Foreign owners cut to the quick with Nissan layoffs

Globalization put in a Godzilla-like appearance in Japan yesterday, crushing factories and leaving thousands jobless. At least that's how it felt to some Nissan employees.

Nissan Motor Company's new Brazilian boss unveiled a massive restructuring plan that will close three plants in Japan and cut 21,000 jobs from the world's fourth- largest automaker. Ever since French car company Renault saved Nissan from bankruptcy in March and appointed Carlos Ghosn its new chief operating officer, analysts have been waiting for such a move.

But for Japanese, the size of the cuts - and the uncompromising way in which they were announced - are a shock. While firms here have been restructuring at the government's urging, they have done so slowly and indirectly, through attrition and freezing new hires.

Nissan's cuts pose a direct challenge to this piecemeal approach and underscore the crisis many Japanese firms are facing - the need to reduce personnel. The ripple effect from the cuts will affect thousands who don't work for the company and provoke strong opposition from unions.

Analysts say reaction to the firm's announcement could shape Japan's future economic course. "It could pave the way for other companies here and foreshadow more aggressive restructuring," says Andrew Shipley, Tokyo-based economist for the British investment bank Schroders. "No longer will firms be able to announce ambiguous, attrition-based restructuring plans. Nissan has raised the hurdle for all these companies.

"But government reaction to this announcement will be pivotal," Mr. Shipley cautions. "If the government steps in in any way [to interfere with the cutbacks], it could be very damaging to Japan's revitalization."

Mr. Ghosn, who took the reins at Nissan after Renault bought a 37 percent stake in the firm, announced the news without much sugarcoating. "Nissan is in bad shape," he said, adding that the company had no choice but to take strong action.

That will mean a 14 percent cut to the worldwide work force by April 2002, and a 30 percent reduction in domestic output. The moves are meant to return Nissan to profitability in five years.

Japan's second largest automaker has lost money for six of the last seven years and turned to Renault for rescue. The fact that a Japanese firm needed a Western "white knight" to save the day was a bitter pill to swallow.

More bitterness about the new management style is likely, as the cutbacks undermine traditions of company loyalty and lifetime employment that shape Japan's corporate culture even in recession.

"Nissan's restructuring plan is just not acceptable," declares Hiroshi Iwakura, a spokesman for the Tokyo Confederation of Trade Unions. "It will affect its contractors and the economy in areas where factories are located. We are going to ask Nissan to either put off its plans or decrease the number of laid-off workers." For economist Shipley, these attitudes demonstrate an emphasis on social harmony over financial health that is hindering economic recovery.

"Firing people is not a pleasant task in any culture," he says. "But when conditions get to the point where survival of the firm is at stake, you have no choice."

(c) Copyright 1999. The Christian Science Publishing Society