (12 percent), and inorganic chemical products (9 percent).

Mitsubishi Chemical constructed an aluminum rolling mill in 1963 under a joint venture with the Reynolds company of the United States. The mill was designated the company’s Naoetsu plant and later became Japan’s largest aluminum facility. During the 1960s, Mitsubishi Chemical constructed another coke plant at Sakaide, which was opened in 1969. Production of aluminum at the Sakaide plant commenced two years later.

In 1970, Mitsubishi Chemical resumed pharmaceutical manufacturing (suspended in the early 1950s), as part of its expansion into “bio-industry.” The following year the company established the Mitsubishi-Kasei Institute of Life Sciences at Yokohama, which has since acquired an excellent reputation for research.

Overcoming Hardships: 1970s–1980s

The world oil crisis of 1973 compelled Mitsubishi Chemical Industries to reduce its work force in order to remain profitable. In addition, the company was forced to sell its aluminum division (later called Mitsubishi Light Metal Industries, Ltd.). As raw material costs continued to rise, particularly in petrochemicals, Mitsubishi Chemical placed greater emphasis on pharmaceutical and fine chemical production. It also initiated a program to reduce energy consumption. The company’s financial position strengthened, and as oil prices began to fall, the petro chemical operations became less of a burden. The transfer of the light metals division to Mitsubishi Light Metal Industries was completed in 1976.

In 1983, the Mainichi Shimbun and Nihon Keizai Shimbun, two Japanese newspapers, reported that the United States Defense Department forced the American division of Mitsubishi Chemical to sell its Optical Information Systems unit to the McDonnell Douglas Corporation. Although the stories were denied, the reports said that Pentagon officials considered the company to be in possession of sensitive laser technologies that they felt could not remain secret unless controlled by an American company. The unit, which Mitsubishi Chemical purchased from Exxon in 1981, was reportedly sold for about $7 million.

In a continuing effort to expand its pharmaceutical division, Mitsubishi Chemical purchased the Mitsubishi Yuka Pharmaceutical company from the Mitsubishi Petrochemical Company in 1985. The transaction included the transfer of over 200 researchers to the company’s research institute.

Mitsubishi Chemical lost ¥8.5 billion in 1983 and was forced to suspend dividends. This lowered demand for the company’s stock and prevented it from recapitalizing, leaving Mitsubishi Chemical with a weak financial structure despite modest profits. In 1986, however, stronger profitability returned and a five yen dividend was reinstated.

Although it operated as independent company, Mitsubishi Chemical remained closely associated with other Mitsubishi companies. Managers of Mitsubishi Chemical regularly attended the Kinyo-kai, or “Second Friday Conference,” a monthly meeting of Mitsubishi Corporation affiliated companies where joint business strategies were formulated.

During the mid-1980s, Mitsubishi Chemical declared that in the future it would emphasize its “functional products,” namely Pharmaceuticals and biotechnology products. Carbon products (coke) had been reduced to a 28 percent share of the company’s revenues. The largest share of income was derived from petrochemicals (40 percent), followed by chemicals (17 percent) and agricultural chemicals (9 percent).

The company also branched out into the electronics sector. By 1985, the firm’s information and electronics product division was gaining momentum through strategic partnerships and ventures, including tie-ups with U.S.-based Verbatim Corp. and SAE Magnetics to manufacturer floppy disks and rigid disks, respectively. In order to mark its diversification into these new fields, Mitsubishi Chemical changed its name to Mitsubishi Kasei Corp. in 1988.

Company Perspectives:

Mitsubishi Chemical is focused on the pursuit of satisfaction for customers, shareholders, and employees. We place the highest priority on customer satisfaction. By regarding it as a fundamental element of all of our business activities and forming deeper relationships with our customers, we will enhance the satisfaction of shareholders and employees. We will maximize integrated strengths of the MCC Group to become our customers’ preferred solution partners.

The Creation of Mitsubishi Chemical Corp. in 1994

Operating under a new corporate moniker, Mitsubishi Kasei turned its attention to growth in the United States. In the early 1990s, it established Kasei Virginia Corp., a U.S. subsidiary created to oversee the production of high-tech products. As the company eyed international growth as key to future success, it set plans in motion to merge with Mitsubishi Petrochemical Co., Japan’s largest petrochemical concern. According to a 1993 Financial Times article, the decision to merge came at “one of the most difficult times for Japan’s petrochemical sector,” which had been plagued with overcapacity and intense competition. While Japan’s Ministry of International Trade and Industry had been encouraging merger activity since the early 1980s, most of Japan’s chemical firms remained independent, unwilling to relinquish control of their companies. The merger of the two Mitsubishi companies signaled a change in corporate thinking—that mergers may be necessary for survival.

The deal was completed in October 1994 and created the Mitsubishi Chemical Corp. (MCC), Japan’s largest chemical manufacturer with sales surpassing ¥1 trillion. As the newly merged company focused on integration and global expansion, its domestic market was hit hard by both a downturn in the Japanese economy and a crisis that plagued Asia’s financial institutions. As such, the firm began cutting costs while expanding into several areas. Its information and electronics division worked to strengthening its foothold in the data storage media market. The company also inked a deal with Asahi Glass Co. Ltd. to manufacture color filters for liquid crystal displays (LCDs). In its specialty chemicals business area, MCC partnered with U.S.-based Cargill Inc. to develop a low-calorie sweetener.

Japan’s continued economic deterioration forced MCC to launch a major restructuring effort in 1999. The plan included plant closures, layoffs, cuts in spending, and spin offs of certain businesses. Overall, the company planned to save ¥40 billion per year as a result of the measures. Upon entering the new century, MCC made additional restructuring moves designed to shore up profits by focusing mainly on petrochemicals, specialty chemicals, and Pharmaceuticals. The company made several key moves during this time period, including the divestiture of unprofitable businesses and the sale in 2002 of its agricultural chemicals business.

In 2001, the company announced the merger of its Mitsubishi-Tokyo Pharmaceuticals Inc. unit and Welfide Corp. The union created subsidiary Mitsubishi Pharma Corp., a company whose objective was to increase sales networks in both the United States and Europe by making key acquisitions and partnerships. In early 2003, MCC purchased Tonen Chemical Corp.’s shares in Japan Polychem Corp., a polyolefin joint venture created in 1996 by Mitsubishi and Tonen. After the purchase, Japan Polychem operated as a wholly owned subsidiary of MCC.

Under the leadership of president and CEO Ryuichi Tomizawa, MCC adopted a new management plan, the KAKUSHIN Plan, in 2002. Under this strategy, the company focused on restoring profits, intensifying research and development efforts, and consolidating the group into five major segments related to its core businesses. Meanwhile, the company’s operating environment continued to pose challenges as Japan’s economy remained stagnant. While MCC appeared to have a solid strategy in place, its future rested on both a domestic turnaround and the ability to successfully expand into international markets.

Principal Subsidiaries

ACT Research Center Inc.; Advanced Colortech Inc.; API Corp.; Chuo Rika Kogyo Corp.; Dia Fine Co. Ltd.; Dia Instruments Co. Ltd.; Dio Chemicals Inc.; Echizen Polymer Co. Ltd.; GenCom Co.; Japan Epoxy Resins Co. Ltd.; Japan Ethanol Co. Ltd.; Japan Polychem Corp.; Japan Unipet Co. Ltd.; Kawasaki Kasei Chemicals Ltd.; MCFA Inc.; Mitsubishi Chemical Engineering Corp.; Mitsubishi Chemical Functional Products Inc.; Mitsubishi Chemical Foam Plastics Corp.; Mitsubishi Chemical Logistics Corp.; Mitsubishi Engineering-Plastics Corp.; Mitsubishi Kagaku Foods Corp.; Mitsubishi Pharma Corp.; Nippon Rensui Corp.; Rhombic Corp.; ZOEGENE Corp.; Mitsubishi Chemical America Inc.; USR Optonix Inc. (U.S.A.); Verbatim Corp. (U.S.A.); Mitsubishi Chemical Europe GmbH (Germany).

Principal Competitors

BASF AG; Nippon Kayaku Co. Ltd.; Sumitomo Chemical Co. Ltd.

Key Dates:

1934:: Nippon Tar is established by the Mitsubishi industrial empire.
1936:: The company changes its name to Nippon Chemical Industries.
1950:: Nippon Chemical is separated from Mitsubishi and becomes a public limited company.
1952:: The company changes its name to Mitsubishi Chemical Industries Ltd.
1988:: The company adopts the name Mitsubishi Kasei Corp.
1994:: Mitsubishi Kasei and Mitsubishi Petrochemical Co. merge to form Mitsubishi Chemical Corp.
1999:: The company launches a major restructuring effort designed to cut costs during an economic slowdown.
2002:: The firm sells its agricultural chemicals business.