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Web-only Exclusives
November 30, 2000

From Our Correspondent: Hirohito and the War
A conversation with biographer Herbert Bix

From Our Correspondent: A Rough Road Ahead
Bad news for the Philippines - and some others

From Our Correspondent: Making Enemies
Indonesia needs friends. So why is it picking fights?

Asiaweek Time Asia Now Asiaweek editorial

NOVEMBER 5, 1999 VOL. 25 NO. 44

Radical Surgery
Nissan's restructuring may speed the remaking of Japan Inc.


    ALSO IN ASIAWEEK
New Start
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Shift
Nissan's restructuring may speed up Japan's overhaul

More editorials:
Population Asia, in particular, must curb its burgeoning population
Post-Coup Pakistan's generals should seize the chance for fundamental reform
Accident After the latest plant mishap, Japan needs to rethink its nuclear-power program
Visions Toward a clean, creative Hong Kong

  RELATED STORIES
TIME
Japan: No More Jobs for Life
Nissan's plan to axe 21,000 workers may herald a tough new approach in Japanese business culture

On Oct. 18, Nissan's new chief operating officer unveiled his three-year plan to restructure Japan's ailing No. 2 automaker. Carlos Ghosn, who was assigned by France's Renault after it took a controlling 37% interest in Nissan last May, lived up to his nickname of "Le cost killer." On his hit list: five Japanese plants, 21,000 jobs, 4,000 parts and service suppliers and 300 dealerships. Gone too, Ghosn hopes, will be 30% of the company's bloated car-making capacity and at least half the firm's $13-billion debt within three years. He wants to see Nissan back in the black as early as next year.

Until recently, such boldness was unheard of in the land of the rising debt, where lifetime employment holds sway. But overextended, drowning companies are rethinking the idea. Nippon Telegraph & Telephone says it wants to shed 20,000 jobs in three years. However, no restructuring plan is as specific as Nissan's. If it works, it could shake Japan Inc. - and Japanese society. Since World War II, the country has focused on economic expansion, buoyed by strong ties between management and labor, and between firms and subcontractors. But that strategy led to overcapacity in the 1990s when the bubble burst, plunging Japan into recession. Though there have been some moves to cut overcapacity, more needs to be done. A Nissan success story could become a model for battling the bulge at other corporations.

There may also be a lesson on making the most of a merger. Ghosn wants the Renault-Nissan tie-up to tap synergies, not just add names to the annual report. He is considering a joint global purchase center to buy parts. Its huge orders will allow a streamlined group of suppliers to reap economies of scale, which they can pass on in the form of lower prices.

Ghosn admits the restructuring plan was born of desperation. Nissan lost money seven of the past eight years, with the figure hitting $261 billion in 1998. The company is operating at 60% capacity, against the 70%-80% deemed necessary for profitability. Cutting capacity will help ensure that the whole company stays afloat, along with more than 100,000 workers.

Of course, the cuts will hurt. Some 16,500 of the jobs eliminated will be in Japan. Still, the Western-style revamp does have Asian characteristics. Most of the trimming will be done through natural attrition, spin-offs of operations, more part-time workers and early retirements. Nissan has said workers' jobs will "basically be guaranteed," though it isn't ruling out lay-offs. Hundreds of suppliers and dealers will be axed.

The government - whose traditional "administrative guidance" is notably absent from the Nissan plan - has expressed concern about the fallout. It is considering tax breaks and other aid for affected communities. And it can help cushion the blow for parts makers by introducing them to new buyers and giving loans to smaller businesses. Authorities will have to assist the tens of thousands of people who may lose their jobs in the nationwide restructuring sweep. Workers need retraining for new industries, notably fast-growing ones like information technology.

The stakes in the Nissan experiment are high - and not just for the company, but also for the Japanese economy as a whole. Ghosn is likely to face considerable resistance. If his plan succeeds, he could help usher in a new era of corporate accountability. If not, there could be a backlash against foreign companies that would benefit no one in the long run. The business world should wish Ghosn well.


This edition's table of contents | Asiaweek home

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TIME:

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