The company in the western Japan which was declared unprofitable six years ago, is now getting ready as the Japan’s demand for the room air-conditioners is raising Daikin managers and Ogura are planning to boost the output by 20 percent at the plant.
Daikin is a 33 year old veteran who joined the company just after high school.
The Kusatsu plant is 45 years old.
There is no budget for the new capital investment at the plant. The work at the plant involves home-made robots for ferrying parts, experimental systems using gravity rather than electricity to power parts of line, seasonal contracts workers at the plant and dozens of steps to chip away at the 1.63 hours it takes to make a new air-conditioner.
“We can do a lot without spending anything, anything we need, we first try to build ourselves.” says Ogura.
As the yen is getting weaker other Japanese manufactures are shifting production from China to Japan.
Japanese companies are cautious about new capital investment in equipment and factories even though the output is recovering. Smaller firms down the supply chain are following this trend.
According to the quarterly survey released by the Bank of Japan, small manufacturers are decreasing their investment in the current year by 14 percent whereas in the previous fiscal year they have increased spending by 6 percent.
Daikin has a plan to increase investment by 5 percent.
There is 11 percent increase in corporate earnings and Daikin’s shares are up more than four-fold from its 2008 low.
Companies are resisting using the cash for new investment from two years since the Prime Minister Shinzo Abe took office.
For the economic revival plan to work companies need to spend.
“It turned out that the government and the BOJ were wrong in thinking monetary easing would boost capital spending, low growth expectations appear to outweigh the benefit from lower interest rates, keeping companies from boosting capital spending.” said Taro Saito, director of economic research at NLI Research Institute.
Daikin is suspicious that the growing yen and low demand that forced the closure of plant could return at any time.
Toyota has unveiled the results of its five year old program to re-engineer the way they make cars to cut the cost of retooling new factories and building new ones.
Atsushi Takeda, chief economist for the Itochu Economic Research Institute, Abe’s government could only ease regulation, encourage new industries where progress has been slow and there is not much other than this which they can do to push the companies for investment.
He said, “Companies were so hard hit by the excessive yen strength after the Lehman shock they want to be convinced there won’t be a reversal of the weak yen over the next five to 10 years, they are in no mood to take risk.”