Tokyu Corporation

1883–1937

Tokyu Corporation operates railways, freight companies, bus companies, and a domestic airline in Japan. It is also involved in construction and real estate development, focusing on geographic areas that are served by its rail lines, and hotel ownership and other travel and leisure services. The company is the nucleus of the Tokyu Group, a group of more than 500 companies. Tokyu is one of Japan's relatively new conglomerates, unlike the long-established, finance-oriented groups such as Mitsubishi and Mitsui.

Early 1900s: Roots in Transportation

The story of Tokyu began in the rural town of Aoki in Nagano Prefecture in western Japan, where founder Keita Kobayashi was born in 1883. After completing primary school in his native village he attended high school in the nearby city of Matsumoto, where he spent a year before moving to Tokyo to attend what is now the law department of Tokyo University, the country's most prestigious university. He graduated in 1907 at the age of 24. While at the university Keita Kobayashi made the acquaintance of a politician, Takaaki Katoh, who would later become prime minister of Japan. Katoh was an inspiration to the young Kobayashi and provided him with a prestigious position upon graduation with the civil service in the Agricultural Ministry. The following year Kobayashi took the name of his wife's family, Gotoh, which means "raider" in Japanese. The pun has been used by countless journalists alluding to Keita Gotoh's style of doing business.

By 1921 Gotoh was employed by the Ministry of Transport. He was involved in supervising Japan's national railway system, and was given a post as director of the newly privatized and ailing Musashi Railway. At the time Musashi Railway was a so-called paper company because it did not actually own or operate any trains, but possessed real estate and planning permission to do so. Gotoh not only turned the company around but in 1922 also bought a controlling interest in it for ¥50,000. This was to be the first of the many corporate buyouts that characterized Keita Gotoh's rise. In the same year, he founded Tokyo Kyuko Electric Railway Company Ltd., which absorbed Musashi Railway.

The following year Eichi Shibusawa, a leading Japanese industrialist and founder of Denenchofu Corporation, one of Japan's first electric railway companies, was looking for help in building and developing the railway arm of his company, Mekata Railway. He approached Ichizo Kobayashi, founder of Hankyu Corporation, who promptly recommended Gotoh. Gotoh not only accepted the offer, but following the Great Kanto Earthquake of 1923 he took control of its railway interests.

1920s-30s: Growth and Acquisition

The next five years saw ambitious construction projects realized, including a 13.2-kilometer line through the southwest section of Tokyo. The late 1920s and the 1930s in Japan were a time of rapid industrialization, and Gotoh realized that the key to a modern and industrialized Japan was an efficient infrastructure. In densely populated Tokyo and in Kawasaki and Yokohama, rail transport was becoming increasingly important. Gotoh's aggressive expansion policy continued as the Tokyu Corporation--as it was then named, "Tokyu" being an abbreviation of "Tokyo Kyuko," or "Tokyo Express"--came to include the Ikejoh and Tamagawa lines and Tokyo Underground line. Gotoh became a pioneering force behind the most efficient underground railway system in the world by building, in 1937, an underground link from Shibuya to Shinbashi, both districts of Tokyo. Other acquisitions made around this time were Enoshima Electric Railways and Shizuoka Electric Railways companies, both outside Tokyo; Sotetsu Transport Company; and Kanto United Cars, a railway car manufacturer. In the decade before the end of World War II, Gotoh continued his policy of buying weak companies and turning them around. He also began exploiting the extensive lands his company owned around its railway lines. One of the first areas to be developed--which became one of Tokyo's most exclusive residential areas--was Denenchofu. During its first two decades, leading up to World War II, Tokyu was not only providing the crucial transport links to this area but also developing and constructing real estate.

The J-REIT, which was expected to be launched in 2002, was to be valued between $2 billion and $4 billion and listed on the Tokyo exchange.

1920–1964

About this time, another railway and real estate group was flourishing in Tokyo, the Seibu Group. The two companies became bitter rivals.

World War II: Starting Over

The years 1935 to 1945 were prosperous years. The Japanese war machine was in full gear and provided the various group companies with contracts in such areas as cargo, construction, and the manufacture of railway cars for the Japanese army. The saturation bombing of Tokyo during 1944 and 1945, however, proved disastrous for the company, severely disrupting the railway lines. The U.S. occupation proved equally disastrous. Like the other huge industrial and financial combines, or zaibatsu, Tokyu was dismantled under the Economic Decentralization Law imposed by General Douglas MacArthur. Rail and bus transportation networks were broken up and transferred to other companies. With its operations reduced, Tokyu Corporation attempted a new beginning as did the remnants of other Japanese companies. Although much of the infrastructure had been damaged or destroyed, Gotoh used this as an opportunity to modernize the company's enterprises and make inroads into new businesses to meet the various needs of consumers. Gotoh made the remaining businesses into subsidiaries, thus encouraging them to develop and prosper independently. In 1949, in order to raise capital for continued expansion, Gotoh floated Tokyu on the Tokyo stock exchange.

1950s-70s: New Markets

In the early 1950s Gotoh's son Noboru, born in 1920, began to rise through the ranks within the company. As his father was still the largest single shareholder in Tokyu, it was natural that Noboru Gotoh should succeed him at the helm of the company. Indeed, it was the young and dynamic Noboru who was encouraging his father to lead Tokyu into new markets. In 1934 Tokyu opened its first department store with the innovative idea of locating it in one of its Tokyo railway stations. In 1948 the Tokyu Department Store Company was formed to expand the chain nationwide and eventually overseas. Tokyu Tourist Corporation was established in 1956 to provide travel services both in Japan and overseas, and in 1960 Tokyu added the hotel business to its activities. Noboru Gotoh became president of Tokyu in 1958 at the age of 38. Keita Gotoh died in 1962, leaving his son clearly in charge of the group. Although Noboru was a less aggressive businessman than his father, he was perhaps more of a visionary and made ambitious plans for Tokyu both in Japan and overseas. He even healed the rift between Tokyu and Seibu by attending the opening of a new Seibu department store.

In 1953 Tokyu began the development of the real estate it owned around its Denentoshi line in Tokyo. The project spanned three decades and involved the development of a relatively sparsely populated suburb called Tama Denentoshi. As Tokyo grew as a center of business and government, and as residential real estate in centrally located areas became more expensive, the new development provided thousands of Japanese with the opportunity to own decent homes within commuting distance of their workplaces. Tokyu would later apply this domestically acquired experience on overseas projects in Seattle, Washington, and in Perth, Australia.

In 1961 Tokyu, under the leadership of Noboru Gotoh, branched out into two new areas of business: air travel, through the formation of Toa Domestic Airlines, later Japan Air System; and information services, through the formation of Tokyu Agency, which became one of the largest advertising agencies in Japan and, later, overseas. Tokyu also began manufacturing automobile parts in 1964 with the formation of Shiroki Corporation.

1949–1989

While the company branched out into these new areas, Tokyu's mainstay remained its railways, and although the latter did not experience growth as rapid as for some of the newer businesses, it provided steady growth along with a financially stable backbone for the group. In 1961 Tokyu established Izukyu Corporation, a railway line carrying tourists to the national park of Fuji-Hakone-Izu. In 1966 the opening of a new Tokyu railway in the Tama Denentoshi area brought the number of Tokyu lines in the Tokyo area to seven, totaling more than 100 kilometers. The Ueda Kotsu Company, operating a line in Nagano Prefecture, completed Tokyu's national railway network.

In the 1970s Noboru Gotoh led Tokyu into the car rental business through Nippon Rent a Car Tokyu and also dramatically expanded Tokyu's hotel network by forming two companies: Tokyu Hotel Chain, which operated luxury hotels such as the Tokyu Capitol Hotel in the heart of Tokyo, and Tokyu Inn Chain, which was set up in 1958 to cater to the economizing business traveler. In 1972 with the opening of the Hawaiian Regent Hotel in Honolulu, Tokyu Hotels International was established. By the mid-1970s Tokyu was once again a huge conglomerate and like many large companies used its financial clout for charitable as well as investment purposes. Tokyu Foundation for Better Environment was established in 1974 and, as its name suggested, was concerned with environmental issues, one of the first such organizations in Japan. This, along with the Tokyu Foundation for Inbound Students, provided scholarships for postgraduate and research students. The Gotoh Museum contains a fine Japanese and Chinese art collection, including the original manuscript of what is recognized as the world's first novel, The Tale of Genji.

1980s: International Expansion

The 1980s were years of accelerated overseas expansion for the Tokyu Corporation. In 1980 Tokyu established Tokyu Zurich AG and in 1982 launched a large-scale residential development project in Jakarta, Indonesia. In 1983 Tokyu opened the Mauna Lani Bay Hotel and in the following year the Palau Pacific Resort, both in Hawaii. Tokyu was one of the leading developers in Hawaii. Early in 1986 Tokyu completed construction of a prestigious hotel/office complex in Vancouver. Again, Tokyu was one of the pioneer Japanese developers in a city that was to become one of the world's most lucrative real estate investment areas. In 1987 Tokyu branched out into television broadcasting with the formation of Tokyu Cable Television. As his father had done before him, Noboru Gotoh relied on the infrastructure base of Tokyu's railway lines to move into a new area of business. Cables were laid initially to span the Tama Denentoshi region, covering 600,000 households. A broadcasting center and studios were constructed in Tama Denentoshi, and to launch their activities a two-way Tokyu Cable Computer was developed. The system, which linked the center's host computer to each subscriber's home terminal, was designed to provide subscribers with diversified two-way information services.

Tokyu's railway and bus transportation business remained the nucleus of the group. In 1987 Japan National Railways (JNR), carrying 86 percent of Japan's passenger traffic, was privatized and split up into regional companies that were organized to be more cost-effective and profit-oriented. This in the late 1980s meant increased competition for Tokyu and the other private railway companies such as Seibu and Hankyu, and heralded a turbulent time both financially and politically for the usually steady Japanese railway industry. Tokyu, therefore, set about increasing its competitiveness through better service. This meant alleviation of overcrowding, greater passenger comfort, and greater speed and frequency of service. An example of investment toward these ends by Tokyu was the construction of triple tracks and station improvement along the heavily used Toyoko line between Tokyo and Yokohama.

By the mid-1980s Noboru Gotoh was approaching retirement. Like his father before him, his eldest son was rapidly rising within the Tokyu organization. Konsuke Gotoh was born in 1949, and by 1987 was a senior manager in Tokyu Construction. In an interview with the Yomiuri Newspaper shortly before his death in 1989, Noboru Gotoh stated that Tokyu was no longer a Gotoh family concern and that although he would give his son Konsuke the chance to take over the reins, he would like to see his son work his way up competitively. Although Noboru Gotoh became president at age 38, the Tokyu Corporation had grown and diversified tremendously since then. Its president was Jiro Yokota, but Konsuke Gotoh was fairly powerful within the organization.

1990s Through the Early New Century: Restructuring

1995–2002

In 1995, Jiro Yokota, plagued by health problems, stepped down from his post as president of Tokyu Corporation. He was succeeded by Shinobu Shimizu, who had previously been a senior managing director of the company.

The late 1990s saw major difficulties for the Tokyu Group, which by that time consisted of some 500 companies. With the financial crisis of 1998 and its far-reaching ramifications, the performance of many of the group's companies suffered. This decline, especially among the group's publicly traded companies, caused Tokyu's investment rating to be downgraded.

By 2000, feeling compelled to make major changes, the Tokyu Group announced the launch of a three-year restructuring. The process through which the group was to reorganize differed substantially from the way decisions had been made in the past--and placed Tokyu Corporation in a pivotal role. Previously, strategy decisions for the group had been made by an organization consisting of group companies' presidents. Under the 2000 plan, however, Tokyu Corporation, as the principal shareholder in the group's operations, was appointed to lead the entire restructuring. In the Tokyu Group's 2000 annual report, Shinobu Shimizu explained Tokyu Corporation's new responsibility: "Regarding Tokyu Corporation's role, Tokyu will be positioned as, in effect, a holding company with a strategic decision-making function."

As part of the restructuring, Tokyu identified two core businesses: the urban development business, which focused on growth in areas served by Tokyu's railway, and the group of Tokyu-branded businesses, which included the hotel, real estate, tourism, and airline businesses. The group began reshuffling its assets; one of the first major changes implemented was making the Tokyu Hotel Chain a wholly owned subsidiary of Tokyu Corporation. The group also began a thorough review of its underperforming and/or noncore companies, looking for those that should be consolidated and those that should simply be sold off.

Meanwhile, as part of the effort to develop areas served by its railway, Tokyu joined with Sony Corporation to develop a broadband network. The partnership, formed in 2000, gave Sony a 10 percent stake in Tokyu's cable television unit. The companies planned to use Tokyu's existing cable infrastructure, which had been put in place in the 1980s, as the basis for the new broadband system.

In mid-2001, Shimizu vacated the position of Tokyu Corporation president, assuming instead the position of chairman. The presidency was filled by Kiyofumi Kamijo.

Another significant development of 2001 was the formation of a joint venture with Lend Lease Corp. Ltd., the largest real estate company in Australia. Together, Tokyu and Lend Lease planned to establish an asset management firm specializing in Japanese real estate investments. The partners' initial investment vehicle was to be a Japanese real estate investment trust (J-REIT), which would consist mostly of Tokyu properties. The J-REIT, which was expected to be launched in 2002, was to be valued between $2 billion and $4 billion and listed on the Tokyo exchange.