Landing an Airport on Time--and on Budget

Can a Toyota veteran perform a public-works miracle?

The airport emerging from the waters of Ise Bay near Nagoya in central Japan bears all the hallmarks of the Japanese white elephant: generous public financing, questionable profit projections, support from local business kingpins, and--last but not least--redundancy. Indeed, the Central Japan International Airport was conceived 12 years ago, when the economy was relatively strong. Today, with air traffic at the existing airport in Nagoya flat at about 10.5 million passengers a year, the new facility looks like the latest in a long line of pork barrels.

Whether the airport is needed or not, its construction will be a model of efficiency. That's because at the helm of the company building the facility is a shrewd Toyota Motor Corp. (TM ) executive--a white-elephant tamer, one might say. Yukihisa Hirano, who earned his managerial spurs as head of Toyota's first European plant in the early 1990s, is the first nonbureaucrat to oversee a big Japanese infrastructure project. Hirano (motto: "no excuses") aims to get the airport built on time and for the budgeted $5.9 billion, even if that means upsetting the cabal of general contractors and government mandarins who have made such projects among the costliest on the planet. "I have no idea how a typical public-works project is run," says Hirano. "But my mission is clear: Complete the airport as scheduled and not a yen over budget."

If he succeeds, Hirano, 64, will provide a model for future public-works projects. Already he is something of a media darling, giving speeches and infuriating bureaucrats. But Hirano is under pressure to make the project work because Toyota's reputation is at stake. The auto maker and other private firms own half of the airport's operating company, Central Japan International Airport Co., or Centrair, of which Hirano is president. He must prove that private enterprise can run a publicly funded project. Moreover, getting it built is one thing, making it pay quite another. Critics say Japan has too many airports and that Centrair will be hard-pressed to profitably operate a new one.

For now, Hirano is focused on getting the airport built by 2005, when Nagoya hosts the next World Expo. So far, Hirano says, he is on schedule, thanks to concepts straight from the Toyota playbook: cost benchmarks for suppliers, competitive bidding for contractors, and outside advice. With a staff of career bureaucrats and private-sector types, Hirano needed to get his people thinking outside the box. So he invited a team of 15 independent consultants, including five Americans, to review blueprints for the main passenger terminal. They recommended more than 50 time- and money-saving changes that helped shave the building's estimated cost by 20%, to $538 million. They included everything from substituting cheaper ceiling tiles to axing plans for a roof reminiscent of an origami crane.

Hirano's team is all business when it comes to awarding contracts, too. Centrair employees are forbidden to accept meals or gifts from general contractors, while tenders are listed on the Internet for one and all to see--along with a stern warning against bid-rigging, known as dango in Japan. In fact, Centrair says it will ban any company suspected of trying to rig bids. "They never awarded a bid that wasn't in their own best interests," says Gary Konop, commercial consul at the U.S. Consulate in Nagoya. "They're very anti-dango."

As a result, foreign contractors are sharing in the spoils, something that rarely happened in the past. In 1999, for instance, foreign companies captured just $50 million, or .02%, of Japan's $250 billion annual public-works budget. Centrair, by contrast, has awarded U.S. engineering and architectural firms 15 contracts so far. Overseas Bechtel, the global arm of San Franciso's Bechtel Group Inc., has clinched deals worth some $90 million. "Almost all the key dealmakers are from Toyota, so they're tough negotiators, but also very fair," says Tetsuhiko Matsuo, Bechtel's general manager in Tokyo.

Skeptics remain. "Even though we present ourselves as a private enterprise, people tend to look at us as a typical public-works project," sighs Hirano. "But we have held the line." Whether Japan's newest airport will turn a profit is a question on which the Centrair boss won't hazard a guess. But the cost- and time-saving lessons learned from this bold experiment in public works could be its most important legacy.

By Chester Dawson in Nagoya

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