Automobile business edition

Field in which it can widely exert its integrated corporate strengths

 Harumi Triton Square (Chuo-ku, Tokyo) is the home of Sumitomo Corporation’s Tokyo head office. Currently, Hideyuki Nagaoka, Tetsu Taki, and Takanori Otsuka work on the 23rd floor of the Tokyo head office in the Automotive Division, No. 1. Their job is to provide support from the Tokyo head office to affiliates in Japan and aboard.

Nagaoka is in charge of providing support to Kiriu Corporation, an auto parts manufacturer in Ashikaga, Tochigi Prefecture, which is wholly-owned by Sumitomo Corporation. Taki handles support for Mazda de Mexico Vehicle Operation (MMVO), a joint venture set up in Mexico between Sumitomo Corporation and Mazda Motor Corporation. Meanwhile, Otsuka is responsible for giving support to PT Oto Multiartha (OTO) and PT Summit Oto Finance (SOF), which are both auto finance companies operating in Indonesia. Each of these employees covers a completely different field—auto part manufacturing, finished car manufacturing, and financing for car and motorcycle consumers. In addition, the companies they cover are each headquartered in a different location. However, these three members work on the same floor, constantly exchanging information and frequently consulting with one another about their jobs.

Brake discs are a mainstay of Kiriu. These brake discs are widely used in the brakes of many automobiles. Currently Kiriu produces automotive parts at four sites in Japan and nine sites overseas.

In recent years, Mexico has become one of the world’s leading centers for automotive production. Sumitomo Corporation established a joint venture with Mazda in Mexico and began mass production of finished cars starting January 2014.

Of the many businesses that Sumitomo Corporation is engaged in, the automotive business is a particularly broad field. Several thousand companies, both small and large, are engaged in the value chain from the upstream sector to the downstream sector of the auto industry. At the upper-most end of this stream is materials procurement, and flows downward from parts manufacturing, finished car manufacturing, exports, wholesale, retail, financing, rental, leasing, after service, and then recycling. Sumitomo Corporation is one of these companies. However, Sumitomo Corporation distinctively differs from many of its peers because is operates businesses throughout the majority of value chain from the upstream sector to the downstream sector.

Sumitomo Corporation’s automotive business can be largely divided into three areas—manufacturing, sales and distribution, and financing and leasing. Manufacturing is the in upstream sector of the value chain, sales and distribution in the midstream sector, and financing and leasing for end users is the downstream sector. The business network extends throughout all sectors from the upstream to downstream and has a global reach, encompassing Asia, North America, Latin America, Europe, the Near and Middle East, and Africa. Sumitomo Corporation’s automotive business also covers an extremely wide range of domains in the regions that it operates. In the automotive field, the company is able to extensively leverage its distinctive (trading company) integrated corporate strength to its utmost.

Mr. Taki

Tetsu Taki joined the company in 1988 and has since been working solely in the automotive business. He has experience working in the Ukraine and Germany. He quietly told us that he feels a sense of achievement when he sees the happy faces of business partners or customers or when he feels as if his work has benefitted others.

Business expansion driven by active investments

Sumitomo Corporation entered the automotive business in 1954. The company got its start by exporting 20 buses manufactured by Hino Motors, Ltd to Burma (current-day Myanmar). Since then, the company has been gradually expanding the scope of this business by exporting product for each domestic auto manufacturer, setting up sales companies overseas, and entering the auto wholesale business.

The expansion of the automotive business coincided with trends in the overall trading company business, namely the shift in focus from trading to business investment. Previously, the main role of an integrated trading company was to import and export goods, such as manufactured products, materials, and food. However, from 1990 to 2010, many integrated trading companies began to actively invest in various fields in Japan and abroad. This began their pursuit down the path to operating their own businesses.

This business investment strategy began to bear fruit relatively early on at Sumitomo Corporation in the form of the automotive business. Investments included the acquisition of Kiriu, welcoming it into the Sumitomo Group as a wholly-owned subsidiary, the joint establishment of overseas manufacturing sites with finished car manufacturers, and the purchase of a stake in auto financing companies in Indonesia. Thanks to this strategy, Sumitomo Corporation was able to build a platform that encompassed the automotive business value chain.

According to Taki, “Sumitomo Corporation possesses an extremely wide range of experience and knowhow in the automotive business. I believe that more and more people in the automotive industry are also seeing Sumitomo Corporation in this light.”
He added “We are able to refer the best person in our company that is most suited to handling consultations about the automotive business and also refer optimal business partners. We also can work together to develop a new business framework (platform). I believe this is Sumitomo Corporation’s strength in the automotive industry.”

Mr. Nagaoka

Hideyuki Nagaoka joined the company in 1992. His career path has been focused solely on the automotive field. Nagaoka was posted in India. He was scheduled to return to Japan, but was stopped by the president of the local company who asked the head office to extend his stay. As a result, Nagaoka’s return home was postponed. He said that was a happy moment for him.

Working in unison taking into account mutual roles

The partnerships with various players are what create a value chain that connects the upstream, midstream, and downstream sectors. We enter new business fields and domains by selecting an optimal method, including mergers and acquisitions, joint ventures, and affiliations, and partner that suits each situation. Sumitomo Corporation repeated this process to expand the scope of its business.

Naturally it is necessary to build a win-win relationship when forming a partnership. Kiriu benefitted from becoming part the Sumitomo Corporation Group as it was able to accelerate its overseas expansion. Mazda teamed up with Sumitomo Corporation to take advantage of its extended business experience, which enabled the carmaker to successfully put down roots in the local market. For OTO and SOF in Indonesia, a partnership gave them access to Sumitomo Corporation’s financial strength, which was imperative for their business expansion.

Sumitomo Corporation’s business investment largely contributed to the growth of the companies it invested in, and also generated substantial benefit for itself. However, integrated trading companies are not investment funds. Nagaoka explained the difference.
“An integrated trading company develops a strategy and then investments in a company. This part is the same as an investment fund. However, what happens after the investment is what differs. We do not only provide capital. We get involved with the people working in the frontlines. We place emphasis on working together to build the business. In other words, we become a main constituent and play a key role in the business. This is where, as an integrated trading company, we can utilize our experience and network.”

Employees at Sumitomo Corporation often refer to the company’s hands-on culture. Essentially, it is the culture of Sumitomo Corporation to become deeply involved in the operations of the company it has invested in, and to experience both the good and tough times along with the employees of that company. Nagaoka values this culture and always pays close attention to fostering optimal relations.
“The employees of Kiriu, the company I supervise, are professionals in manufacturing craftsmanship. Since Sumitomo Corporation does not specialize in manufacturing, I believe that, at the very least, we should respect the professional work style of Kiriu’s employees and not infringe upon their domain.”

Sumitomo Corporation’s unique hands-on culture takes into account mutual roles, and aims to combine strengths and competencies while balancing its involvement in its partner.

Relations between people form the foundation of business

Partnerships are underpinned by the relations between people more so than the connection between the two companies. Nagaoka, Taki, and Otsuka all agree. They believe that no matter how dynamic the value chain is, a potentially fruitful partnership will not be successful if there is poor communication among people in the frontlines.
Otsuka explained that “Naturally I believe it is important to convey Sumitomo Corporation’s style of business to the some 10,000 Indonesian employees that work at OTO and SOF. However, I think it is more important to understand the culture and manner of thinking of the Indonesian employees. We cannot guide the business to success if there is a lack of mutual understanding between both parties.”

Taki nodded in agreement, adding the following.
“It is only natural that there are differences since the employees of each company adhere to different corporate cultures and come from different backgrounds. The real challenge of this job is to communicate persistently to fill the gaps that exist between us, and to tackle each challenge one by one.”

The employees of Kiriu and Sumitomo Corporation have recently started participating together in softball games, and the employees in Indonesia and Mexico participate in a long-distance relay race once a year. This reflects the widely shared belief that relations between people build a foundation for business.

These three key members are a driving force for Sumitomo Corporation’s automotive business. They joined the company at different times and are different ages but they are close colleagues that can rely on one another at any time. Daily communications among employees are the backbone to Sumitomo Corporation’s integrated corporate strength.

The term people, as used here, does not strictly mean the employees of suppliers or business partners. It also does not simply refer to customers. At times it can mean colleagues or superiors, or subordinates, in other words, the relations between the employees of Sumitomo Corporation. This is none other than the valuable relations between people. According to Taki, “Close-knit communication inside the company will contribute to productive communication with people outside the company.”

Going forward, once the Trans-Pacific Partnership (TPP) goes into effect, Sumitomo Corporation’s cross-border value chain in the automotive industry is likely to expand further. However, no matter how big a business grows in scale, each business will continue to be supported by detailed communications between people which at times can be either troublesome or enjoyable. Nagaoka, Taki, and Otsuka are still hard at work on the 23rd floor of the Tokyo head office, exchanging spirited dialogue while gazing at the future of the automotive business.

(Article run January 2016)

Mr. Otsuka

Takanori Otsuka joined the company in 1998. He started our working in the aerospace business but later was transferred to work in the automotive field. He was posted in Indonesia for five and a half years (his stint ended in April 2015). He stated that “I respect the colleagues I work with and have earned the respect of others as a professional working at a trading company. I aim to continue to hone my personal skills going forward.”

Group employees in Indonesia and Mexico each year have a chance to participate in a long-distance relay race. This is a picture taken at a race held in Indonesia. The race held in Indonesia was an idea proposed by Otsuka who is shown in the right-hand side of the picture. He believed this was the perfect opportunity for employees to improve communications with one another.

The Sumisho Scrum concept

Leveraging the integrated corporate strength of Sumitomo Corporation in various domains, this is the Sumisho Scrum.

“I want my work to contribute not only to my own department but also to other departments. I believe the company’s overall strength could be enhanced if all employees shared this same awareness.”
──Hideyuki Nagaoka, head of the Automotive Manufacturing Business Section No.2, Automotive Manufacturing Business Department No. 1

Hideyuki Nagaoka, head of the Automotive Manufacturing Business Section No.2, Automotive Manufacturing Business Department No. 1
Tetsu Taki, head of the Vehicle Manufacturing Team, Automotive Manufacturing Business Department No. 2

“This is a company we can work together with and be partners with for a long time──I think that when we exert our integrated corporate strength, this is how our partners will evaluate our various business transactions which crossover into many fields.”
──Tetsu Taki, head of the Vehicle Manufacturing Team, Automotive Manufacturing Business Department No. 2

“I believe in carefully listening to what others have to say, no matter what their position, and in not building walls between organizations. That is the type of culture I see taking root in our company. I think that consideration between employees is the basis for our integrated corporate strength.”
──Takanori Otsuka, head of the Auto Retail Finance Team No.1, Auto Retail Finance Business Department

Takanori Otsuka, head of the Auto Retail Finance Team No.1, Auto Retail Finance Business Department
Etsuko Komiya’s perspective

Etsuko Komiya’s perspective

My image of an integrated trading company is that its main role is to export parts and finished car products overseas and import fuel from overseas to Japan. However, I was somewhat surprised to hear that Sumitomo Corporation is involved in the actual manufacturing of parts and auto bodies. They are truly engaging in all sectors of the business from upstream to downstream. This broad business is being supported by its partnerships with different companies. Sumitomo Corporation is not trying to handle everything alone. It is dividing up duties among various partners so that it can expand its functions step by step. I think this is the true nature of Sumitomo Corporation’s integrated corporate strength.

A scrum that will change the world

People are the bridge that links the future Sumitomo Corporation