The influence of foreign executives at the helm of Japan's biggest car manufacturers fails to conceal the old corporate model underneath
By any reckoning, it has been quite a year for Japanese auto companies, whose results have just landed. Record earnings at Nissan and Toyota, dramatic swings from losses to profits at Mitsubishi Motor and Mazda, all this comes amid much change in the industry.
The salutary performances turned in by Japan's big-brand car manufacturers also come with some sort of weird celebratory ritual among the 'gaijin,'' as we foreigners are known. Somehow, these companies are now supposed to be something other than Japanese.
They're succeeding to the extent that they've begun to follow the lead of imported saviours, missionaries, really, who have turned them into foreign islands in a Japanese sea.
I can't buy into this. The influence of foreign executives among Japanese carmakers is unmistakable. They are performing tasks their Japanese counterparts were addressing too slowly or not at all. But the notion that a handful of gaijin is altering the national ethos is sheer hubris. The control in the experiment is simple: Toyota Motor is the largest and most successful automaker in Japan. It's also explicitly committed to upholding the Japanese corporate model.
The star of the show among the car manufacturers, of course, is Carlos Ghosn, the Brazilian-born president and chief executive at Nissan Motor, who was brought in to restructure the money-losing giant in 1999. Having watched him succeed swiftly, if not yet completely, we are now invited by the Financial Times to think of him as another Commodore Perry, the American door-opener of the 19th century.
Behind him stand others set to assume the same role, based on partnerships similar to Nissan's with Renault. At Mitsubishi Motor, Rolf Eckrodt, who came from DaimlerChrysler, has overseen the restructuring and is set to become chief executive in the coming weeks. Mark Fields, who came from Ford Motor, has headed Mazda Motor for the past three years and has guided that company's return to the land of the living.
Results for the year to 31 March certainly make the gaijin look good. Nissan just reported record operating profits of ¥490bn on sales of ¥6.2 trillion. Ghosn has achieved an operating margin just short of 8% and debts are down drastically. The man from Renault is now negotiating an important joint venture with Dongfeng Motor, its partner in China.
After a year of restructuring, Mitsubishi Motor reported a return to profit, with an operating gain of ¥40.2bn, against a loss of ¥74bn the year earlier. This came on a marginal drop in sales, to ¥3.2 trillion. Debt is down, and the cost-cutting drive is being intensified.
Roughly the same story at Mazda, which is one-third owned by Ford. It turned in net profit of ¥8.8bn, compared with a net loss of ¥155bn the year earlier. For the year just begun, the company says it expects profit to increase by more than double, to ¥20bn, on a forecast rise of 8% in sales, more debt payback and reduced capital outlays.
Currency swings played no small role in these results. So did tougher contracts with suppliers, workforce reductions, plant closings, changes in decision-making and management, the deeper story at all three of these companies.
Fine. But has Ghosn turned Nissan into something other than a Japanese company?
Has he invalidated the stakeholder values at the heart of the Japanese system and proven the efficacy of an antithetical foreign model?
I'm hard-pressed. Nissan is very different now than it was before he arrived. But the larger part of Ghosn's skill, it seems to me, lies in the extent to which he has managed fundamental change without upsetting the apple cart any more than circumstances required. His goal all along, as he put it in a presentation last year, has been to make Nissan 'a first-rate Japanese company.'' That's what he's doing.
The system is too tightly integrated at this point for Japan to afford too many like him without creating a recklessly deflationary danger. As to Nissan itself, the atmosphere inside is less than jovial. Japanese executives loyal to him in public appearances, I often hear, are bitterly resentful in private settings.
Nor is Ghosn quite finished yet. Debt is down and margins up; the sales increase he is looking for has yet to be achieved. He wants to add a million unit sales between now and 2004. This will be tested with the addition of 28 new models over the next two years, almost half of them within the next 12 months.
Now consider Toyota. It reported a 31% increase in net profit, to ¥615.8bn, on a 12.5% increase in revenue to ¥15.1 trillion. The company promptly announced a ¥600bn share repurchase.
With 42% of the Japanese market, Toyota hopes to lift its share of the global market by half, to 15%, over the next eight years.
The lesson here is a good one. I can't put it any better than Shu Nung Lee of Lehman Brothers Japan 'It's not the system that was bad at Nissan or any other carmaker,'' he told me once. 'It was the way the system was managed. That's what makes the difference.''
It's an old movie, the one where the gaijin ride in and change everything in their own image. The car industry does have echoes of Perry and his arrival off the Japanese coast in 1853. Perry is a figure in history; after him came great change. But the Japanese managed all those changes, and they made sure Japan as it modernised and industrialised went on being Japan.
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