In the automotive industry, the ability to produce the lightest, most streamlined product as possible while ensuring strength is paramount, especially as the transition towards EVs marches on. One of the companies working to make high-quality yet lightweight components is Japan’s Chrysanthemum Co. Founded in 1960, Chrysanthemum manufactures products in two categories: stranded inner cables and coated cables. The stranded cables are mainly made of two materials, high carbon steel and stainless steel, and finished with zinc plating (galvanizing) or the company’s special KIKU-GT finishing. The cables are then coated with resin in response to customers’ need. We sat down with president Hisashi Kikugawa to find out more about the company, its products and their applications.
In the last 30 years, Japan has been subject to intense competition from Chinese, Taiwanese and Korean manufacturers in both the consumer electronics and the automotive sectors. They have replicated Japanese monozukuri techniques but have done so at a cheaper labor cost. Yet today, we still see Japan as a leader in certain B2B (business-2-business) sectors. Can you explain to us, what are the advantages of Japanese monozukuri that allow Japanese companies to still succeed?
We have been pushed by competitors especially from China, South Korea and Taiwan, but I think the difference between these countries and Japanese companies is that Japanese makers and their management are eager to go beyond the specifications demanded by our clients. We always try to add more value by going beyond the quality that is needed by the clients. I think this pursuit of perfection is something that makes Japanese companies stand out from their regional competitors. The manufacturers in Japan possess a sense of craftsmanship when trying to create things that are beyond expectations. While this kind of spirit creates expensive products, it also adds to the cost of production. In recent years, some customers want specifications that they demand only, which has led to some Japanese companies suffering in regards to our regional competitors.
Another effect taking place in Japan is its aging population. Japan is the most aged society in the world, with around 28% of people already over the age of 65. At the same time, due to the declining birth rate, we know that there will also be less people in Japan in the future. How is your business reacting to these population changes, and what challenges and what opportunities do you expect to come as a result?
We are clearly seeing the impact of Japan’s declining population. We are in the business of the mass production of automotive and motorcycle parts. We need to maintain a certain volume of production for us to survive as a company. That is why, in 2014, we decided to establish a plant in Vietnam. As the number of domestic consumers shrinks, we need to make a choice, whether we should pursue value added products, even though the volume of production is small, or whether we should pursue a certain level of production quantity. For the former, you need to have a high price, high cost and super high quality model which could make a profit even manufacturing small quantities. For the latter, the model would be kept at a reasonable price while manufacturing a large quantity with a certain level of high quality and the model could also target overseas markets. It often comes up for debate, I do not think that it is a bad thing to downsize the company in accordance with the size of the quantity of production. When it comes to downsizing, the image some people may have is not good, however, I do not think it is the wrong choice. It should be an option for businesses. By pursuing both strategies, we can not only focus on the development of a high-end product in Japan but also meet mass-production needs in Vietnam. However, as a Japanese ‘monozukuri’ company, we fully understand that some companies have to change direction towards the former strategy due to the corporate environment or many other reasons. When we established the plant in Vietnam, we were experiencing the appreciation of the Japanese Yen. This meant that we did not have the competitive edge for the transportation and exportation of our goods to overseas markets. That was the reason why we made the choice to establish a plant overseas to spread the risk of fluctuations in exchange.
Around the year 2000, there was a trend in the Japanese private sector, which saw many plants established in overseas markets. However, I considered whether this was the right choice or not. We took many years deciding if we should establish a plant in Vietnam. In Japan, I think that people tend to follow suit. When everyone is doing something, others tend to follow. However, in overseas countries, they tend to make their own decisions. In Japan, you need to be careful to not be inclined to follow overall business trends. I try to make my own decisions, and that is something that I have learned from overseas.
With Covid-19, we have seen huge disruptions to manufacturing supply chains worldwide. For example, we have seen semiconductor shortages in the automotive sector, and in some cases, plants have been closed. We have also heard from many companies here in Japan, that China’s zero-tolerance policy towards Covid-19 has disrupted their ability to receive critical components from China. In the case of your company, as a customized wire cable manufacturer, what impact has Covid-19 had on your business, and what long-term adjustments did you make as a result?
Covid-19 had an impact on our company, especially in the first quarter of 2020. The automotive industry slowed down a lot, therefore our production volume shrunk by a large amount. Our sales almost halved in this period. Our plants in Osaka, Ishikawa and Vietnam were also hit hard. However, due to Covid-19, people preferred driving their own cars, rather than taking public transportation, so the demand returned in Autumn 2020. Our production value recovered. Many industries such as the travel industry and the restaurant industry were badly affected, however, the automotive industry was in a unique position. Therefore, I think the impact of Covid-19 was limited for us. However, in 2021, when Vietnam was taking a zero-tolerance policy towards Covid-19, as more contagious variants of the infection were spreading there, the Vietnamese government told us that we had to control movement in and out of every single person to continue operation at the plant along with preventing further spread. That means, our staff had to live within plant premises. We carried out a survey with our employees, and surprisingly, about 40% of our employees said that they were willing to live at the plant for a certain period of time. Many of our workers, even those who have families back home, chose to stay at the plant. Some of our married workers there also chose to stay at the plant. We really appreciated our employees, and as a result of their willingness to stay at the plant, we were able to maintain between 50% and 60% of the plant’s production. One of the upsides of Covid-19 was that we were able to forge a company-wide strong bond.
Chrysanthemum offers products in three categories. First, there are spiral inner cables that consist of one single wire. You also have your stranded inner cables with spiral cables that are laced together. Finally, you have coated cables where you offer galvanized and various resin coated finishes. Which cables are your best selling, and who are your main customers?
We can find a lot of our cables in window regulator systems. Our stranded inner cables which require softness, flexibility and durability are used in these systems. Therefore, they are our best selling and most used cables. In recent years, we have supplied our cables for the power sliding door system for cars, especially minivans. While not every power sliding door uses a cable, when it does come to cable type, a lot of our products are used there.
The automotive industry is one of your main customers, however, the automotive industry is currently transitioning to EV and adopting CASE technology which will eventually make cars fully autonomous in the future. How is your business reacting to this transition?
As you have mentioned, the automotive industry is now facing many changes. What used to be the standard components are not standard anymore. Chrysanthemum is supplying less and less cables, especially for parking brakes. Parking brakes would often require cables, but recently few new models operate manually by parking brake system. They are connected to a new control system which doesn’t require a cable. We obtained such information many years ago. It was an inevitable situation that we needed to accept. As a result, the cable forecast has been decreasing recently. Those have been the negative effects of the automotive industry’s transition. On the positive side, however, cables are components that can transmit significant power without taking up space, and this can contribute to making cars lighter in weight. We are therefore seeing a demand for devices that require cables, so we expect an increase in demand for our cables in the future.
The automotive industry is demanding lighter materials to offset the weight of batteries with this transition to EV cars. What technologies are you using to make your cables lighter, but still capable of retaining that durability and operability that is needed by your customers?
There are two things that we need to tackle. The first is that we need to make the cables thinner and lighter, while maintaining the existing durability of the cables. Pursuing that technology is indispensable going forward. However, we can not do it alone so we like to work together with Tier 1 companies. We would like to receive requests from Tier 1 companies and challenge ourselves. The second is that we would like to use materials other than steel. We are looking for alternative materials which will also strike a balance with the cost.
Are you looking for overseas partners to help you develop these new products?
As a company, when we pursue new technology, we like to maintain flexible thinking and to be neutral. We try to be engaged with a lot of clients which also means that we do not stick to a specific company. We would like to develop the technology used in new products by working together with other companies. Development is very important for our company to grow. After this article is published, I hope that companies in other parts of the world will approach us.
Your company has unique technologies. For example, the KIKU-GT which provides 5 - 10 times more corrosion resistance than regular galvanized steel wires. Can you tell us about these technologies and your competitive advantages?
Since Chrysanthemum was established, we have been an integrated manufacturer from raw materials to finished products. Our business employs only around a few hundred people, however, we are able to complete the integrated process from raw materials to finished products, as an SME. Our competitive edge is that we are very flexible in being able to respond to our customers’ requests in a swift and efficient manner. We are also very fast at development and producing prototypes. They are the strengths that our company possesses. I myself used to be an engineer, so I understand what our engineers are feeling. I encourage them to carry out many trials, and I am accepting of errors and failures. That supportive environment encourages our engineers to develop new ideas and products. Therefore, our company has great research and design capabilities.
Mr. Kikugawa, you have mentioned how you understand your engineers, and how you are not afraid of new challenges, or of trial and error. I can also see that you are a relatively young president. Since 2014, you have had your overseas facility in Vietnam, but as a young and ambitious president who is not afraid of trying new things, what is your international strategy moving forward?
There are two things to consider. Firstly, our company strives to be an attentive company that provides detailed care. Being attentive is a very Japanese characteristic. We sense what others are thinking, and then we take action. We try to sense what our customers or suppliers need. We then take action based on that understanding. The same goes for our employees. We have our plant in Vietnam, however, that culture is not so widespread at the Vietnam plant. Therefore, we would like to promote that attentive culture and educate our employees there. However, we are not trying to be an educator for them. There are things that we too can learn from our Vietnamese employees. As you mentioned earlier, Japan is facing a declining population. When you consider Japanese workers as one group, you would see the group may lack a passion or drive to challenge themselves. That’s not because such spirit is lacking. That’s because a tendency towards stability becomes more pronounced in elderly people, and the percentage of workers from this generation continues to increase while young people don’t increase equally. On the other hand, the Vietnamese workers are very energetic. That is something that we can learn from them. Therefore, I believe that we should cross-educate between Japan and Vietnam to absorb the best aspects of each culture.
Secondly, regarding monozukuri, I believe that quality, cost and delivery (QCD) are the three most important measures for the manufacturing process. It can be very difficult to satisfy our clients in regards to these three measures, however, I would like to build upon our QCD. We believe that our attentiveness or understanding of clients could serve as a solid foundation for QCD. This is the aspect that we would like to focus on, and are always trying to strengthen. We believe the inside matters. QCD is a superficial approach to QCD that won't make any clients happy; it must be built upon a basis for mutual understanding between clients and us. This is not only for Japanese clients but also for clients overseas.
Are there any other countries or regions that you would like to increase your sales in? Which sectors are you targeting for growth?
Needless to say, we would like to expand our business further in the automotive sector and motorcycle sector. But I believe there are more sectors for which we have not marketed products. There is an entire world out there. We would like to find a sector where our products are in constant demand. From the Vietnamese plant, we would like to expand the application of our products to other industries as well. Regarding the geographic targets for our future sales, when it comes to the automotive sector, many new devices are created in regions such as Europe or the United States, so we would like to pay attention to those regions. On the other hand, we would also like to target the countries and regions where the population is growing, such as Southeast Asia or India. For those regions we will try to maximize the cost effectiveness.
Imagine, on the very last day of your presidency, many years from now, we interviewed you again. What would you like to tell us? What goals and achievements would you like to have accomplished by then?
Regarding the material aspect, that is something that I think is unavoidable, and if there are any social changes, or new societal circumstances, I think we should accept them. However, regarding the human aspect, I would like every one of our employees to be more attentive. I hope that kind of spirit can be deep-rooted in their lifestyles through working at this company. If we all possess that same kind of spirit, I think that I will be happy to retire from the presidency.