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A Restructuring Japan Looks to U.S. Models

Trends: Analysts say Asian subsidiaries of American firms are changing the status quo.


TOKYO — Although every good Japanese mother wants her boy to be gainfully employed, one mom recently wrote to the president of an American company here, telling him: "I don't want my son to ruin his life. Please don't hire him."

That unusual plea reflects the widespread Japanese view that corporations, especially those run by foreigners and particularly those headed by Americans, increasingly are payroll-slashing, bottom-line-driven, heartless operations.

But as Japan struggles out of one of its worst recessions and Japanese companies trim bloated payrolls, shift production overseas and rethink the lifetime employment system, Japan more and more is looking to American models here for ways to grapple with painful restructuring.

Japanese companies have taken serious steps on their own.

But some analysts say it is the subsidiaries of U.S. firms here that are really challenging the status quo and leading this nation's restructuring efforts.

And nowhere is this more true than with IBM Japan, which has taken the best Japanese corporate traditions and infused them with more aggressive cost-cutting measures to create a new, hybrid model of restructuring.

"History is full of dreadful examples of how Americans come over to Japan and impose their Western business practices on the Japanese," said IBM spokesman Mac Jeffries. "But every once in a while, we actually do something right. At IBM, the first thing we did right was create equal opportunity for women. The second is our restructuring."

IBM came to Japan in 1937 and is one of the most established, well-connected foreign companies. IBM Japan has made a concerted effort over the years to show that it truly is a Japanese company, not just a cabal of visiting foreigners.

But Japan's stalled economy forced the company to take harsher, U.S.-style cost-cutting measures in the early 1990s. Since 1990, IBM Japan has cut its work force by one-fifth to 20,000. It has spun off almost two dozen subsidiaries--a practice virtually unheard of here.

Layoffs in Japan are, in effect, socially taboo, and IBM knew that firing workers here would tarnish its image. But under pressure from America to trim payrolls, the Japanese subsidiary came up with a range of generous early-retirement programs to ease employees out.

"We had to do what we had to do, but we tried to minimize the perception-damage that was going on," Jeffries said.

It didn't work at first. The Japanese media castigated IBM Japan for being a leader in layoffs.

But, as Jeffries noted, "lo and behold, a year later, everyone else had to do the same thing." He said IBM Japan and its competitors face the same crisis--it merely reacted earlier and more aggressively. "We stepped up to the plate a lot sooner than a lot of companies here, like our competition at Fujitsu and Hitachi," which followed later with their own restructuring moves, he said.

His company's efforts have been judged so successful that Jeffries said there now is an underground network of Japanese corporate executives who troop to IBM Japan for advice on how to restructure.

Experts say Japan's corporate giants were slow to deal with their problems because they were in denial. Their executives had come of age in a go-go, high-growth period here, and they clung to the belief that if they just waited, things would get better.

U.S.-tied firms had no such leeway. "Japanese subsidiaries [of U.S. firms] are very small compared to Japanese companies," said Charles Duffy, president of the American Chamber of Commerce in Japan. And "when costs go up, their budgets are cut quickly. American companies have less tolerance for higher costs."

As a result, he said, U.S. subsidiaries here are quick to cut people and move offices.

The heads of many U.S. companies here, though, said they must act not only with alacrity to meet demands of profit-focused shareholders in America, but also with thought and care to satisfy societal expectations in Japan, where, among other practices, the Japanese have come to cherish the idea of lifetime corporate employment.

Still, there's no doubt that the bottom line for U.S. subsidiaries is to make money, not to act as a corporate family. "There is a difference on the focus of profitability, which American companies are forced to respond to," said one American businessman. "In Japan, profits are almost secondary."

Employees at U.S. subsidiaries here say that when things go smoothly, their parent companies in America take a hands-off approach. But when profits fall, the pressure to take action comes swiftly--and tensions rise.

Tetsu Taniguchi, an employee at a U.S.-Japan joint venture, says his firm constantly faces pressure from its American parent to cut costs more. "Until 1993, when orders came from above, we could refuse our American parent company's advice and say, 'We'll do it the Japanese way,' " Taniguchi said. "But there's none of that feeling left. No one can think that we have recovered--profits are still falling. Now we have to listen."

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