Nissan: Saying Sayonara
For 39 years, Nissan Motor Co.'s Murayama plant outside Tokyo was a prime example of Japan's auto-making prowess. At its peak, the company's flagship factory employed 5,000 people, cranked out 453,000 passenger cars a year, and was deemed so efficient that in 1995 it won a Japanese Deming award for quality control.
Today, the Murayama plant is being bulldozed, and the land it sits on may be sold to a Buddhist religious order. Several months ago, Carlos Ghosn, the CEO installed by controlling shareholder Renault, ordered the place shuttered as part of his efforts to return the auto maker to long-term profitability. The factory's equipment has been auctioned off or scrapped. Production of six models has been shifted seamlessly to three surviving plants. Several hundred people have lost their jobs.
Murayama's demise has become a symbol of the new order in Japan. It's now a country where lifetime employment is becoming a memory and a gaijin CEO can mothball plants and shift production offshore with barely a ripple of labor unrest. Murayama is the third--and largest--plant closed since Renault bought its stake in Nissan in early 1999.
There's more: The company has also just decided to shift all production of its export-only Maxima sedan out of Japan to an existing plant in Tennessee. And it aims to open a $1 billion minivan and sport-utility factory in Canton, Miss. "Everything has proceeded more smoothly than I expected," says Hisayoshi Kojima, Nissan's executive vice-president in charge of the plant closures. "So the question now is not why we closed so many plants but why we didn't do it earlier."
Japan's other carmakers have been asking themselves the same question as they, too, quietly go about cutting domestic production. Last year, just 10.1 million vehicles were made in Japan, down from 13.5 million in 1990. Meanwhile, the number made overseas has grown by almost half. Honda Motor Co. has trimmed its domestic-plant workers by about 2,000, or 7%, since 1990, even as it has boosted offshore production by 30%. Industry leader Toyota Motor Corp. closed two Japanese assembly lines last year, though it has kept production of its most expensive cars at home. Even Mazda and Mitsubishi, both latecomers to the restructuring push, say they will close one factory apiece and cut jobs at home and abroad.
BUY LOCAL. It's easy to see why Nissan and its Japanese rivals are finally doing what they postponed for so long. With the home market weak and demand for Japanese models still strong in North America, it makes sense to make cars where the buyers are. Doing so avoids currency swings and helps sell cars to consumers wary of buying "foreign" brands. In its American push, Nissan is rushing to catch up with Honda and Toyota, both of which have been steadily expanding output in the U.S.
For Nissan, the payoff is clear. The closures of Murayama and two smaller plants will boost operating capacity to an average of 74% this year, up from 52% in 2000. The company's increased efficiency, plus continued cost-cutting gains, are expected to boost Nissan's profit 21%, to $2.9 billion, on sales of $53 billion for the year ending next March, topping last year's record earnings. The carmaker paid its shareholders dividends of 6 cents a share last year, the first such payment in three years.
Nissan's actions also underscore a major change: Japanese unions' growing acceptance of the inevitable. When Ghosn announced in 1999 that his Nissan Revival Plan would require 21,000 job cuts globally, labor unrest was widely expected at the company's Japanese plants. But Ghosn convinced labor leaders that, while their rank and file would endure some pain, the downsizing would lead to sustainable profitability. "We bought into Ghosn-san's vision, and so far, he has met all the targets," says Akira Takakura, vice-president of the All Nissan Motor Workers' Union. Ghosn also gained credibility by unveiling a higher-than-expected wage hike in March, after a two-year freeze. That will make it politically easier to eliminate the other 6,800 jobs he needs to cut before he hits his reduction target of 21,000 by 2003.
Despite Ghosn's success in wooing Nissan's union, this is still a Japanese-style restructuring, less brutal than what would happen in America. Nissan execs made an important concession by agreeing, in principle, to offer workers at closed plants other jobs. More than two-thirds of the employees in Murayama transferred, including 700 who went to a plant in Oppama, near Yokohama. "We didn't throw anybody out in the cold," says Yoichi Ochi, the human-resources official in charge of winding down operations at Murayama.
The catch? Keeping a job meant abandoning Murayama, where many employees had spent their entire working lives. That was too much to ask for some 400 workers. They either accepted early retirement or had to leave their jobs. An additional 200 employees who couldn't make up their minds stayed behind in Murayama, stamping replacement parts such as doors and hoods at a small facility on the factory lot. But that workshop will close by 2004, at which point they must move or join the unemployment line. "I have a mortgage, three kids, and a wife who works the night shift at a hospital, so I really don't know what to do," says Noboru Kami, 46, who has worked in Murayama for 27 years. "It's an excruciating decision."
FAMILY STRAIN. Workers asked to move to Oppama along with the production of the Cube and March subcompact models were equally conflicted. Rather than sell their homes and transfer their kids to new schools, some work Monday through Friday in Oppama and drive the 50 miles to Murayama on weekends. "I've never had to live apart from my family, so it's been tough on all of us," says Eigo Sasaki, a 31-year Murayama veteran and father of two.
It's going to get tougher. Over the next half-decade, according to a study commissioned by the Confederation of Japan Automobile Workers' Unions (JAW), Japan may lose 143,000 of about 800,000 auto and parts-assembly positions. That's on top of the nearly 100,000 such jobs that have disappeared in the past decade, putting further pressure on the government to address unemployment.
If the unions don't figure out a way to hold on to auto jobs, more plants will close, and more company towns will feel the pain Murayama has suffered. While tax revenues from Nissan have been negligible ever since the company slipped into the red eight years ago, local businessmen are starting to hurt. Mitsuji Migita, manager of a stew shop across from the factory's main gate, isn't happy to see Nissan leave the area. "We still have our regulars," he says. "But there are fewer of them now." Getting by with less: It's a hard lesson for Nissan, its rivals, their workers, and Japan itself.
By Chester Dawson in Tokyo