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Discussion Paper 2 in 2006
First published in ejcjs on 15 April 2006

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The Light and Shadow of Corporate Reconstruction

Nissan and Mitsubishi Motors Corporation

by

Takuya Ito

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Abstract

Nissan and Mitsubishi Motors Corporation (MMC) are both representative Japanese automobile manufacturers. However, there is a commonality and a difference between the two. The commonality is that both of them had sunk into the doldrums. Subsequently they aimed at corporate reconstruction by attracting investments from foreign manufacturers and appointing non-Japanese as executives. The difference is in the results obtained by the two manufacturers. This paper examines why Nissan succeeded in saving itself, while MMC failed in its reconstruction.

In order to discuss the above issues, the paper uses Jungian psychology for its theoretical foundations. Jungian psychologists, in particular, often research traditional folk tales in order to learn about the unconscious. The reason for the success of the approach is that mental illness has been a universal phenomenon throughout human history and Jungian psychology refers to these unchanged phenomena as the 'collective unconscious'. Folk tales are, thus, a part of humanity’s psychological treasury and Jungian psychologists search for clues to support their counselling in these tales. This paper applies the same methodology to studying Japanese business in considering Nissan and MMC.

Introduction

Recently, two Japanese automobile manufacturers Nissan and Mitsubishi Motors Corporation (MMC) sank into the doldrums and thereafter aimed at corporate reconstruction. The restructuring efforts of both these companies were very similar. They intended to reconstruct themselves by attracting investments from foreign automobile manufacturers and appointing non-Japanese as company executives. However, there also existed clear differences between the efforts made by the two manufacturing companies. Nissan used the opportunity successfully to reconstruct itself. On the other hand, MMC could not emerge from the doldrums. This paper takes into consideration the following three differences between the two manufacturing companies: business partners, the crisis consciousness among employees and, the model of corporate reconstruction.

The first difference is that of business partners. Nissan formed a capital alliance with Renault, but the latter did not intend to take over the former. Instead, Renault aimed at becoming an equal partner. On the other hand, MMC formed a capital alliance with DaimlerChrysler; in this case the latter intended to transform the former into its subsidiary company. Moreover, Nissan had only one business partner, Renault. On the other hand, apart from DaimlerChrysler, MMC was also in partnership with the Mitsubishi group that included Mitsubishi Heavy Industries. Thus, MMC could not clearly understand which of these companies was its main partner.

The second difference is the crisis consciousness of employees. One who is familiar with Jungian psychology is aware that an individual is sensitive to the term 'consciousness'. 'Crisis consciousness' was an appropriately used expression in the case of Nissan (Ghosn 2001a: 164). Nissan appeared as if it were on fire. If one's house is on fire, one attempts to put the fire out by using a bucket of water or by seeking a fire extinguisher. When the individual realises that the fire cannot be extinguished, he or she calls the fire department. This situation explains the meaning of the term 'crisis consciousness'. In other words, the term implies a clear recognition of the current situation at hand and a proper judgment and action based on that judgment. In the case of Nissan, not only Carlos Ghosn, COO (Chief Operating Officer)^[1] of Nissan, but also the employees were involved in the process of corporate reconstruction. On the other hand, the employees of MMC did not extinguish their fire.

The third difference is the model of corporate reconstruction. Nissan did not use a model developed by other companies. It sought solutions for its reconstruction within itself. However, MMC employed a model used by another company, Nissan, and failed in its reconstruction efforts because it lost sight of itself and did not pragmatically discover the solutions to its difficulties.

This paper is organised as follows. The next section considers the first difference, that of Nissan’s and MMC’s business partners. The following section discusses the second difference, the crisis consciousness of the employees of both Nissan and MMC. The subsequent section is concerned with the third difference, the model of corporate reconstruction. The last section presents the paper’s conclusions.

Business Partners

Nissan

When Nissan unofficially negotiated with Renault in regard to a possible capital alliance, the latter agreed on the following four conditions set down by Hanawa Yoshikazu, the then president of Nissan (Sato 1999, Sato 2000:176-211):

Renault's response to the conditions put forth by Nissan was agreeable to the latter; however, there existed a problem with regard to the amount of the investment. Although Nissan insisted on an investment of 800 billion yen, Renault wanted to limit this to 400 billion yen.

In addition to Renault, Nissan also negotiated with DaimlerChrysler and Ford. In particular, Nissan expected DaimlerChrysler to be its partner because it was possible for the latter to invest the amount required by Nissan. However, the negotiation with DaimlerChrysler broke down on 10 March 1999. On the following day, Moody's Investors Service announced that it had downgraded Nissan's unsecured long-term credit rating from Baa3 to Ba1. However, Renault did not capitalize on these issues. On the contrary, it informed Nissan about its plans to increase the amount of investment without changing its response to the above conditions. Finally, on 13 March, Nissan and Renault reached a broad agreement on their capital alliance. On 27 March, Renault announced an investment of 643 billion yen by taking a 36.8 per cent equity stake (Renault 27 March 1999, Cott and Piper 2003). Following the announcement of the alliance, the two companies organized Cross Company Teams (CCTs) that developed the alliance between them (Yoshino and Fagan 2003).

Although the breakdown of the negotiations between Nissan and DaimlerChrysler could have become an excellent opportunity for Renault to exploit Nissan's vulnerability, Renault chose not to do so for the following three reasons. First, it emphasised a long-term confidential relationship with Nissan rather than a short-term success (Korine, Asakawa and Gomez 2002: 42, 45). Its purpose was not the buyout of Nissan but to create a mutually cooperative relationship. Even if Renault had intended to buy out Nissan, it would have failed in its attempt because it would have failed to enlist Nissan's cooperation (Ghosn 2002). On the contrary, both the companies would have struggled to gain ascendancy over the other. Second, Renault had learned a lesson from a previous failure in its tie-up negotiations with Volvo (Korine, Asakawa and Gomez 2002: 45-46). On 6 September 1993, Renault and Volvo had announced that they would have merged in January 1994 (Nihon Keizai Shimbun 7 September 1993). However, Volvo decided to cancel this agreement on 2 December 1993 because Volvo feared it would be absorbed by Renault and the French Government (Nihon Keizai Shimbun (Evening Edition) 3 December 1993a, Nihon Keizai Shimbun (Evening Edition) 3 December 1993b). Third, Nissan continued to negotiate with Ford. Thus, Renault had successfully concluded the negotiation before Ford took action.

MMC

MMC announced its capital alliance with DaimlerChrysler on 27 March 2000 (Mitsubishi Motors Corporation 27 March 2000). This alliance decided on the four following issues. First, DaimlerChrysler would buy a 34 per cent equity stake in MMC at a purchasing price of 450 yen per share, and the total price would be 225 billion yen. Second, DaimlerChrysler could not increase its holdings beyond the 34 per cent stake without the approval of the MMC board for a period of ten years after the formation of the capital alliance. Third, MMC would jointly develop a small car with DaimlerChrysler, which was to be produced by NedCar in a 50/50 joint corporation. Fourth, DaimlerChrysler would send some representatives to the MMC board of directors.

Following this announcement, MMC's recall cover-up was exposed, which will be explained in more detail later in this paper. DaimlerChrysler took advantage of this problem and forced MMC to revise the aforementioned agreements. Although both companies formally signed the agreements on 28 July 2000 (Mitsubishi Motors Corporation 28 July 2000a), these agreements were immediately revised and announced on 8 September (Mitsubishi Motors Corporation 8 September 2000). The revised agreements consisted of the following five issues:

These revised agreements suggest that DaimlerChrysler intended to take advantage of MMC's problem in order to bring it under its umbrella. This case was in great contrast with that of Renault and Nissan. In fact, Jürgen E. Schrempp, the CEO (Chief Executive Officer) of DaimlerChrysler at that time, mentioned that his company examined the possibility because it was possible for DaimlerChrysler to increase its holdings in MMC in 2003 (Nihon Keizai Shimbun (Evening Edition) 8 April 2000).

To state precisely, DaimlerChrysler planned to change MMC into a subsidiary company that produced small cars. Therefore, it examined the abolition of the Pajero, MMC's representative SUV (Sport Utility Vehicle)^[2]. However, DaimlerChrysler's challenge failed because of MMC's repeated recall cover-up problems. As a result, on 22 April 2004, it decided to withdraw from MMC's reconstruction by discontinuing the additional financial assistance offered to MMC (DaimlerChrysler 23 April 2004). On 11 November 2005, DaimlerChrysler announced that it had signed an agreement to sell its shares in MMC (DaimlerChrysler 11 November 2005). After a week, it announced that the disposal of its stake in MMC had been concluded (DaimlerChrysler 18 November 2005). Although DaimlerChrysler failed in its ambitions, it was possible for the company to bring MMC's buses and trucks subsidiary under its umbrella^[3]. However, the recall cover-up problems of the subsidiary company—Mitsubishi Fuso Truck and Bus Corporation—led to more trouble for DaimlerChrysler.

DaimlerChrysler withdrew from MMC's reconstruction process; however, MMC also received support from another business partner—the Mitsubishi group. MMC hoped that the Mitsubishi group would also support it (Sankei Shimbun shuzaihan 2002: 269). Nevertheless, according to another opinion, it wanted to become independent of the Mitsubishi group; however, the group interrupted this process (Nikkei Business Mitsubishi jidōsha mondai tokubetsu shuzaihan 2004). This was symbolised by the occurrence of a certain event.

MMC announced the introduction of Toyota's G-BOOK, an information network service (Mitsubishi Motors Corporation 3 September 2003). This infuriated the members of the Mitsubishi group. In particular, Mitsubishi Electric Corporation wanted to penalise MMC. Sonobe Takashi, the chairperson of MMC at that time, apologized to Mitsubishi Electric for this behaviour. In any case, the partnership between the Mitsubishi group and MMC was strong, with Mitsubishi Heavy Industries (MHI) being MMC's most important business partner, because MMC had been established as a section separate from the automobile section of MHI in 1970. In fact, it was Okazaki Yoichiro, the director of MHI, who became the chairperson of the board of directors, the president and the CEO of MMC after DaimlerChrysler withdrew from MMC's reconstruction (Mitsubishi Motors Corporation 30 April 2004).

Following this, three Mitsubishi companies (MHI, Mitsubishi Corporation, and the Bank of Tokyo-Mitsubishi (BTM)), began the reconstruction of MMC. On 21 May 2004, MMC announced a business revitalization plan that included a capital enhancement of 450 billion yen (Mitsubishi Motors Corporation 21 May 2004). According to the plan, the Mitsubishi group, including the three companies, would invest 140 billion yen in MMC. In addition, BTM and Mitsubishi Trust and Banking Corporation would swap 130 billion yen of debt for equity. However, this plan immediately came to a standstill because MMC repeated the recall cover-up problem. On 28 June 2005, MMC announced a new plan—'Mitsubishi Motors Revitalization Plan' (Mitsubishi Motors Corporation 28 January 2005). According to the plan, the three companies decided to increase their capital by 270 billion yen by issuing new common and preferred shares.

This aspect of MMC’s reconstruction was also markedly different from Nissan's case. Nissan belonged to the Fuyo group that included Fuji Bank. However, the group's unity was not as strong as that of the Mitsubishi group. Thus, Nissan was required to form a capital alliance with Renault. However, this had a positive effect on Nissan. As mentioned by Korine, Asakawa and Gomez (2002: 49), Nissan was infused with an entrepreneurial spirit during the formulation of the alliance agreement. In other words, this alliance inspired the crisis consciousness of Nissan's employees, as discussed in the next section.

Crisis Consciousness of the Employees

Nissan

In the case of Nissan, not only Carlos Ghosn but also the employees were involved in the process of corporate reconstruction (Kawano Koichi & 'Nissan pawā torein kaihatsu honbu' shuzaihan 2004, Maeya 2004, Mine 2003a, Mine 2003b, Nagasawa and Kino 2004: 81-128). Ghosn himself argues that it was the employees of Nissan who saved the company (Ghosn and Riès 2003: 207-208).

As mentioned earlier, the employees gradually developed their crisis consciousness in the process of creating the alliance with Renault. However, when Ghosn joined Nissan, he felt that their crisis consciousness was insufficient (Ghosn and Riès 2003: 224-227). On the contrary, the employees blamed other departments for Nissan's decline (Ghosn 2001a: 164, Ghosn 2002, Ghosn and Riès 2003: 227-228). Ghosn termed this 'a culture of blame'. For example, according to the sales department, Nissan's vehicles were not attractive. On the contrary, the product planning department believed that the sales department lacked the expertise required to sell vehicles. Blaming each other is a frequently used aspect of Japanese internal corporate culture and can be termed 'sectionalism'^[4]. Ghosn changed this culture by organizing Cross Functional Teams (CFTs) among the company’s employees. The CFTs brought Nissan's problems to light, such as its low profits, and formulated a corporate reconstruction plan—the 'Nissan Revival Plan' (Ghosn 2002, Yoshino and Egawa 2003a, Yoshino and Egawa 2003b). In short, Ghosn restructured the minds of the employees by organizing the CFTs (Magee 2003 :168, Cott and Piper 2003: 14). In other words, he was a 'catalyst' who provoked them sufficiently to develop a crisis consciousness (Ghosn and Yonekura: 2001).

MMC

In contrast to Nissan's employees, MMC's employees did not intend to increase their crisis consciousness with regard to corporate reconstruction. Instead, they believed that DaimlerChrysler would take initiatives for the reconstruction of MMC. The latter's cover-up of customer complaints regarding defective vehicles is proof of its dependence (amae) since this was disclosed on 18 July 2000 (Nihon Keizai Shimbun 19 July 2000), after the announcement of the capital alliance with DaimlerChrysler on 27 March 2000.

The following is an outline of the scandal. On 12 June 2000, an anonymous phone call was made to an official of the Ministry of Transport (Okuyama 2004: 14-34, Okumura 2005: 13-17). The caller informed the official about the scandal and also told the latter how to expose it. The caller informed the official about the documentary evidence that was hidden in lockers in the employees' changing room. This phone call led to the exposure of a series of recall cover-up problems. On 5 July 2000, officials from the Ministry of Transport carried out a surprise inspection at MMC. As a result, they found documentary evidence that exposed the recall cover-up scandal.

The cover-up activity was conducted as follows. First, MMC separated the information that could not be disclosed from other information that could be disclosed. It marked the former information 'H' implying the Japanese words 'hitoku' (concealment) or 'horyū' (reservation) and the latter 'P' (Nihon Keizai Shimbun 25 July 2000). It managed to switch between the 'H' and 'P' information via computer (Nihon Keizai Shimbun 22 July 2000). In 1992, MMC commissioned Toshiba to develop this computer system. With this system, they were able easily to maintain the 'H' information and thereby reduce their fears. However, they could not establish an entirely paperless management. They managed the 'H' information on paper as well as through computers. MMC always locked away its confidential documents in the lockers of the employees' changing room when inspections were conducted by the officials of the Ministry of Transport. However, this time, the inspectors found these documents (Okuyama 2004: 21-30).

Surprisingly, even after the confidential documents were found, the employees offered excuses and said that the computer system had a defect. Moreover, they modified the computer system, making their excuses appear plausible. In the night, they shredded the documents that were not checked by the inspectors before the latter arrived the next day to continue the inspection. On the following day, the inspectors revisited MMC and continued the investigation. They questioned the employees about the details of the system defects. The employees were unable to explain the problem clearly; therefore, the inspectors intended to contact Toshiba—the company that developed the system. At last, the employees of MMC admitted the existence of a double management system, and the scandal was thus disclosed.

Moreover, it is claimed that MMC had constantly engaged in this type of double management for approximately twenty years since inspections by the Ministry of Transport began in 1977 (Nihon Keizai Shimbun 23 August 2000). According to another news report, it had engaged in such cover-ups for approximately thirty years since 1969 (Nihon Keizai Shimbun 22 August 2000 (Evening Edition)). In any case, it cannot be said that the recall cover-up was a trivial problem.

On 26 July 2000, following the disclosure, MMC reported recalls of nine models (532,000 vehicles) to the Ministry of Transport. Of these recalls, 152 heavy trucks (the Fuso) corresponded to the recall cover-up. Surprisingly, Kawazoe Katsuhiko, the president of MMC at that time, claimed that he was unaware of this cover-up until a senior manager informed him about it while he was holding a press conference (Nihon Keizai Shimbun 27 July 2000).

The recall cover-up problems were not disclosed all at once, instead they were uncovered gradually. On 22 August 2000, MMC reported other recalls of eleven models (20,000 vehicles) to the Ministry of Transport. Of these recalls, three models, being 472 large-sized buses (the Fuso Aero Queen), 33 microbuses (the Fuso Rosa) and 143 expensive passenger cars (the Debonair) corresponded to the recall cover-up (Nihon Keizai Shimbun (Evening Edition) 22 August 2000). President Kawazoe took responsibility for the recall cover-ups and resigned (Nihon Keizai Shimbun 28 August 2000a).

Nevertheless, the recall problems continued. On 10 January 2002, while in motion, one of the wheels of a heavy duty truck manufactured by MMC came off and collided with pedestrians, killing a housewife and slightly injuring her two children (Kobayashi 2005). At the beginning, MMC had insisted that poor maintenance of the vehicle was the cause of this accident (Mitsubishi Motors Corporation 6 February 2002). However, Mitsubishi Fuso Truck and Bus Corporation (MFTBC)^[5] admitted that there was a design defect and announced a recall of the truck on 11 March 2004 (Mitsubishi Fuso Truck and Bus Corporation 11 March 2004). MMC (MFTBC) appear to have made an organization-wide attempt to conceal this recall (Nihon Keizai Shimbun 7 May 2004).

Following this incident, MMC (MFTBC) truck-related recall problems were exposed one after another (Nihon Keizai Shimbun 29 March 2004). In particular, the design defect that caused an accident in Yamaguchi prefecture on 19 October 2002 proved to be a serious problem. One of MMC's heavy duty trucks could not stop at a tollgate due to a failure of its clutch, and it crashed into a building. The driver was killed in the accident. MFTBC admitted the recall cover-up once again because MMC (MFTBC) had recognised the defect at least since 1996 (Nihon Keizai Shimbun 21 May 2004). MMC secretly repaired this defect. These repairs were termed as secret repairs (yamikaishū) (Nihon Keizai Shimbun 21 May 2004 (Evening Edition)). On 26 September 2005, MFTBC announced that it had reported 98 issues of recall cover-ups, including the above design defects, to the Ministry of Land, Infrastructure and Transport (Nihon Keizai Shimbun 27 September 2005).

The series of recall cover-up scandals was problematic because the scandals were exposed after the company formed its capital alliance with DaimlerChrysler. In other words, MMC intended to reconstruct the company through the capital alliance without exposing the scandals. These facts show the lack of crisis consciousness on the part of the employees because they should have noticed that MMC was facing a crisis when it announced its capital alliance with DaimlerChrysler. On the contrary, MMC was seriously threatened by these scandals. In fact, sales of MMC cars fell as a result. According to the Japan Automobile Dealers Association, the domestic sales of MMC's newly registered cars reduced dramatically every year from 1999 to 2002. On the other hand, reduction in the domestic sales of MMC's minicars was not as drastic as that of its registered cars. However, they fell slightly during the period. Table 1 presents MMC's sales from 1999 to 2002.

Table 1: Domestic Sales of MMC from 1999 to 2002.

Notes: The figures for registered cars are based on statistical data obtained from the Japan Automobile Dealers Association (Japan Automobile Dealers Association 1999-2006). Figures for minicars are based on statistical data obtained from the Japan Mini Vehicles Association (Japan Mini Vehicles Association 1999-2002). The number of minicars is the sum of light passenger cars, vans and trucks.

If all the MMC employees had sincerely considered corporate reconstruction, they themselves would have exposed these scandals before the company could form a capital alliance with DaimlerChrysler. However, in reality, they continued to conceal the recall information until the anonymous phone call made to the Ministry of Transport exposed the scandals. In other words, they were unaware that their behaviour had brought MMC to a head. They personally might have considered their behaviour to be wrong; however, they participated in the recall cover-up because they were cogs in the corporate machine. MMC's slogan, 'kanpen taiō' (countermeasures against government circles - in response to the inspections carried out by the Ministry of Transport, the Ministry of Industrial Trade and Industry, the police and municipal offices) proves this viewpoint. According to Okuyama, at least 100 employees were directly aware of the scandals (Okuyama 2004: 2). Therefore, not surprisingly, in June 1998, MMC conducted a drill on how the employees should conceal the scandals from the inspectors of the Ministry of Transport.

MMC management trained the employees to be able to change the computer database and hide the related papers in a library that was prepared for concealment. During the drill, they accidentally ripped paper bags filled with confidential documents and learned a 'lesson' that only a limited number of papers could be put inside a paper bag. Moreover, they learned that it was important to place the paper bag into another one so that the bottom of the bag could be protected. In a certain sense, they appeared to possess a crisis consciousness. However, this was a false crisis consciousness that did not quench the fire with water but instead poured oil onto it.

Thus, it was natural for MMC to create such a corrupt corporate culture because it had continued the recall cover-up for at least twenty years. It is then not surprising that an employee who actively covered up the scandals was promoted to a high position. The Nihon Keizai Shimbun (29 August 2000) suggests that management-level employees led the efforts to develop the double management system. After the system was set up, successive section chiefs were in charge of the system and successive managers of the section kept the situation under control (Nihon Keizai Shimbun 28 August 2000b).

The Model of Corporate Reconstruction

Nissan

Before Nissan reconstructed itself through its capital alliance with Renault, Mazda was also in trouble due to a financial deficit. During the bubble years Mazda had increased its distribution channels from two to five in the expectation of a drastic increase in sales (Sato 2000: 148-153, Miyamoto 2004: 133-136). It had also invested in a new factory in order to supply cars to the five distribution channels. However, this caused an excessive production capability because the bubble economy burst and sales decreased. As a result, Mazda plunged into the red. In 1996, Ford launched out into Mazda's reconstruction because in 1979 the former had become principal shareholders of the latter. Ford placed Mazda under its de facto umbrella and aimed at Mazda's reconstruction by increasing its shareholding from 25 to 33.4 per cent (Nihon Keizai Shimbun (Evening Edition) 12 April 1996). Consequently, Henry Wallace, the vice president of Mazda at that time, who earlier had worked with Ford, took office as the president of Mazda. This event occurred before Nissan formed its capital alliance with Renault in 1999. However, Nissan did not model its corporate reconstruction based on that of Mazda. On the contrary, Nissan found ideas for its corporate reconstruction from within itself. These ideas were successful through their implementation as the 'Nissan Revival Plan' and 'Nissan 180', which were ambitious reorganization plans^[6].

MMC

In contrast to Nissan, MMC appears to have modelled its own revival on Nissan as a successful case of corporate reconstruction. Interestingly, MMC formed a capital alliance with DaimlerChrysler on 27 March 2000, exactly one year after the capital alliance had been established between Nissan and Renault (Sato 2000: 236). This fact symbolizes the standpoint that the MMC modelled its revival on Nissan. However, I argue that MMC viewed Nissan from an incorrect perspective. It was convinced that Nissan was saved by Carlos Ghosn. Thus, MMC believed that it was possible to reconstruct the company by forming the capital alliance with DaimlerChrysler. Here, one may object to this idea because MMC had formed a capital alliance with a foreign company before establishing the capital alliance with DaimlerChrysler.

First, MMC began as an automobile joint corporation between MHI and Chrysler. MHI announced the agreement of its establishment in 1969 (Nihon Keizai Shimbun 19 May 1969). As a result, MMC was established as a unit separate from MHI in 1970 (Nihon Keizai Shimbun 1 June 1970). However, this alliance was dissolved in 1993 (Nihon Keizai Shimbun (Evening Edition) 2 July 1993). Second, in 1990, the Mitsubishi group including MMC and Daimler-Benz agreed to cooperate with each other in industries, such as aerospace, electronics, and so on (Nihon Keizai Shimbun 7 March 1990). However, this partnership also dissolved without any concrete accomplishments^[7]. Third, in 1999, MMC announced an exchange of memoranda with Volvo (Mitsubishi Motors Corporation 8 October 1999). These memoranda consisted of the following three issues:

On 13 December 1999, the agreement was formally signed (Mitsubishi Motors Corporation 13 December 1999). Following this agreement, the above circumstances changed because MMC formed its capital alliance with DaimlerChrysler in 2000. Although MMC announced that it had signed a contract with Volvo, which specified Volvo's acquisition of 19.9 per cent of the shares in MFTBC, on the same day as the announcement of the alliance with DaimlerChrysler (Mitsubishi Motors Corporation 28 July 2000b), MFTBC was eventually brought under the umbrella of DaimlerChrysler, as mentioned above. With regard to Volvo's share in MMC, DaimlerChrysler announced the acquisition of the share as well as MFTBC (DaimlerChrysler 11 April 2001). In short, MMC shifted the collaborative relationship from Volvo to DaimlerChrysler.

Therefore, in 2000, MMC began a full-dress corporate reconstruction through a capital alliance with DaimlerChrysler, after the capital alliance between Nissan and Renault in 1999. Thus, it is possible that MMC must have been aware of Nissan's success because the Japanese mass media often compared MMC with Nissan (Nihon Keizai Shimbun 10 September 2000).

There are three similarities between the cases of MMC and Nissan. First, when MMC announced the revision of its capital alliance on 8 September 2000, it publicly declared that it would accept Rolf Eckrodt, the CEO of DaimlerChrysler's rail systems subsidiary, as its COO, a newly established position^[8]. On the other hand, Ghosn had already taken charge as the COO of Nissan on 1 July 1999 (Nissan Motor Co., Ltd. 25 June 1999). This was also a newly established position. However, there were also two differences between the cases of Eckrodt and Ghosn. First, Eckrodt was elected by DaimlerChrysler and not by MMC. On the other hand, Ghosn was elected by Hanawa Yoshikazu, the president of Nissan at that time (Ghosn and Riès 2003: 20). Second, Hanawa supported Ghosn. However, Sonobe Takashi, the then Chairperson of MMC could not support Eckrodt because the former died from acute heart failure (Mitsubishi Motors Corporation 29 October 2003).

The second similarity was the reconstruction plan. MMC's plan 'Turnaround' resembled the 'Nissan Revival Plan'. The main ideas comprised a reduction in the workforce, purchase of cost-cutting, and factory closure. For some reason, MMC announced the plan on two occasions. First, MMC announced the outline of the plan on 26 February 2001 (Mitsubishi Motors Corporation 26 February 2001) and then the details of this plan were announced on 28 March (Mitsubishi Motors Corporation 28 March 2001). It is possible that MMC may have announced the outline in order to stem the slump of sales caused by the recall cover-up scandals. According to the details of the plan, MMC was to reduce the purchasing cost by 15 per cent, its employees by 9,500 (14 per cent) and domestic productivity by more than 20 per cent from 1.291 million cars. Further, it also planned to close the body assembly line of the Oye plant in Aichi prefecture by the end of September 2001.

On 26 May 2003, MMC announced that the plan had been carried out almost a year before the date planned initially (Mitsubishi Motors Corporation 26 May 2003). This also resembled Nissan's case. On 8 February 2002, Nissan announced that the 'Nissan Revival Plan' would conclude one year earlier than the original plan (Nissan Motor Co., Ltd. 8 February 2002). In addition, MMC mentioned that its current net income touched a record-high of 37.4 billion yen in fiscal 2002. It also expected a net income of 40 billion yen in fiscal 2003. However, it revised the prospect to 10 billion yen after only two months due to many nonperforming automobile loans in North America (Mitsubishi Motors Corporation 24 July 2003). Mitsubishi Motors Credit of America, a financing business unit of MMC in the US, conducted an aggressive sales promotion in North America. This sales promotion consisted of the following three incentives: no deposit, no interest, and no payment for the first six months. MMC expected sales in North America to increase drastically due to this sales promotion. However, the promotion appears to have backfired completely (Nikkei Business Mitsubishi jidōsha mondai tokubetsu shuzaihan 2004, Shūkan Toyo keizai Mitsubishi jidōsha shuzaihan 2004). Eventually, the 'Turnaround' project was a failure in terms of the operating profit margin due to this reckless sales promotion (Mitsubishi Motors Corporation 21 May 2004).

The difference between the cases of Nissan and MMC was the period of preparation of the reconstruction plan. Following Ghosn's arrival at Nissan, the company spent approximately six months preparing the 'Nissan Revival Plan'. However, after Eckrodt took office as COO, MMC spent only two months preparing the 'Turnaround'. Thus, Ghosn was able to visit Nissan's workplaces, suppliers, and automobile dealers in order to grasp the strengths and weaknesses of the company before presenting the revival plan (Ghosn 2001: 163-165, Ghosn and Riès 2003:215-217, Nikkei Business 2000: 258-259). However, Eckrodt was unable to make such visits and present a well-prepared plan.

The third similarity was the staple product. When Eckrodt became the president and CEO on 25 June 2002^[9], MMC announced that it had named its compact car 'Colt'. It was the same name of MMC's previous cars (the Colt 600 in 1962, the Colt 800 in 1965, and the New Colt 1200/1500 in 1968) (Mitsubishi Motors Corporation 25 June 2002); nevertheless I consider that MMC imitated Nissan's revival whose momentum was increased by launching the 'March' (Micra in Europe) that was also a compact car. In fact, MMC had mentioned that the Colt was a key product in the Turnaround (Mitsubishi Motors Corporation 11 November 2002). However, one may argue against this conclusion by stating that Nissan also imitated Mazda, because Mazda reconstructed itself by launching the 'Demio', a best-selling compact car that was released in 1996. However, the Demio was described by Mazda as being a compact minivan or the smallest type of RV (Recreational Vehicle) (Miyamoto 2004: 142-143). Mazda had created a new market niche for itself by launching this vehicle. In addition, it manufactured this vehicle by using a revised platform of the 'Festiva', a compact hatchback of Ford, originally developed by Mazda, that was released in 1986. Thus, the Demio was not exactly a new car. On the contrary, Nissan manufactured the March by using a new platform that was jointly developed by Nissan and Renault. Thus, Nissan did not imitate Mazda's success. On the other hand, the Colt's platform was also jointly developed by MMC and DaimlerChrysler (Mitsubishi Motors Corporation 11 November 2002).

Nissan introduced the March onto the market on 5 March 2002 (Nissan Motor Co., Ltd. 26 February 2002), and it immediately became a best-seller. On the other hand, the Colt was introduced on 16 November 2002 and was relatively successful at the beginning (Mitsubishi Motors Corporation 19 November 2002), but, it gradually went out of favour. Table 2 presents the domestic sales ranking (top 30) of the Colt and the number of sales in the first year of its availability. This table also provides sales results for the March during the same period. According to this table, the March won an overwhelming victory over the Colt. Incidentally, Table 3 also shows results for the March in the first year of its availability.

Table 2: Domestic Sales of MMC Colt and Nissan March.

Source: Figures are based on the statistical data obtained from the Japan Automobile Dealers Association (Japan Automobile Dealers Association 1999-2006).

Table 3: Domestic Sales of Nissan March in the first year of its availability.

Source: Figures are based on the statistical data obtained from the Japan Automobile Dealers Association (Japan Automobile Dealers Association 1999-2006).

In March 2006, no MMC cars appeared in the top 30 list. On the other hand, seven of Nissan's cars appeared in the top 30 list that month. Even though the full model March was changed approximately four years ago, it ranked 18 (Sales: 9,197 cars) among the top 30 list. The other cars that were also ranked in the top 30 list were the Serena (Ranking: 9; Sales: 12,219 cars), the Note (Ranking: 10; Sales: 12,123 cars), the Tiida (Ranking: 11; Sales: 11,089 cars), the Cube (Ranking: 17; Sales: 9,645 cars), the Wingroad (Ranking: 26; Sales: 6,688 cars) and the Bluebird Sylphy (Ranking: 27; Sales: 6,404 cars).

Lessons from the Folk Tales of Old Japan

MMC failed in its corporate reconstruction because it had thoughtlessly imitated Nissan's success. Among the folk tales of old Japan there are stories wherein one person imitates another person's success and fails in the attempt. The sudden introduction of folk tales at this point might come as a surprise to the reader of this paper. However, Jungian psychology, which is the research methodology used here, often refers to folk tales (Kawai 1982). Jungian psychologists study these tales because they obtain suggestions that help them to learn about their clients' conditions. In other words, the approach is successful because mental illness is a universal phenomenon throughout human history. In short, human beings basically remain unchanged in every period. These unchanged phenomena are referred to as the 'collective unconscious' (Kawai 1967: 89-95). Old tales are their treasury, and in these tales, Jungian psychologists intend to find clues for their counselling.

This paper applies the same methodology in order to examine the 'illness' of MMC—that is 'imitation'. The folk tales of old Japan, which often admonish the Japanese for imitation, are known as 'tonari no jii tan' (Tales of an Elderly Neighbour) among scholars (Inada et al. 1994: 652-653) and, according to Inada Koji (1999: 427), a famous scholar of old Japanese folk tales, stories about imitation are characteristic of old Japanese folk tales.

Arguably, imitation is one of the Japanese people’s national characteristics. For example, imitation is a learning method among traditional Japanese arts (Ikuta 1987, Minamoto 1989, Minamoto 1992). The vast literature of theories that claim Japanese cultural specificity (nihonjinron) also indicates that the Japanese have a tendency to imitate (Minami 1994). Thus, as mentioned by Kawai Hayao, a Japanese Jungian, the 'cultural unconscious' would be an accurate expression rather than the 'collective unconscious', which is universal among human beings (Kawai 1977: 33).

A representative tale is that of Grandfather Cherry Blossom (Hanasakajii)^[10]. This is a famous old folk tale that is popularly known among the Japanese. This tale has two elderly males as protagonists—a truthful elderly man and his neighbour, a greedy elderly man. One day, the truthful man and his wife find a puppy. Sometime later that day he goes to the mountain along with the puppy to gather firewood. On arriving at a particular location the puppy begins to bark, 'Dig here!' it appears to say. Although the elderly man is surprised at the puppy's behaviour, he begins to dig at the place pointed out by the puppy. He finds hidden treasures including koban (old Japanese coins made of gold) and kimonos. He brings the treasures home and shows them to his wife.

While they are counting the koban, their neighbour's wife visits and enquires about how they found the treasures. They tell her that the treasures were discovered by the puppy and she, in turn, asks them if she can borrow the puppy. Although they do not comply with her request, she forcibly takes the puppy home. Then, the greedy elderly man goes to the mountain to gather firewood along with the puppy. Although the puppy does not bark at all, he arbitrarily digs for buried treasures. He then digs up a honeycomb and gets stung by the bees. He thus gets angry with the puppy, kills it, buries it in the mountain, and plants a pine tree on its grave.

Following this incident, the truthful elderly man was repeatedly successful, whereas the greedy elderly man failed repeatedly. The former makes a wooden mortar from the pine tree and gets koban and kimonos from the mortar. The greedy elderly man borrows the mortar, but gets only excrement. He gets angry and burns the mortar. The truthful elderly man visits the greedy elderly man and receives ashes in return for the mortar. He then climbs a dead tree on a street with the ashes in his hand. When a feudal lord passes by him, he sprinkles the ashes of the dead tree and it blossoms. Pleased with the elderly man, the feudal lord rewards him. The greedy elderly man imitates this act, but he fails in his attempt and is punished by the same lord.

In this old tale, the character of the truthful elderly man corresponds with Nissan, and that of his greedy neighbour corresponds with MMC. It should be noted that, by using this metaphor, I do not wish to state that MMC is a greedy company. I only wish to indicate a simple motivation for imitation. An important defect of imitation is to lose sight of oneself. A person who imitates another person always focuses on the other person, and does not engage in deep introspection. Thus, he or she cannot learn about his or her strengths and weaknesses.

In contrast to this, Nissan engaged in deep introspection and considered its strengths and weaknesses. Its strengths were as follows (Ghosn and Riès 2003: 215-219, 258):

In particular, Ghosn must have been surprised at the cooperative trade union relationship because earlier he had instigated the factory workers of Renault to go on strike when he had decided to shut down a Belgian factory (Ghosn and Riès 2003: 158-164, Hasegawa 2004: 30-31). Indeed, there was some resistance from Nissan's suppliers, factory workers and the trade union. However, on the whole, they adopted a cooperative attitude towards corporate reconstruction. On the contrary, the following were Nissan's weaknesses (Ghosn and Riès 2003: 223-229, 257):

Nissan was able to overcome these weaknesses. In particular, and as mentioned already, Ghosn motivated the employees to develop a crisis consciousness. Thus, Nissan clarified both its strengths and weaknesses. As a result, it could identify solutions for corporate reconstruction within itself.

On the contrary, however, MMC did not clarify its strengths and weaknesses. Therefore it could not find solutions for corporate reconstruction. However, one may object to this argument because MMC challenged the Japanese popular car market once again with the introduction of a new mini-passenger car, the 'i' after the failure of the Colt (Mitsubishi Motors Corporation 24 January 2006). The latter failed because the registered car brand of MMC was damaged by the recall cover-up scandals. However, its minicar brand was barely damaged by the scandals (See Table 1) since they occurred mainly in registered passenger cars, buses and trucks. In addition, MMC announced that it would supply Original Equipment Manufacturers (OEMs) with mini-commercial and mini-passenger cars for Nissan (Mitsubishi Motors Corporation 29 August 2003, Mitsubishi Motors Corporation 17 January 2005). According to these contracts, on 6 October 2003, Nissan began to sell the mini-commercial cars manufactured by MMC, the 'Minicab van' and the 'Minicab truck' as the 'Clipper van' and the 'Clipper truck' (Nissan Motor Co., Ltd. 16 September 2003). On 7 June 2005, Nissan began to sell the mini-passenger car, the 'eK wagon' manufactured by MMC as the 'Otti' (Nissan Motor Co., Ltd. 7 June 2005). These contracts also saved the MMC minicar brand. Thus, the i, the new mini passenger car, was a make-or-break product for MMC.

However, I wonder why MMC named the car 'i'. According to MMC's official press release, it decided to name the car 'i' because MMC expected that this car would encourage the owner to express himself/herself (I) completely. In addition, the name, derived from the first letter of 'innovation', was based on the fact that it was a 'next-generation innovative minicar' (Mitsubishi Motors Corporation 23 May 2005). However, MMC did not explain why it was expressed as a small letter ('i'). It probably must have intended to benefit from the boom of Apple Computers’ 'iMac' and 'iPod'. If this was the case, then it implies that MMC has not yet found the solutions for corporate reconstruction within itself.

Conclusion

This paper has examined the following three differences between Nissan's success and MMC's failure:

• business partner,
• crisis consciousness of the employees and,
• model of corporate reconstruction.

The question that then arises is, how does MMC reconstruct itself? MMC must consider a reconstruction plan without looking externally for the model of corporate reconstruction, since the solutions are available within the company, as mentioned by Carlos Ghosn (Ghosn 2001a: 171, Ghosn 2001b). MMC should imitate only this idea.

However, one may insist that MMC designed a reconstruction plan after DaimlerChrysler withdrew from MMC's reconstruction. However, MMC continues to have two 'negative legacies'. Firstly, it repeated the recall problems. Immediately after it announced its business revitalization plan on 21 May 2004, the problem was disclosed again on 2 June (Nihon Keizai Shimbun 3 June 2004). Seventeen vehicle types of passenger cars (approximately 160,000 cars) corresponded to the recall cover-up.

On 12 April 2005, MMC announced the recall of three vehicle types (approximately 179,000 cars) (Nihon Keizai Shimbun 13 April 2005). These problems were disclosed immediately after it submitted the final report of the recall cover-up problems to the Ministry of Land, Infrastructure and Transport on 30 March (Mitsubishi Motors Corporation 30 March 2005). The recalls were with regard to defects in air conditioners. Two people had been scalded due to these defects. It was three and a half years after the first person was burned on October 2001 that MMC reported the recalls to the Ministry of Land, Infrastructure and Transport.

On 2 July 2005, MMC reported the recall of approximately 21,000 cars (the Libero) to the Ministry of Land, Infrastructure and Transport (Mitsubishi Motors Corporation 1 July 2005, Nihon Keizai Shimbun 2 July 2005). This time the recall was due to a defect in the tailgate, which injured a woman in September 2004^[11]. It was possible for MMC to prevent this accident because it had reported the recall of another defect to the Ministry of Land, Infrastructure and Transport on 2 July 2004. Moreover, it had already confirmed nine vehicle types suffering from this defect between March 2001 and June 2004. Nevertheless, MMC did not take any measures against this defect until the woman was injured.

The second negative legacy was inconsistent management. MMC planned to shutdown the Okazaki plant in Aichi prefecture by the end of 2006 as part of the abovementioned business revitalization plan (Mitsubishi Motors Corporation 21 May 2004). It then moved the date of the closure to the end of 2005 (Nihon Keizai Shimbun 17 June 2004). On 8 November 2004, it announced that it had almost completed the personnel redistribution of the factory (Mitsubishi Motors Corporation 8 November 2004). However, on 19 April 2005, it announced the postponement of the closure plan (Mitsubishi Motors Corporation 19 April 2005). On 27 October 2005, the Nihon Keizai Shimbun reported that MMC was determined to continue operating the Okazaki plant (Nihon Keizai Shimbun 27 October 2005). However, MMC immediately retorted that this was untrue (Mitsubishi Motors Corporation 27 October 2005). MMC insisted that the postponement was decided for the purpose of the optimum quality control of a new model. It said that it would re-examine the factory closure when it undoubtedly expected the reconstruction plan to be successful.

These facts show that MMC was not yet able to find solutions for corporate reconstruction from within the company itself. Therefore, in its press releases, MMC had always to add the proviso that MMC did not guarantee that forward-looking statements were objectively exact and to be achieved in the future^[12]. In contrast, Ghosn would not permit this proviso to be added in Nissan’s press releases. Thus, MMC is unable to find solutions for corporate reconstruction due to its wrong perception of its current state. For the purpose of corporate reconstruction, it must begin to recognise its current situation. Perhaps, it should begin considering the implications of words or phrases such as 'recognise' or 'the current situation'.

Notes

1 He entered Nissan as the COO and then assumed the position of its president and CEO.

2 See Nihon Keizai Shimbun (16 April 2004). After DaimlerChrysler withdrew from MMC's reconstruction, Okazaki Yoichiro, the president of MMC at that time, mentioned that MMC had continued to manufacture the Pajero (Nihon Keizai Shimbun 1 May 2004).

3 See DaimlerChrysler (14 March 2003). In September 2005, DaimlerChrysler held 85 per cent of the shares in the subsidiary (Mitsubishi Fuso Truck and Bus Corporation 2005). With regard to the relationship between DaimlerChrysler and MMC, both the companies emphasized that their current cooperative projects would not be affected by the disposal (DaimlerChrysler 11 November 2005, Mitsubishi Motors Corporation 11 November 2005). For example, on 28 October 2005, MMC and Smart, a wholly-owned subsidiary of DaimlerChrysler, agreed that MMC would supply an engine for Smart (Mitsubishi Motors Corporation 28 October 2005).

4 See Ito (2005), for a study of buraku discrimination, a kind of Japanese social sectionalism.

5 It was established on 6 January 2003 after a separation from MMC (Mitsubishi Motors Corporation 6 January 2003).

6 Mazda also found ideas for corporate reconstruction from within itself. In particular, it improved its brand image to one that was 'sporty' (Miyamoto 2004: 156). Its achievements were the introduction of the 'RX-8' and 'Mazda Roadster' (Mazda Motor Corporation 9 April 2003, Mazda Motor Corporation 25 August 2005). The former was a novel four-door, four-seater sports car that mounted Mazda's famous rotary engine, whereas the latter was a new model of a world-famous, two-seater convertible.

7 See Sankei Shimbun shuzaihan (2002: 269). However, the capital alliance with DaimlerChrysler might have been its concrete achievement (Okumura 2005: 25).

8 See Nihon Keizai Shimbun (9 September 2000). However, MMC announced the abolishment of both the COO and CEO titles after DaimlerChrysler announced its withdrawal from MMC's reconstruction (Mitsubishi Motors Corporation 31 March 2005).

9 His promotion also resembled that of Ghosn, who took charge as the president of Nissan on 20 June 2000 and then as the president and CEO on 21 June 2001 (Nissan Motor Co., Ltd. 21 June 2001).

10 See Inada (1999: 373-387). Other examples of tales are 'Shitakiri suzume' (The Tongue-cut Sparrow), 'Nezumi no jōdo' (The Pure Land of Mouses), 'Torinomijii' (The Elderly Man who Swallowed a Small Bird) and so on (Inada et al. 1994: 652-653).

11 The Nihon Keizai Shimbun reports that the accident occurred in September 2004 (Nihon Keizai Shimbun 2 July 2005); however, according to MMC's press release, it occurred in October (Mitsubishi Motors Corporation 1 July 2005). Incidentally, for some reason MMC does not report the incident in the press release in English.

12 For example, Mitsubishi Motors Corporation (9 February 2006). Incidentally, for some reason this sentence is not written in its English version.

References

Press releases detailed below can be accessed on the following websites:

• DaimlerChrysler.
• Mazda Motor Corporation (Japanese) (English).
• Mitsubishi Fuso Truck and Bus Corporation (Japanese) (English).
• Mitsubishi Motors Corporation (Japanese) (English).
• Nissan Motor Co. Ltd. (Japanese) (English).
• Renault

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