No.35+No.36,Winter,Spring.2002
No.35+No.36,Winter,Spring.2002
| Editor:Kazuyuki KUSAZIMA | ||
| Address:Rodo-Soken,Union Corp 3-3-1 Takinogawa,Kitaku,Tokyo,Japan(114) | ||
| Tel:03(3940)0523 | Fax:03(5567)2968 | E-mail:HZI01762@nifty.ne.jp |
Analysis of the Financial Turnaround of Nissan Motor
On the occasion of the announcement of its
Revival Plan and its restructuringOctober 10, 2001
Japan Research Institute of Labour Movement (Rodo-Soken)
Nissan Motor Co., Ltd., headed by Prisedent Carlos Ghosn, is widelyknown for its turnaround of its management from "the biggest deficit in history" to "the biggest surplus in history." Remunerations of the directors, including Mr.Ghosn himself, have been raised for their services. With this background, Japan Research Institute of Labour Movement (Rodo-Soken) made a start Nissan Management Analysis Team (person in charge: Mr.Kanemichi Kumagai, an executive director) on April 28, 2001. The team had an aim of clarifying two questions: 1. Can Nissan's "biggest surplus in history" and "revival" be glorified like this? 2.How has "the biggest surplus in history" been made possible? In order to get to the bottom of "the biggest surplus in history" the team has analyzed the management documents including published financial statements by answering these questions.
The Result of the analysis could be summed up as follows:
1) Possible future profit was counted as liabilities in advance. 2) Increased nonrecurring profit by sale of holding stocks, lands and productive sections and expended 700 billion yen of retained earnings. 3) Substantially reduced labour cost by intensifying exploitation of workers to a new level through placing workers to other posts, transfering workers to other companies, manpower downsizing, extension of working hours and worsening of working condition. 4) The exploitation of the keiretsu subsidiaries and subcontractors was intensified to a new level by ruthlessly selecting and cutting off them and forcing substantial reduction of contract unit prices. 5) "The biggest surplus in history" was fabricated based on these manipulations. 6) The most serious is that production and sale of automobiles, the key sections of Nissan Motor, is not only stagnant, but declining. The inability to overcome this weakness is decisive for Nissan Motor.
The analysis result by the Team helps and encourages the demand-based movements of, within Nissan Motor, one of the major monopolistic enterprises, the workers and the trade unions especially Japan Metal and Information machinery workers' union (JMIU), struggling to defend workers' interests -employment and working conditions and rights- and, outside the company, the medium and small-sized subcontractors who provide parts and services to Nissan as well as their workers.
The analysis team is composed of: Kanemichi Kumagai (Rodo-Soken Executive Director, Vice-President of National Confederation of Trade Unions, Zenroren), Takeshi Tanie (Professor at Meijo University Jonior College Department), Yutaka Kaneda (Rodo-Soken Executive Director), Kazuyuki Kusajima (Rodo-Soken Secretary General), Shigeki Sakai (JMIU Nissan Motor Branch Chief Secretary Director), Naoki Nisimura (Metal Union Research Institute), Nobuhiro Fujihoshi (Rodo-Soken Director).
In addition, Rodo-Soken set up the "Project Team on the Nissan Problems" (prerson in charge: Tomio Makino, Executive Director, Professor at Nihon University) on November 2, 1999. The project team drew up a report titled "Characteristics of Nissan Motor's Restructuring Plan and our Policy to Fight back it"), summarizing analysis of and criticism against the large scale restructuring plan "Nissan Revival Plan (NRP)", published on October 18, 1999 and suggesting the direction of our struggle against it. The report was made public to media on March 2, 2000 at the "Field Struggle Headquarters of Zenroren against Nissan Restructuring Plan in Santama Trade Union Hall.
The full text of the report is on an extra "Rodo-Soken News" (March 15, 2000) which is available on the website of Rodo-Soken (rodo-soken@nifty.ne.jp). The readers are welcome to access it. The digest of the report (table of contents) is cerried at the end of this analysis.
Nissan Motor's Financial Situation
How does it suddenly change
from Deficit to Surplus?Nissan Revival Plan and Restructuring
The Nissan Analysis Team of Rodo-Soken
Contents I Analysis of the financial statements (2) 1 Capital tie-up between Nissan and Renault (3) 2 Nissan Revival Plan (NRP) and the factors of the recovered profitability (3) 3 Cutbacks in the Cost of Purchased products, Depreciation, Interest; Income from Sales of the Assets; their Effects (4) (1) Cost Reduction with the Purchased Products (2) Extraordinary Loss due to Shutdown of Plants (3) Cutbacks in the Liabilities with Interest (4) Sale of the Securities (5) Cutbacks in the sales cost 4 Fund Raising and the Financial Management in 2000 5 Impacts on Workers (6) 6 The Huge Devident to Renault as the Biggest Shareholdr (6) 7 The Fabricated Deficit Balance as of March 2000 (7) II Changes is situations of the Keiretsu and Subcontract Affiliated Companies (8) 1 Screening of Keiretsu Subsidiareies (8) 2 Examples of streamlining of the Main Keiretsu Subsidiaries (8) 3 Shifting of Burdens to the Low-end Subcontractors (9) III Cosmetic "Recovery" at the Cost of Workers -Field Reports- 1 Impacts of "NRP" on the Workers (10) (1) Cutbacks in Production Capacity based on the Assumption of Long and intensive work (2) Retirement of Many Employees due to the Shutdowns of Plants (3) Workers Transfer away from their families and Long Commutes Forced on the Majority of the Workers because of Suhtdowns of Plants (4) Introduction of Merit System and Increase of Unpaid Overtime Work 2 No Real "Revival" with "Pains" imposed on Low-End (11) 3 Rapid Progress Anti-Restructuring (11)
I The Analysis of the Nissan Financial Statements
Today, car makers in the world have become multinational enterprises. They are in a fierce competition under the worldwide overproduction. Some multinational car makers are in the process of reorganization in the form of capital and technological tie-up and the others. Nissan Motor Co., Ltd.( hereafter Nissan) was once received as the second largest car maker next to Toyota. In the recession following the collapse of the economic bubble, Nissan has been seeking a tie-up with a foreign capital as a way out of the stagnant business performance and the financial difficulties with huge debt with interest. It agreed on a capital tie-up with Renault, one of the French leading car makers (Chart 1). In Japan it was the second case of Japanese car tie-up with foreign capital, which was followed by Mazda, and Mitsubish Motors tied up with Daimler Chrysler. In October, 1999, Nissan announced the Nissan Revival Plan(NRP) and effectuated restructuring. The company's consolidated account settlement in March 2001 turned to a large surplus, recovering from a large deficit in March, 2000. What were the factors that made this turnaround possible? We will try to answer this question by analyzing the published financial statements.
1 Capital Tie-Up Between Nissan and Renault
On March 27, 1999, Nissan completed capital tie-up with Renault, coupled with Renault's capital participation in it. Renault contributed a total amount of 643 billion yen to Nissan group, screwing up its capital ratio with Nissan to 36.8%. Renault has practically got hold of the management of Nissan and sent Carlos Ghosn to the company's management as a COO. The capital tie-up, that brought Nissan, Japan's second biggest car maker, under control of a foreign capital, accelerated the process of the global reorganization of car-makers which had started with the creation of DaimlerChrysler. Renault underwrote Nissan's new stocks of 585.7 billion yen worth allocated to a third party on May 28, 1999, which made Renault the biggest shareholder of Nissan. At the same time Renault bought warrant section of the 215. 9 billion yen worth, 5-years warrant bond (Chart 2)
How did the tie-up affect Nissan's self-owned capital? On standalone basis, Nissan's capital increased from 203,755 million yen in March, 1999 to 496,605 millions in March 2000. The increase was 292,850 million yen during the same period. The Capital reserve also increased from 377.412 billion yen to 690.262 billion yen, up 292.850 billion yen.
The amount paid by Renault was 585.7 billion yen, for capital and capital reserve, respectively, in the ratio of 50-50. Renault also invested 22.5 % in Nissan Diesel's, thus both of them appeared as the two biggest shareholders. How did Nissan was supplied funds and managed in 1999, i.e., the year when Nissan received the investments from Renault?
Out of 585.7 billion yen from Renault, 53.1 billion yen was used for reimbursement of the long-term loans, 361.4 billion yen of short-term loan extended to the affiliated companies and the remaining for partial reimbursement to the short-term liabilities. The reimbursement of the short-term liabilities was partly covered by 117.7 billion yen of the short-term investments. The balance of the loss at the term-end increased by 756.4 billion yen, reducing the "other surpluses" by 800.1 billion yen. This loss was caused by adding up various reserves (structural reform project reserve etc.) and the expense for the long-term outstanding pension fund. Equipment investment, loan and capital investment, and inventory investment were cut down to minus figures.
2 "Nissan Revival Plan (NRP)" and the factors contributing to the recovered profitability
With its basic idea, for future growth, of investing the management funds, produced by cost reduction and sales of assets, NRP set its goals as follows.("Securities Report" March 2000, Nissan Motor):
The Goals of NRP 1. To realize surplus in consolidated income as of March 2001 2. To realize consolidated sales profit rate of more than 4.5% by March 2003 3. To cut the liabilities with interest (in automobile division) on the consolidated basis by half or below 700 billon yen.
Based on NRP, Nissan will cut 21,000 employees (including consolidated affiliates) and one trillion yen in the consolidated cost on the global scale. The huge profit was realized by means of the "management rationalization" aiming at this reduction in manpower and cost.
We can see, in the profit and loss statement (Chart 3), that profitability recovered significantly from March 2000 to March 2001. It happened because a NRP's target, consolidated profit of 331 billion yen, was attained, a target of cconsolidated sales profit was 4.8%, exceeding 4.5%, and the aforementioned reduction in the liabilities with interest was effected. An analysis of the factors of this recovery in profitability tells us the following (Chart 4):
(1) The current profit rate of total capital went up both on stand-alone and consolidated basis: 3.79% on stand-alone and 4.37% on consolidated basis. It was caused by the rise of the current profit rate of sales by 4.55% on stand-alone and 4.63% on consolidated basis. While the turnover rate of total capital remained unchanged from the previous period (March 2000), the turnover of tangible fixed assets increased due to the cutbacks of them (shutdown of plants and sales of divisions): from previous 4.5 times to 5.52 time on stand-alone basis.
(2) The rise of the current profit rate of total capital can be ascribed to the rise of the current profit rate of total sales, which, in turn is the result of the 4% decrease of the sales cost ratio, from 87.5% to 82.86%. The latter was due to a substantial decrease in the cost of the purchased products/(cost of raw material)("Securities Report"), March 2001). "The rate of decrease in the purchased products reached 11%, exceeding the commitment figure of 8% and the target figure of 10%" (The 102w.wond wp Annual Report, March 2000-March 2001). This cutback in the cost of the purchased products considerably accounts for recovery of the profitability of Nissan.
3 Cutbacks in the Cost of Purchased Products and Depreciation; Interest Payment; Incomes from Assets Sales and its impact
(1) Cost Reduction with the Purchased Products
Now, let's look into the cost reduction with the purchased products. The cost reduction in this form led to a reduction of the sales cost. NRP set a target of 8% cost reduction in the purchased products in March 2001. After one year, the reduction rate reached 11%, surpassing the target figure of 8%, due to screening of parts makers etc. They say this practice is beneficial both for Nissan and the parts makers. This merit is, however, open only for Nissan and the parts suppliers who passed through screening. As Nissan tightened the screening of parts makers, many suppliers were deprived of orders from Nissan. Then, Nissan and Renault purchased jointly. The table of purchase cost of raw materials (Chart 5) shows that Nissan spent on stand-alone basis 2,255,350 million yen on raw materials, 111,233 million yen down from 2,136,768 million yen of the same period of the previous year. The cost of processing by outsiders, included in the total cost, is not published separately and therefore not available. This diminution in the cost of raw materials increased the consolidated profit by 287 billion yen.
Thanks to this diminution in the cost of purchased products, sales cost shrank from 2,607.2 billion yen in March 2000 to 2,469.3 billion yen in March 2001, the amount of decrease reaching 161.2 billion yen. As a result, the profit rate of total sale increased from 13% to 17.11%. This cutback in the cost of raw materials and purchased products had an important impact on the iron and steel makers and the keiretsu subcontractors.
(2) The Extraordinary Loss Due to Plant Shutdowns and Sales of Divisions, and the Cost Reduction
Plant shutdowns and sales of divisions inflicted damages on the workers, keiretsu subcontractors and business partners. The restructuring-related expenses were entered in the extraordinary loss in March 2000, namely, the amount of 184,936 million yen as operation reform extraordinary loss (Chart 6), increasing the deficit accordingly. The additional reserve fund was entered in the anticipated expense in and after the next year together with the entry of these extraordinary losses in the deficit account.
The other padding is sale of "marginal" divisions in what is called "sale in pieces" ("Nikkei Industry Paper", November 8, 2000) and closure of key plants. For example the synchronized-joint-drive-shaft division of the Nissan Tochigi plant was sold for 9 billion yen to GKN, a British major parts maker. The division made a fresh start as a GKN's affiliate company on November 1, 2000. The new company, with the president who is at the same time the manager of the third production department of the Tochigi Plant, receives 270 loan workers from Nissan and continues to produce and deliver drive shafts to Nissan. Also Nissan Oppama Plant in Yokosuka sold its production line for resinous fuel tanks to Inergy, a Belgian-French joint venture company. About 10 employees were sent from Nissan to Inergy on loan. Inergy also bought a production line of Nissan Kyushu Plant in 2001.
Nissan Murayama Plant, Aichi Industrial Port Plant (in Nagoya city) and Nissan Body Kyoto Plant were also closed. Some say that not a single car was taken away from the production. Still, many workers had to pay the price. Production of "Laurel" and "Skyline" was transferred from Murayama, "Serena" from Aichi Machine to Tochigi plant. The concentration of production raised the facility utilization rate. With domestic plants, it will rise from 51.1% with 7 plants last year to 74.1% with 4 plants this year (according to the production plan). The production of small-lot category cars is said to be concentrated in Nissan Body Shonan Plant.
As chart 7 shows, the tanglible fixed assets decreased from March 2000 to March 2001, down by vM)52,022 milion yen. Of this decrease the real estate accounts for 27,151 million yen. Due to this decrease in the tangible fixed assets, depreciation cost fell from 86.5 billion yen in March 2000 to 45.6 billion yen in March 2001 down by 40.9 billion yen (cost reduction). Nissan raised the facility utilization rate and capital efficiency with these closures and sales of divisions, which brought more intensified work to the workers or forced them to leave.
(3) The Cutback in Liabilities with Interest
Nissan aimed a cutback in the liabilities with interest as a measure to rehabilitate the balance sheet (automobile business)*. The consolidated liabilities with interest was 1, 834.8 billion yen in March 2000. It shrank to 1,236.3 billion yen in March 2001, down 598.5 billion yen in one year.
*The liabilities with interest are based on the following calculation.
The short-term borrowing + Commercial Paper (CP) + long-term borrowing falling due in less than a year + bonds falling due for redemption in less than a year + bonds + convertible bonds +\ long-term borrowing +\ outstanding note receivable discount + employee's entrusted money.
In calculation of the liabilities with interest of Nissan, outstanding note receivable discount is subtracted form the above.
On Chart 9 you can see that the consolidated interest payment in March 1999 was 102.9 billion yen. In March 2000 it fell to 73.9 billion yen, down by 28.9 billion yen, alleviating the interest burden accordingly. In March 2001 it fell further to a little over 42.2 billion yen, reducing the interest payment by 31, 738 million yen.
(4)Sales of Securities etc.
The income from sales of securities is also used to reimburse the liabilities with interest.
The stand-alone value of securities was 237.5 billion yen in March 1999. In March 2000 it fell to 201.1 billion yen, down 36.4 billion yen (income from sale). The profit from sales of securities was 12, 671 million yen in March 2000. That from sales of securities of the affiliates was 21, 754 million yen.
The amount of the holding securities in March 2001 fell from the previous year from 201,188 million yen to a tiny amount of 8 million yen, down 201,188 million yen (income from sale). Presumably, this income was used as the additional short-term loan to the affiliated companies, namely, 602 billion yen to Nissan Finance ()202.3 billion yen increase over the previous year) and 18.4 billion yen to Canada Nissan (new investment).
The consolidated, as well as the stand-alone holding securities decreased (sold) substantially. It fell from 260.2 billion yen in March 2000 to 3.9 billion yen in March 2001, down by 256.2 billion yen. The consolidated profit from the sales of securities amounted to 38,599 million yen and profit from the sales of the invested securities 26,444 million yen in March 2001. These profits, together with other sales profits, were earmarked to reimbursement of the liabilities with interest (Chart 10).
(5) Cutbacks in marketing cost
In the field of marketing and sale, Nissan completed the three-years plan to close 300 business centers in one year. Of 18 affiliated dealers scheduled to be cut off and reorganized to local independent enterprises, 10 have been done with. In Europe where hub strategy was adopted, Nissan and Renault have been working on consolidation of their dealers, having completed it in Switzerland and Holland (according to press conference on the balance sheet by Presiderit Ghosn on May 17, 2001).
As a result, the consolidated sales cost dereased from 348, 010 million yen in March 2000 to 281,341 million yen in March 2001 down by 66, 660 million yen.
To sum up, the year 2000 ended with high consolidated surplus attained due to reduction and profits on sale of securities and facility assets. In other words, the consolidated surplus cost the workers harder-labor, unwilling retirement, health hazard.
The subcontractors and dealers also had to shoulder the burden.
4 Fund raising and financial management in 2000
Let us move on to the sources-and-uses statement of the year 2000 (March 2001). We can see that the amount of 206 billion yen in facility investment and loan-and-investment comblined were covered by depreciation fund and other reserves, The short-term loan to the affiliated companies was presumably covered by short-term investment amount of 187.4 billion yen increase in "other reserves" was made possible by the large profit. Thus Nissan increased the internal reserves (stand-alone).
5 Impacts on workers
Cutbacks in the personnel cost resulting from plant shutdowns
The stand-alone presonnelcost of Nissan Motor was reduced from 341.6 billion yen in March 1998 to 277.6 billion yen in March 2000, down by 63.9 billion yen. It was caused by the decrease of 7,262 employees, from 39,969 in March 1998 to 32,707 in March 2000.The stand-alone number of employee in March 2001 is 30,747, down by 2,000 since March 2000. The personnel cost (stand-alone) increased from 277.6 billion yen in March 2000 to 283.7 billion yen in March 2001, up by 6 billion yen. It is due to changes in the pension account rules, which increased the retirement payment to 8,190 million yen, up by 7.3 billion yen from the conventionl 883 million yen (Chart 12). In NRP project Nissan will reduce the domestic capacity, at present 2.4 million cars a year, by 30% in 3 years.
Let us look at the number of employees of Nissan at home and abroad (Chart 13) by the "Securities Report"). The group's consolidated numbre of employees fell from 141,526 in March 2000 to 124,467 in March 2001, down by as many as 17,059,. On the other hand, the group's consolidated sales amount increased from 5,777 billion yen in March 2000 to 6,896 billion yen in March 2001, up by 112.5 billion yen. In consequence, the consolidated sales amount per head increased from 42.23 million yen to 48.92 million yen, up by 6.69 million yen,.
Considering the increase of production from 2.26 million units in March 2000 to 2.47 million in March 2001, up by 210,000, and sales from 2.41 million units to 2.56 million, up by 150,000, there certainly was stretch-out both in production and sales. Let us look more closely into the matter. If you add up 24,818 Nissan stand-alone employees in manufacturing division, 12,851 car and parts emploees of the domestic affilated manufacturing companies, and 27,039 employees of overseas affiliated companies, you will get 64,708 employees. If you further add 3,703 overseas employees, you will get 68,411. As the increase of production was 210,000 units, the annual increase per head was 3 units.
In Japan, the stand-alone number of employees of Nissan decreased by 2,382 from March 2000 to March 2001 (if you deduct the recruits, the actual number of the retired will be more). Also the number of the employees of the domestic affiliated companies of car and car parts makers and sellers decreased by 5,980 from March 2000 to March 2001. More than that, the number of the latter decreased by 5,023. While Nissan stand-alone and its domestic affiliated companies dismissed 8,362 employees, those of the overseas affiliated companies increased by 2,260. Among others, the North America Nissan Motor hired 2,303 more, and Mexico Nissan Motor 1,095 more, or 3,398 more if these tow are combined. Domestic constolidation and downsizing on the one hand and overseas expansion on the other are going on hand in hand. It implies not only simple consolidation and downsizing of production and sale, but streatch-out for the employees intensifies as the process of "Nissan Revival Plan" advances.
6 The Huge Divident to Renault as the Biggest Shareholder
Renault, founded in 1898, is now a leading car maker in France alongside of Peugeot. It was reorganized from Regie Nationale to joint stock company, of whose shares 44.2% was owned by the french Government, the biggest shareholder, followed by the U.S.pension fund. Consequently, the profit of Nissan first goes to Renault in proportion to its share, then to the French Government and the U.S. pension fund. According to the draft of profit appropriation in March 2001 the unsettled deficit of 579,293 million yen was compensated by the contingent reserve of 734,742 million yen and other reserves of 12,959 million yen, based on the special taxation measures law, thus producing the disposable surplus of 168,490 million yen.
The amount of 27,840 million yen from this disposable surplus was appropriated to dividend of profit (7 yen per share), leaving 120,295 million yen as a carrey-forward. Renault, owning 1,464.25 million shares (36.82% of the outstanding stocks) received 10 billion 249 million yen. In this profit distribution plan, the contingent reserve, one of internal reserves, was not only used to cover the unsettled dificit, but to produce a surplus of 27.8 billion yen disposable as dividend to the shareholders. While refusing to use the internal reserves to meet the workers' demand for wage increase, the management agreed to do so to meet Renault's demand for dividend. In other words, the workers and subcontractors paid the price for the increase of dividend.
7 "Fabricated" deficit balance in March 2000
The Nissan Motor's "V-shape recovery" to a large surplus in March 2001 was fabricated by "the management, who put as much future loss as possible into the account of the precedent year" ("Nihon Keizai Shinbn", May 27, 2001) (Chart 15).
"Allowance reserve is money set aside for particular need expected in the future. Being treated as cost in settlement without being actually spent, it contributes to increase the future surplus. Most of the extraordinary expense in March 2000 fell into this allowance reserve."(op.cit)
1. The shutdown related cost of 70 billion yen in March 2000 includes the antedated extraordinary expense of the shutdown of Murayama Plant, closed on March 29, 2001.
2. The early retirement premium allowance reserve of 60 billion yen is based on the assumed amount of 10 million yen per head, multiplied by 6,000 persons. It was also antedated expense of the premium for the expected retirees in March 2001.
3. Changes in accountancy and real-estate evaluation were also manipulated for V-shape recovery. Depreciation of the tangible fixed assets now conforms to the straight line depreciation method. The overall revaluation of the asets corresponding to the new method produced the extra expense of 46.5 billion yen, which contributed to increase the sales profit by 28.7 billion yen as of March 2001. The real-estate related deficit was 65 billion yen. In March 2001, it turned around to 55 billion surplus (extraordinary profit).
To sum up, at least 500 billion yen, or a half of the final consolidated deficit 1 trillion yen, may be safely assumed to be an effect of a "trick of accountancy" ("Nihon Keizai Shimbun", May 27, 2001)
If we deduct this assumed 500 billion yen, the final deficit 684.3 billion yen in March 2000 would dwindle to 184.3 billion yen. The profit on sale of the real-estate (extraordinary profit) as of March 2001 was conjured up by entry of future extraordinary deficit. The large consolidated surplus was realized in this way in March 2001. As we have seen, however, this surplus was produced not by the "trick in accountancy", but at the cost of the employees and kerretsu subcontractors.
II Change in the Situations of Keiretsu and Subcontract affiliated Companies
1 Screening of Keiretsu Subsidiaries
The consolidated settlement as of March 2001 was in surplus of 331.1 billion yen, an all-time record, showing V-shaped rapid recovery. One main reason for this is 11% cut in purchase expenses realized through price cut-down which is very much like his name, the renowned "cost-cutter"). It screened 30% of parts and service providers through consolidation of the keiretsu subsidiaries, sales of the holding shares of affiliated keiretsu companies. In short, Nissan imposed heavy burdens on the keiretsu subcontract companies and their workers.
In this regard, President Ghosn remarked, "We are not harassing the parts makers. The parts makers' shipments increase too. This method is mutually beneficial." However it is only true with the makers who were not screened out, and they make up only a small part. Those who were screened out are left out of consideration, together with the second and third subcontractors who deliver the products to the first subcontractors.
The increase of bankruptcy among them is none of his concern.
It is true that the financial reports of the 17 Nissan affiliate parts makers indicate the accelerated profit increase in spite of diminution in the sales, thanks to cut-down of purchase price as part of the effort to cut purchase expense (Chart 16). In other words, Nissan consolidated the outside parts suppliers to a small number, and demanded price cut-down from those few suppliers in exchange of the increase of orders, which the latter had to absorb by rationalizing production system including drastic manpower cutbacks, consolidation of production system with the aim of improving efficiency.
President Ghosn said at the shareholders' general meeting that only ten of Nissan's business partners went bankrupt in 2000, down from 14 in 1998. However we must emphasize that there are sacrifices made by many affiliated companies who were screened out and the workers, lying behind the good performances of the companies who survived the severe screening.
2 Examples of Streamlining of Main Keiretsu Subsidiaries
Now let us dwell on some cases that appeared on media recently.
(1) Calsonic Kansei booked 430 billion yen sales amount, but it dwindled by 21.6 billion yen due to discount request of Nissan. Calsonic Kansei reportedly absorbed it by squeezing out 22 billion yen by means of VE and VA propositions, internalization, saving of material expenses by screening suppliers. The company is now in the process of further downsizing of indirect departments. Since Calsonic and Kansei merged in April 2000, they have transferred the redundant posts and staffs to divisions of new projects and purchase. As overall business got on the right track one year after the merger, they decided to get on with improving operating efficiency of the indirect departments through reviewing the personnel system as a whole, including merit system and expansion of merit-based part of the wage.
They also intended to hire employees on anual basis of remuneration by companies separately set up and to introduce stock option.
(2) Hashimoto Forming Industries, a keiretsu exterior parts maker of Nissan, who already closed Yokohama Plant in 1998 due to a drop of sales to Nissan, is going to put an end to the production at Nagoya Plant by September 2001, because Minato Plant of Aichi Machine Industries, and Kyoto Plant of Nissan Body, both Hashimoto's customers, pull out from car production according to NRP. The Nagoya Plant with 50 employees and annual turnout of 2 billion yen produces plastic molded parts like wheel covers and radiator grills as its staple products. The employees will be transferred to Fujisawa Plant, Tatebayashi Plant and other plants in Kanto area. Production of the parts for Honda Suzuka Plant will also be transferred to Tatebayashi Plant. Nagoya Plant will function as a physical distribution center of Chubu district, with the management entrusted to a transport company of the group.
(3) In case of Aichi Machine Industries, the car production decreased by 11.1% because it no longer produces as a stand-alone plant, but as part of a production unit togther with Nissan Tochigi Plant. The production of manual transmission, which is the staple product of the plant, almost doubled with an increase of 91.2% due to the consignment production form Jatco TransTechnology. The production of engine remained near the level of the previous year. The sales amount increased to 217.2 billion yen or up 1.5% whereas the current profit increased to 6.1 billion yen or 2.2 folds. Expecting the output to decline by half in 2002 as a result of pullout from the car production, they plan to complete the manpower downsizing by May as one step toward overall rationalization and raise the share of the non-Nissan products in the total sale. Taking the opportunity pulling out from automobile production and thus becoming an exclusive component maker, they are going to abolish seniority wage system and stretch the merit system to the full length. The new system follows the example of that of Nissan, introducing annual wage system for approximately 140 managerial posts. It demands specific target of each individual, gets the results reflected directly on wages, including bonus if the target is attained. The gap between the highest and the lowest wages is expected to reach 2.4 million yen for managers, 1.6 million yen for assistant managers and 1.95 million yen for section chiefs. At present it is on trial with assistant manager and section chiefs, preparing for full-scale introduction starting from April 2002.
(4) In case of Unisia Jecs, a 1,100 personnel cutback has been implemented by means of spinning off as subsidiary companies and favorable early retirement benefits. In case of Fuji Univac, favorable early retirement benefits and rationalization by consolidation of plants contributed to a turnaround of current account. Further they plan to close Mizukubo office by 2001, and transfer the staff there to the affiliated companies, while at Kiryu Machine Manufacturing Co., Ltd. they are going to rationalize by spinning off machine tool division as a subsidiary company.
(5) Tachi-S, once a supplier of car seats to Nissan Maruyama Plant who stopped production, closed v|v$v&v#vFAkishima Plant and dismissed 16 employees and trans-ferred the rest to Tochigi and Oppama Plants (with the promise of bringing them back to Ome and Musashi Plants in 2 years) except 80 employees who stayed at the head office as managerial staffs.
Nissan sold its holding shares of Tachi-S to Fuji Kiko, a car seat maker, thus cutting off Tachi-S form Nissan keiretsu. Tachi-S announced a tie-up with Araco in the car seat sector. Presumably, they decided that cooperation between Araco, and affiliate of Toyota who is also its main partner, and Tachi-S who does massive business with Nissan and Honda, will be of mutual benefit to exploit new customers and increase sales volume. In the international market, Tachi-S, who has not taken root in East Europe or India, will depend on Araco's production bases there.
(6) Fujisawa Manufacturer, who used to supply body parts to Murayama Plant, closed Higashi Yamato Plant and moved to Hasuda Plant in Saitama prefecture. Many employees were forced to retire on the occasion, as the company did not even provide a dormitory for them. At Sunahara Painting, located on the west of Murayama Plant, the management, facing 30% discount demand from Nissan, tried to impose 20% wage cut. The workers organized a struggle around a newly established JMIU branch and had the wage cut recanted.
(7) Unipres, a Nissan keiretsu press parts maker, has promoted structural reforms since 2000 in response to NRP, including shutdown of domestic production centers, and reduced the cost by more than 3 billion yen through cutbacks in manpower cost and lower prices of materials. At the same time, they spent 2 billion yen on plants in Tochigi and Fukuoka as well as an affiliated company in U.S. to introduce large scale power press. In addition, they are going to build production centers in U.S. and France in order to take care of new plants there. As to 30% of their stock owned by Nissan, they take every opportunity to inform the latter of the desired new shareholders convenient for them.
(8) Rhythm (the president is sent from Unisia Jecs), a steering maker chiefly doing business with Nissan, expects domestic overstaff due to expansion of overseas production in North America. In all the 18 companies of its group, a little over 100 workers or a 10% of the whole employees has agreed on voluntary retirement at the end of March 2000. From April on, the company is considering to employ workers on limited term contract or on loan.
(9) Fuji Univance, a drive-related part maker chiefly doing business with Nissan, invited 150-200 employees for early retirement over May and June 2000, in face of the discount demand by Nissan. They plan to cut current 1,200 employees down to around 85 after 3 years, and consolidate the domestic production sites in a few years.
(10) The Kasai Kogyo stocks owned by Nissan was sold to Nagase & Co., Ltd. Kasai Kogyo is now working to reduce the sales share of Nissan group, currently 70%, down to 50% in 2003, thus accelerating its move of "de-affiliation"). They are going to supply parts to U.S. Ford and the Mazda group: interior parts for '626' (called 'apella' in Japan), a staple sedan scheduled to be put on sale in 2002 in the U.S. market, with annual sales of about 2 billion yen; roof trims for 'Mustang', a Ford sports car, with annual sales of about 1 billion yen towards 2003.
(11) Unisia Jecs, who used to produce exclusively for Nissan, now supply valve timing control (VCT) to Honda with a view to expand production. Up to now they produced the number of VCTs required to equip 1 million cars in Atsugi Plant and Akita Plant. The produation will be stepwise transferred to the affiliated subsidiary "Unisia Iwaki", where the production capacity will be elevated. A new plant exclusively for production of the same part is under construction in the U.S. too, scheduled to start operation in 2002. Akita plant, which used to produce for and supply to Nissan pumps for power steering, will transfer the production to Thai plant and use the domestic plants as production centers for new products. Akita plant will scrap 40% of the production facilities as redundant and shift to production of new parts developed jointly with ZF, a German leading parts maker and thus promote division of production with Thailand. In addition they consider spinning off subsidiaries and converting them to joint ventures.
3 Shifting of Burdens to Low-End Subcontractors
The major first-stage parts makers, doing business directly with car makers, cope with price cutbacks by means of personnel downsizing, screening business partners, exploiting new customers and cost reduction, thus shifting the burdens to small and weak companies like second or third stage parts makers and processing companies. The major parts makers may recover, but the cost of the recovery is imposed on the workers and small and medium-sized second and third stage parts makers, aggravating their business difficulties and plight. For instance, accordind to June 4, 2001 issue of "AERA", price cuts by Nissan caused domino effect of discount, which led to admonitions of Japan Fair Trade Commission for violation of the subcontract payment law between the subcontractors. Company A, a second subcontractor of Nissan (door maker in Kanagawa) had agreed with B, their subcontractor, on discount. When B sent a bill to A, A demanded further discount, on the ground that they would sustain loss because they could not procure as much order valume as had been planned. B, afraid of losing future orders, accepted the demand, which amounted to 2 million yen. Such discount in subcontract payment violates the subcontract payment delay prevention law, and Japan Fair Trade Commission, on the accusation of B, made investigation, which resulted in the admonition to correct the violation. Nissan demands discount from the selected subcontractors in exchange for increase of orders. But the volume of orders increases only for the first subcontractors, while second and third subcontractors get discount request whithout additional orders. They may be able to cut cost in someway or other, by integrating three parts in one, for instance, but the technical difficulties would increase while profit margin would narrow. Nissan asked the parts makers to make propositions at the design stage, and demanded the latter to "cut delivery prices by 25% in 3 years." Although the parts makers met the demand thanks to cooperation from the second subcontractors in the first year, they still face the risk of losing orders from Nissan, who is in the process of global reorganization. The "dread of the second year" is shared by all the parts makers. The target discount Nissan presented to Topre, a steel and iron parts maker, is 7% in the first year, but increases by 9% a year for the second and third year. The parts makers comment: they cut down manpower, ask discount to their suppliers, but they are running out of discount resources. It may be impossible to cover it by rationalization. The staff of development department of Nissan also expresses their concern: they receive one proposition for cost reduction after another. Some of them are mere makeshift measures, like using thinner materials. Such measures with risks give us great burden, because we have to check the safety: some makers who are sure to break off with Nissan at the next model change are unwilling to take any extra trouble for Nissan. They feel the mutual trust based on the long cooperation is falling apart.
Company D, a second subcontract transport company who gets 40% of the total freight income from Nissan, was unilaterally notified of 2+A)5% freight discount in September 2000. Cost reduction by minute measures like avoiding toll roads has its limit. They turned to the last-ditch means of having the drivers who earned large overtime allowance to pay for part of gas from their own purses. Company E, another second subcontract transport company, complains: it is impossible to cut the wages of the drivers. If they cut the number of driver, it will entail stretch-out and higher risk of accidents. Nissan does have information about the cost reduction and the financial situation of the first subcontractors with whom it keeps business relations after the reorganization, but it pays no attention at all to the subcontractors further below, or the burdens shifted down to them.
As we have seen, the huge profit of Nissan was attained at the cost of the subcontractors, from the secondary dowm to the low-end. Furthermore, in order to realize the target 20% cutbacks in purchase cost at the end of 2002, Nissan is promoting the system of optimum sources to minimize cost on an international scale, including disposal and outsourcing of the current internal parts divisions to overseas big parts makers. Weeding of the affiliated subcontractors and the burdens imposed on them are expected to intensify.
III Cosmetic "Revival" at the cost of workers -Field Report-
On October 18, 1999, Carlos Ghoson, the supreme executive at the time of Nissan Motor, announced the "Nissan Revival Plan" in English whose three key pillars are: shutdown of 5 plants, cutbacks in employees by 210,000 and in the affiliated companies by half. He used lisping Japanese when he came to the following lines: "I am acutely aware of struggle and pain it takes to accomplish the Nissan Revival Plan.
But please have faith in me. There is no alternative." During the two subsequent years, all he did was to inflict pain without remorse on the affiliated companies and the workers who had supported Nissan arduously. Recently mass media generally reports that President Ghosn is making steady progress in reviving Nissan. But it is too one-sided view. We will biring the truth to light by examining objectively what impact NRP made on the workers of Nissan Motor.
1. The Impact of "NRP" on the Workers
(1) Cutbacks in porduction capacity based on assumption of long and intensive work
According to the explanation of the management of Nissan until just before the announcement of NRP, the current production capacity of Nissan was 2 million and they had set a goal to improve the company's constitution so that it can make profit even at the level of 1.7 million. NRP revised the current production capacity to 2.4 million in one stroke. The ground for this expansion is a production system called "full time operation in 2 shifts"). It would require daily overtime work and 3 day-off works a month on average, and the annual overtime work hours would by far exceed 360 hours stipulated in the Labour Standards Law. When the trade union pointed out that if three plants were closed, there would be fierce production in the rest, Ghosn even referred to "annual 5,000 operation (of facilities) hours" which presupposes introduction of France-style 3 shift system. In fact, the workers who make the hot-selling of "March" at Murayama and Oppama plants work overtime for four hundred and several dozen hours per year.
(2) many workers had to retire due to Plant shutdown
The defunct Prince Motor Industries, which was absorbed by Nissan in 1966, had three plants in Metropolis of Tokyo: Ogikubo Plant, Mitaka Plant, and Murayama Plant. They were all closed: Ogikubo in 1998, Mitaka in 1999, Murayama in 2001. The workers were transferred from Ogikubo to the plant in Tomioka City, Gunma Prefecture (sold to Ishikawajima-Harima in July 2000), from Mitaka to Kariya City, Aichi Prefecture (sold to Toyota Industries Corporation in April 1999), from Murayama to Tochigi and Oppama. As a result, the number of workers who retired or lost job reached approximately 700 with Murayama Plant alone. The great majority of them have been unable to get new jobs, vegetating on the dreg of extra retirement pay.
(3) The great majority of the workers had to work away from home, or commute long distance as a result of shutdowns.
As a result of shutdowns of Murayama Plant, Nissan Body Kyoto Plant and Aichi Industrial Port Plant (Nagoya), the workers were transferred to Tochigi Plant, Oppama Plant, Nissan Body Shonan Plant. Almost all of them have to work away from home or commute long distance, whose detrimental influence on their health and family lives are becoming obvious. While Ghosn himself has called his family from France, and his love for his children so deep as to be named the "best father" is reported by mass media, the workers live lonely lives in dormitories for single employees built between 1955-1975. In one tragic case, a factory manager, transferred to Oppama plant away from home, died suddenly and nobody knew it until next day.
(4) Introduction of merit system and increase in unpaid overtime work
Introduction of merit based wage system is one of the pillars of NRP. The managerial posts are already paid by annual wage system, while the project general managers are subject to merit based wage system, i.e., they give "commitment (promise a certain result)" depending on which their wages are determined. As a result, the project general managers are forced to work long and hard without overtime pay, and force in their turns unpaid overtime work on their subordinates.
Ghosn is proud of his nickname, "Seven-Eleven", that is, works from seven in the morning till eleven at night. The shareholders' general meeting decided to double the directors' remuneration, and his own income increased too. But he is totally indifferent to the workers' low wages.
2. No real "Revival" with "pains" imposed on low-end
When Prime Minister Koizumi invited President Ghosn the other day, he adulated him, saying he might follow his suite in running the state. Judging from his unreserved willingness to impose the pain of the "structural reforms" on the people, he seems to have a lot in common with Ghosn,
Will "restructuring" revive Nissan?
We don't thik so. The production for the first half of 2001 fell considerably both in Japan and Northern America. We saw that there has been no explanation at all inside the company about expending all 734.7 billion yen contingent reserve. The revival at the cost of the workers, the affiliated companies and the local residents is merely an artificial revival, which will weaken the strength of the company in the long run. In the last two years, Zenroren, JMIU and JMIU Nissan Branch have organized all-out campaign against the revival plan promoted by Ghosn, who represents Renault's will. What drives us is, in short, our ardent wish to play a positive role in the movments of the workers and all the people including Zenroren, to defend living conditions of workers of Nissan and its affiliated companies from the "revival plan at the cost of workers", hold back a "Restructuring cures everything" trend prevailing throughout Japan, and strive for a true revival of the Japanese economy.
Recently it was reported that the vacant lot of Murayama Plant would possibly be sold to a religious organization, a symbolic incident to demonstrate an attitude of capital, "Apres moi le deluge").
Let us recapitulate th consequences ofNRP.
(1) Cutback in the workers by 14,200 persons on the consolidated basis. (2) Cutback in the parts makers by 30%. (3) Cutback in suppliers including service by 40% (4) Cutback in the purchase of parts by 322 billion yen. (5) Cutback in the purchase of parts by 322 billion yen. (6) Sale of holding stocks of 80 affiliated companies in the value of 146 billion yen. (7) Shutdown of three body assembly plants. (8) Coercion of long and hard labour.
We cannot just sit by and watch such a destructive management.
3 For rapid progress of the movements against restructuring
There are several basic policies for the movements.The first is to reveal the contradiction between the NRP and the interests of the workers, the people and national economy. After the announcement of the NRP, Mitsubishi Motors, Mazda and Isuzu are going to implement similar restructuring plans. Recently, NEC, Toshiba and Matsu shita, leading electric makers, announced large-scale restructuring plans.
In the face of these moves on the side of capital, there is spreading a view among the domestic public that to defend and expand employment is indispensable for improvement of national economy. Under these circumstances, it is a duty of the workers of Nissan to disseminate their experiences.
The second is to make best use of the trust of workers obtained through this struggle to actually expand this organization. Our activities have reached the hearts of workers. We have established strongholds for our activities in Tochigi, Yokohama, Oppama, Zama, Murayama and Nissan Technical Center. Using there strong holds, we will strive to expand the organization.
The third is to improve exchange of information and extend joint struggles. As we have seen, restructuring storm is now ramping about within enterprises throughout Japan, but the struggles against it is also gaining momentum. Exchanges between the workers of multinational enterprises in various countries are also extending.
Under these domestic and overseas circumstances, we need to develop movements that are based on demands common to workers of car industry and those of other industries including electronics as well as overseas workers.
The fourth is to promote cooperation among all the people.
Murayama Plant and many others were invited by the national and local governments with various kinds of preferential treatment with a view to promote local industries and economy. Local commercial and industrial facilities gathered around those plants, and residential area for workers and others were formed. Municipal finances also depend on them. So Nissan's responsibilities to local communities are extremely important.
Despite all this, Nissan caused great damages to local communities and economies by bulldozing shutdown of plants, massive manpower cutbacks and weeding of subcontractors according to NRP, thus neglecting the responsibilities of a big corporation. Furthermore, Nissan made huge profits from these misconducts, making its social injustice even more outrageous.
Nissan must fulfill its responsiblilities to local communities including securing employment and local business. To force Nissan to do so is a task, not only for the workers related with Nissan, but for local residents, local governments and local small and medium-sized enterprises. The important thing is to strengthen joint efforts to control arbitrariness of big corporations by bringing together local forces into a broadest possible social power. It will be our pleasure if this management analysis of Nissan contributes to develop this movement.
"Characteristics of Nissan Motor's Restructuring
Plan and Our Policy to Fight It"
(published on March 2,2000)
Content
1 Social and economic impact by Revival Plan and its problems
(1) Decresase in the employees' income and GDP, and its influences on the local ecomony based on analysis of industrial interconnection
(2) Padded production level by means of considerable extension of working hours and personnel cutbacks
(3) One more aim: shift of workers from regular employment to irregular one 2. The task to protect subcontractors and small and medium-sized enterprises and their employees.
(1) Purchase of parts at optimal places would dissolve Nissan keiretsu subcontractors and reorganization them into Renault's business network
(2) On-going reorganization and shift of burden to workers and small and medium-sized enterprises (3) Reorganization of related parts industry and task to protect small and medium-sized enterprises and their employment 3. The position of Japanese car industry and the responsibilities of the government (1) The structure of Japanese industries and the position held by the car industry (2) Protection by the government and automobile industry as a lever for the economic policy with priority on public work projects (3) Responsibilities of the government in case of Nissan Motor 4. Let big business assume worldweide accepted social responsibilities (1) Focal points and development of plant closure at Virvoorde plant in Belgium (2) The restructuring plan of Michelin and the response of the government (3) The Dismissal control laws in EU, France and Belgium 1) The Dismissal Control Law in EU 2) The Collective Dismissal Control Law in France and its characteristics 3) The Collective Dismissal Control Law in Belgium 5. The immediate demands and tasks relating to the Nissan restructuring