Japanese business in Europe

Not just Toyota – the Brexit rebalancing has already started

Toyota‘s warnings at Davos that it was having to consider how to survive in the UK after Brexit were preceded by a very under-the-radar announcement that it would be making some redundancies at its Burnaston plant. It is a sign of what is to come for Japanese companies in the UK and our research (see below) shows that a rebalancing is already being undertaken by many. Whereas Japanese companies increased their employment across Europe, Middle East & Africa by nearly 10% from 2015 to 2016, UK employment levels remained unchanged.*

Toyota said that a reduction was necessary as the initial burst of production needed for new models introduced in 2015 is now stabilising. Indeed, Toyota’s total workforce in the UK had already fallen by 3.6% in 2015/6 and by 9% across Europe.

Now it is clear that the UK really will leave the Single Market and the Customs Union, where there are long term trends in place already, such as automation or phasing in and out of models, Brexit will provide the impetus to rebalance resources across Europe and beyond, to maintain integration in the Single Market or ease of serving other growth markets if Europe disintegrates further and/or growth slows. Hardline Brexiters, Trump and Putin may welcome the disintegration of regional arrangements, but multinationals are moving in the opposite direction, integrating their operations regionally and globally both in terms of supply chains and people.

Fujitsu already made similar move in announcing 1800 redundancies in the UK in October 2016 – part of 3300 job losses across Europe. It stated it was not related to the Brexit referendum result, but part of a longer term transformation programme – mainly to do with moving more of its IT services support to lower cost bases.

Our latest compilation of the Top 30 Japanese companies in Europe and the UK – now most annual reports for year ending March 2016 have been published – shows that this process had indeed started before the referendum. Fujitsu has reduced its workforce in the region it calls EMEIA (Europe, Middle East, India and Africa) by 3% from 2015/2016 and in the UK (in which it was possibly overweight anyway, thanks to the legacy of having acquired ICL) by far more – 15%.

Fujitsu is still the biggest Japanese employer in the UK, with over 10,000 employees, but if it dips much below 8000 as a result of the latest round of redundancies, then Nissan, currently with 7,657 employees, might well overtake it. Nissan’s UK workforce grew 2.9% in 2015/6 and actually shrank across Europe by 2% in the same period. Calsonic Kansei, one of Nissan’s key suppliers, also grew its workforce by 10% in the UK to 1,729. Presumably this will hold until the new Nissan models will come online in 2019 giving a year or two of high production and sales, until, well, see Toyota above. As previously posted, car manufacturers operate on the basis that a factory needs to serve a market of at least 100 million consumers in order to be sustainable. The EU qualifies, as does Russia – but the UK on its own does not.

Other big increases in the UK workforce were due to acquisitions – Mitsui Sumitomo & Aioi Nissay Dowa group acquiring Lloyds underwriters Amlin and Insure The Box, Softbank acquiring ARM and Dentsu Aegis acquiring various agencies in Europe and the US, absorbing their UK workforce with it. Organic growth highlights were Hitachi (18.8% up) – building on its Hitachi Rail acquisitions – soon to be employing 900 at its Newton Aycliffe plant, Ricoh (up 11% in the UK but only 1% in Europe) and Fast Retailing, expanding their Uniqlo and Comptoir des Cotonniers retail business, with 1100 employees, up from 700 the previous year.

However Hitachi expanded 70% across Europe, presumably due to the acquisition of Ansaldo rail businesses in Italy and NTT Data also expanded across Europe by 20% to 18,000 employees (NTT Data’s UK workforce is surprisingly small compared to Fujitsu, at around 450 as of 2015). Automotive supplier Yazaki grew by almost a quarter, to reach 45,200 – a large part of this being its manufacturing in Eastern Europe and North Africa – similar locations to the largest Japanese employer in Europe, Sumitomo Electric Wiring, whose workforce shrank slightly to 56,273.

What next for the UK and Japanese companies in Europe?

I would give up any hope of expanding automotive manufacturing in the UK. As outlined above, the shift eastwards in Europe, to Turkey and also to north Africa has already taken place. Which would seem to negate the need for suppliers to be in the Single Market, but note that the EU already has free trade deals with Egypt, Tunisia, Morocco and Algeria and Turkey is in a customs union with the EU. Yazaki (headquartered in Germany) and Sumitomo Electric Wiring (tripartite headquarters across Italy, UK and Germany) used to have manufacturing in the UK but are now largely focused on pre-sales engineering. Calsonic Kansei still has manufacturing in the UK, but has recently invested in plants in Spain and Russia where – not at all coincidentally – Nissan has factories.

The UK still has strength in the design side of the automotive engineering, and I wonder whether the UK government deal with Nissan didn’t have some kind of grant or tax break for supporting this, to cushion the blow to the manufacturing side from any tariffs. Although Nissan’s European headquarters are in Switzerland, there is a large design centre in the UK. Similarly Honda has an R&D operation as well as a Formula 1 engine team based in the UK.

80% of the UK economy is services, and we are a net exporter of services. Delivery of services requires you to be close to the customer. So what the UK needs to ensure is that the customers with the biggest budgets – the regional headquarters of multinationals, Japanese or otherwise – stay in the UK. Our professional services – not just finance but R&D, design, IT, consulting, accounting, legal, marketing – all thrive because they are supporting these regional headquarters. Lower taxes and deregulation might keep some headquarters happy, but ultimately they have to worry about their proximity to customers too. By leaving the European Union, the UK will be perceived as less close to EU customers (and also the regulatory environment). We have to hope that the positive, proactive “global” UK that Theresa May outlined in her recent speech really does come together, and deals are quickly negotiated with African and Middle Eastern countries, so that the UK can position itself as the EMEA (Europe, Middle East & Africa) regional headquarters of choice.

The UK is currently the regional base for over half of the top 30 Japanese companies in Europe or EMEA. Keeping it that way will also, as the Japanese government itself pointed out, need a free movement of people in the region and a liberal immigration policy. If this becomes an issue, which it already has of course, the other trend I have highlighted elsewhere, of an increasingly virtual structure, where regional management and functions are scattered around a region, will intensify and will be increasingly difficult to service from one location, particularly if that location is not part of the Single Market or immigration has become a sticking point in free trade agreements.

If this happens, then UK services companies are going to have to open more offices across the EMEA region and relocate their personnel accordingly – as various banks have already announced.

(*Percentages calculated only for those companies where annual report figures for the EMEA or Europe region and the UK were available.)

Reports, profiles and other research on the Top 30 largest Japanese companies in Europe, Middle East and Africa are available from Rudlin Consulting – please contact pernillerudlinrudlinconsultingcom for further details.

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British customer service has improved – or is it just the technology?

I asked two Japanese expatriates who were both on their second stint in the UK what had changed since their last stay in the UK 10 or so years’ ago. To my surprise, both said that they thought customer service had improved.

My initial response was that this was probably due to the big increase in people from Eastern Europe who are working as waiters, shop assistants and so on, with far more enthusiasm and efficiency than had been normal in the UK in the past.

But on discussing this further, and thinking about my own recent experiences, I realise the improvement they were talking about has more to do with technology than the cultural mindset of service sector employees. One of the Japanese expatriates said “when you arrange for someone to come to your house to repair something, they arrive when they say they will”. This used not to be the case – you could take a whole day off work waiting for someone and not even get a phone call explaining the delay.

When I recently bought a washing machine, I purchased it online and chose a time slot and a day for it to be delivered. I was surprised to see that they would deliver up until 21:00 in the evening. Then followed a series of emails and text messages from the store to remind me and offer me a chance to change the slot if I wanted. It’s common to receive further texts during the day of delivery, narrowing the time slot down to within one hour. The delivery and trades people have some kind of handheld GPS device which helps them map their journeys from customer to customer and they can be tracked and assisted by support staff in their company offices.

Then, this week, I realised another item I had bought from Amazon had not arrived, so I went online, clicked the “call me” button and within 1 second someone (I suspect from an Indian call centre) called my mobile phone and immediately arranged for a replacement to be sent the next day.

I realise this kind of service is available in other countries, but it does seem according to various surveys that the British are the biggest online shoppers in the world. According to McKinsey, although internet penetration is higher in the US that Europeans, Europeans are much more likely to prefer a digital channel for buying or using banking services than Americans.

Services now account for 80% of the UK economy, so it’s no surprise I suppose that the UK has got better at delivering them. For Japanese companies, despite Brexit, the British service sector still represents an investment opportunity – both to gain technology and to reach other virtual markets in the rest of the world. It is noticeable that recent acquisitions or investments into the UK from Japan have largely been in the technology-based services sector– from Softbank acquiring ARM, through to Aioi Nissay Dowa acquiring InsuretheBox.

This article was originally published in Japanese in the Teikoku Databank News and also appears in Pernille Rudlin’s new book “Shinrai: Japanese Corporate Integrity in a Disintegrating Europe” – available as a paperback and Kindle ebook on Amazon.

Poland, migration and the future of the EU

It has just been announced that Polish immigrants now represent the largest group of foreigners living in the UK. There were around 831,000 Polish born residents in the UK in 2015, overtaking Indian born residents. This represents a ¾ million increase on 2004 when Poland joined the EU, showing the scale and speed of the increase in immigrants from Eastern Europe – one of the root causes of the British vote to leave the EU.

Poland’s connections to the UK go back further than this, however. A large group of Poles settled in the UK after WWII, and were welcomed because of the well-known heroism of Polish pilots who flew in the Battle of Britain.

Trading links with Poland date back even further, to medieval times and the Hanseatic League of merchants who did business with each other from Russia through the Baltics to Germany, the Low Countries and into the UK.

But it would be wrong to think of this as a European Union style alliance of nation states. League membership was by city. Many of the European countries as we know them now did not exist then. Member cities such as Gdansk or the Hanse capital of Luebeck were semi-autonomous, or controlled by the Holy Roman Empire, or Prussia, or Denmark. And of course more recently the eastern part was under the domain of Soviet communism.

If you visit Gdansk now, the old part of the city is in fact a beautiful, partly imaginary, post-war reconstruction of a pre-Germanic past. The actual old city had been obliterated by WWII. Also worth a visit is the European Solidarity Centre which commemorates the Gdansk shipyard union Solidarnosc and asserts that its strike in 1980/1 started the process which culminated in the Berlin Wall coming down in 1989.

British people who are sceptical about the European Union say it should only be about trade, and that they want control back of UK borders, money and laws. For other EU members, the EU was a way of regaining control of their lives, by ensuring peace and democracy. This aim was not so appealing to the UK, who had no such recent experience of ground wars, dictatorships or being occupied by other countries.

Many people and political leaders in other EU member countries – including Poland – are beginning to say the EU represents a threat to their national sovereignty too. Border controls are being reinstated and there is a strong possibility eventually the EU itself will disintegrate.

Polish residents in the UK are worrying what will happen to them post Brexit and the millions of British who live elsewhere in the EU are also nervous for their future.

Many of the people working for Japanese companies in the EU are migrants, so I think the best thing Japanese companies can do right now is reassure them that they will look after them, and if necessary offer relocation to subsidiaries in other countries, including Japan.

This article was originally published in Japanese in the Teikoku Databank News on 11th October 2016 and also appears in Pernille Rudlin’s new book “Shinrai: Japanese Corporate Integrity in a Disintegrating Europe” – available as a paperback and Kindle ebook on Amazon.

Trump brings back teenage memories – for me and other Europeans

For people of my age, the election of Donald Trump has brought back memories of when Ronald Reagan was elected, thirty five years’ ago. I remember, as a teenager, the British pop songs and TV programmes that mocked Americans for electing Reagan – a seemingly dumb, war mongering, B movie actor.

I lived in Pennsylvania for half a year just before Reagan’s election, and attended an American high school. It was a formative experience for me, to see for myself the land of opportunity, where everything seemed new, energetic and plentiful, compared to the recession, high unemployment and riots back in the UK.

Most Europeans, not just the British, have these similarly mixed feelings about the US and the American people – of admiration, resentment and fear. My parents and grandparents remember the American GIs who were stationed in Europe – to whom they were both grateful for helping liberate Europe – but also resentful of how much wealthier and better fed they seemed than the rest of the population.

I suspect many Japanese people also share these feelings and memories. However, the American influence on Japan is even stronger, thanks to the long post war occupation, the continuing influence of American popular culture, and the fact that the English taught in Japanese schools is American English.

There is a tendency therefore in Japan for those who do not know other Western cultures, to think that the American communication style will work everywhere. But Europeans are very sensitive to anything that Japanese companies do which seems too obviously American. If Japanese companies try to manage their overseas operations via their US subsidiaries, resentments rapidly build up in Europe about the top-down, highly controlling American management style.

Japanese expatriates who arrive in Europe after experience in the US become frustrated, because the American “just do it” approach to directing subordinates does not work. It is not as easy to fire people for incompetence or unwillingness to follow direction in Europe as it is in the USA. Europeans expect to be consulted about their work and think it is important to raise objections or point out problems to their bosses if there are justifiable concerns.

Even written materials which are too obviously American can cause resistance. Twice now I have been told by clients that they did not want to roll out e-learning and manuals which had been developed in Japan, using American style English and tone.

American companies are good at persuading Japanese customers that the American way is the globally accepted international standard way and that is true to some extent. However, the best solution, which we also use at Japan Intercultural Consulting for our training, is to have American core material – so that our customers get the same basic approach around the world – but allow a great deal of customisation to suit the tastes of specific countries.

Getting this balance right is not easy, but if the effort is not made, stubborn European resistance and rejection will result.

This article was originally published in Japanese in the Teikoku Databank News in 2016. It also appears in Pernille Rudlin’s new book “Shinrai: Japanese Corporate Integrity in a Disintegrating Europe” – available as a paperback and Kindle ebook on Amazon.

Brexit accentuates structural trends and cultural differences in Europe

Whatever the outcome of the Brexit negotiations, there are two conclusions we can already draw from what has happened so far in terms of how Japanese businesses may need to respond. One is that structural trends in business which were already apparent in Europe will be accelerated and the second is that differences in negotiating approaches in Europe have not disappeared, despite nearly 25 years of the European Union and single market.

In terms of organisational structure, there is a strange mix of physical disintegration and integration on a virtual level. Currently, over half of the biggest Japanese companies in Europe have their regional headquarters in the UK. This is because of the depth of financial and other support services that are available in the UK, the free movement of people that enables hiring many different nationalities in the UK and the ease of doing business in the English language. The latter advantage will not disappear with Brexit of course, but if the UK does not keep its EU financial ‘passport’, it’s possible a lot of the financial and other services will shift to Amsterdam or Frankfurt. Brexit may also bring an end to the free movement of people between the EU and the UK.

In any case, many of the back office, functional, coordinating jobs were already moving out of the UK. Cheaper, English speaking, well-educated employees can be found elsewhere in the EU. Larger Japanese companies are already developing a pan-European management structure, where teams are scattered across several countries. This is proving very challenging for Japanese employees who are more accustomed to a team working physically together, seated in a cluster of desks. Japanese companies will have to put processes in place to enable discussions and decisions to be made via remote communications and maintain a generous budget for travel.

The second conclusion is that Europe is still split between the pragmatists and the principles and rules based groups. The pragmatists, often traditional trading nations such as the UK, Netherlands and Denmark, tend to negotiate step by step, concession by concession, whereas Japanese companies prefer to acquire all information and know all the risks before making one big decision. Principles and rules based countries such as France or Germany clash with the pragmatists because they refuse to make concessions on what they would consider key principles (such as the free movement of people) or deviate from the rules which have been set in place.

This is why the European Union has become bogged down so often in processes and discussions and seems remote, bureaucratic and corrupt to ordinary citizens. Many Europeans – particularly the British – don’t understand or are not attracted to a European vision for the future. There are two further lessons to be learnt from this for business. One is that, no matter what happens in Europe, the British provide an important counterbalance to the French and the Germans in a management team, if you want pragmatic solutions to problems. The second is that management must not become so inward looking that it fails to communicate its vision to the rest of the employees.

This article can be found in Pernille Rudlin’s recent book “Shinrai: Japanese Corporate Integrity in a Disintegrating Europe” available as a paperback and Kindle ebook on Amazon.

Overcoming British negativity

According to a FT/ICSA Boardroom Bellwether poll in 2015, only 7% of UK companies were willing to speak out in favour of the UK staying in the European Union, even though two thirds believed leaving the EU would be damaging for them. Of course the Greek crisis made it difficult to say anything positive about Europe, but I also think the British have a strong preference for talking negatively rather than positively, when asked to make a commitment to something, particularly if they feel there are plenty of downsides to getting involved.

Then, like the British professor of economics I met recently – who not only forecast the 2008 Lehman shock but also advised the UK against joining the euro – we can say, smugly, “I told you so”, when things go wrong. This apparent wisdom does not, however, take into account what might have happened if we British had got involved. Maybe the Eurozone would have been better structured and managed, or a more balanced approach taken to Greece’s membership conditions and current difficulties if the UK had participated, not only to point out the problems, but find solutions.

I’ve noticed when working in European teams that British pragmatism acts as a good counterbalance to French rhetoric and German methodological rigour. Both Japanese and American managers are united however, in finding the British urge to be upfront about all the likely problems and obstacles, without suggesting any solutions, very frustrating.

Americans want to “just do it” and are not interested in the past, whereas the British look to history and their own experience, so as not to repeat mistakes. A Japanese manager who had become used to the American management style said to me recently “how do I motivate British staff? In the US, my team will do as I ask, because I can promise them a bonus or threaten to fire them if they don’t do it, but the British team don’t seem to be so motivated by money, and they know it’s a lot harder to fire them here than in the US.”

Some British employees are of course motivated by money, particularly in the financial sector, but for most British workers the motivation is more around self-fulfilment, a chance to put their expertise and experience into practice, to make a difference. So if they believe that they will not be able to do something, they won’t even try, as they know how demotivating and humiliating failure will be.

I discussed with the Japanese manager the concept of “jinji wo tsukushite, tenmei wo matsu” (do all that is humanly possible, then wait for the heavens to decide) – that Japanese also have a sense of fatalism, but that does not preclude doing whatever you can to make something work. I described this conversation to a senior British executive, and she started smiling ruefully. It turned out she had insisted to a Japanese boss that a particular course of action was not feasible. He had persuaded her (I expect through appealing to her expertise and experience) and so she eventually went ahead, and to her surprise, she succeeded.

This article was originally published in Japanese in the Teikoku Bank News on 12 August 2015 and also appears in Pernille Rudlin’s new book “Shinrai: Japanese Corporate Integrity in a Disintegrating Europe” – available as a paperback and Kindle ebook on Amazon.

The story of Japanese companies in the UK continues to be the story of the UK economy overall in 2016

The number of people employed in the UK by the biggest Japanese companies in the UK rose by around 1% to 76,103 in 2016 – representing over half of the 140,000 or so the Japanese Embassy to the UK estimates are employed overall in the UK by Japanese companies.

Just as 80% of the UK economy is services, so too with Japanese companies in the UK. Although Nissan, Toyota and Honda attract most of the headlines thanks to Brexit – understandably as they represent around 15,000 of the 76,000 jobs – the vast majority of the rest are in the services sector.

Even Sony has only one small factory left in the UK, making high end audio visual equipment and employing less than 100 people. The rest of 3000 or so jobs are in Sony Interactive Entertainment, music and film & TV or in marketing.

Fujitsu is still the biggest Japanese employer in the UK but the gap with Nissan at #2 is narrowing, as Fujitsu have reduced their headcount by over 15% in the past year or so. Although Fujitsu is still seen as an IT & telecomms manufacturer in Japan, in the UK it is largely an IT services company.

Trading company Itochu may be a surprise at #3, but this is largely due to its ownership of tyre fitting chain KwikFit.

The Hitachi group of companies (#7) has grown by 17% over the year – thanks in part to expansion at Hitachi Rail and Horizon Nuclear Power – but the bulk of its employees continue to be at consumer loans company Hitachi Capital.

Dentsu Aegis Network, part of the Dentsu advertising agency, has continued to acquire across the UK and Europe, resulting in a 21% increase in headcount. Other notable increases thanks to acquisitions include Mitsui Sumitomo & Aioi Nissay Dowa acquiring Lloyds underwriters Amlin and of course Softbank, a new entrant to the top 30, with its acquisition of ARM.

The story of Japanese companies in the UK continues to be the story of the UK economy overall – a trend which will no doubt continue in 2017, with Japanese banks already strengthening and relocating to their other European Union based operations, or threatening to do so.

Customised reports, profiles and other research on the Top 30 largest Japanese companies in Europe, Middle East and Africa are available – please contact pernillerudlinrudlinconsultingcom for further details.

Free pdf of Top 30 largest Japanese employers in UK

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Employers need to change to encourage Japan’s milliennials to be mobile

European employers, just as in Japan, are worrying about how to manage and motivate the so-called millennial generation – people who were born between the early 1980s and the early 2000s.

Across the world, one characteristic that unites the millennial generation is, of course, a high use of social media. There is some evidence that this has led to a more open minded attitude to the rest of the world. In the UK, the millennial generation is much more pro-European Union and pro-migrant than the older generations. Millennials are used to building relationships with people they have never met, through mutual interests and hobbies, regardless of their location or nationality or gender.

This has translated into a higher desire than other generations to live, work or study outside their home country. 71% of millennials, regardless of gender, want to work outside their home country during their career, according to a global survey by PwC in 2015. A multigenerational global survey by PwC in the same year showed that all age groups and genders overwhelmingly agreed that secondment early in a career was also critical.

Yet I have seen surveys of Japanese millennials which show that fewer of them are studying abroad or want to be seconded overseas than previous generations. I expect their concern, which is also the top concern of other nationalities, is what their role will be when they are repatriated to their home country.

I suspect there are also assumptions being made on the employer side about who an expatriate should be and what the role should involve. I recently met a British academic who had interviewed various Japanese women living in the UK and she found that many of them joined a Japanese company in Japan, in the expectation that they would be posted overseas. Yet their requests to be seconded were ignored, so they quit their companies and moved abroad themselves.

It seems to me that many of the issues Japanese companies are facing such as attracting and retaining younger people, an ageing workforce or a lack of men or women who can take up global management roles could be resolved by having a more integrated and inclusive approach to job mobility. It is quite normal for European companies to hire graduates from across Europe, and then rotate them around their operations in different countries. A few of our larger clients are now rotating their graduates to Japan too. Global roles do not have to be for 3-5 years in another country – they can be permanent, a few months or indeed a virtual global role.

One of the messages from the campaign for Britain to stay in the European Union – aimed at the millennial generation – is that if the UK leaves the EU, it will be less easy for young British people to study or work in other European countries. Unfortunately, one other characteristic of the millennial generation is that they are less likely to vote than the more pro-Brexit older generations.

This article originally appeared in Japanese in the Teikoku Databank News and also is in Pernille Rudlin’s new book “Shinrai: Japanese Corporate Integrity in a Disintegrating Europe” – available as a paperback and Kindle ebook on Amazon.

Why Nissan matters more to the UK than the UK matters to Nissan

It will be interesting to see how far Ghosn’s well documented ruthlessness and unsentimentality which he demonstrated in turning around Nissan in Japan will come to the fore in next month’s decision about where to invest for the new Qashqai, because really, to Nissan, the UK is not as important as a market or a manufacturing base as the UK might like to think. Plus, Ghosn has now got Mitsubishi Motors to worry about as well.

Here’s some figures to illustrate:

UK based employees represent around 5% of Nissan’s global workforce
UK based production represents around 10% of Nissan’s global production and around 70% of its European production (the rest is manufactured in Spain and Russia).
Car sales in the UK market represent around 3% of Nissan’s total units sold worldwide. Europe & Russia represent around 15% of total units sold. So the UK market is about 20% of Nissan’s Europe & Russia regional sales.

From the UK perspective:

Nissan is the third largest Japanese employer in the UK, with around 8000 employees – not only in the Sunderland factory but also several hundred working in design at Nissan Technical Centre Europe in Cranfield (ultimately registered in Belgium so that should make a quick getaway easier) and a design centre in London
Nissan is the 8th largest Japanese employer in Europe – around 16,000 employees in total – so around half are in the UK. However the European regional headquarters is in Switzerland, to which the UK factory sells all its production. The operational headquarters and holding company for the rest of Europe is based in France.
Nissan Sunderland’s plant accounts for nearly 1/3 of the UK’s car production. 80% of it is ultimately exported, 76% to Europe.

And of course there’s the supply chain and the jobs it provides – the UK car industry likes to say it supports around 800,000 jobs.

Calsonic Kansei is a supplier to Nissan, and is also in our Top 30 Japanese companies in the UK, employing over 1300 people – with factories in Llanelli and Sunderland – and Spain. Nissan has a substantial stake in Calsonic Kansei, but the cosy mutually supportive supply chains of 20 years’ ago have long disappeared, thanks in part to Ghosn. So it’s not hard to see Calsonic Kansei and others responding as quickly as they can to any shifts in location of demand.

It’s legendary in Japan that when a Nissan employee went to Ghosn to beg him not to axe one of the suppliers totally dependent on Nissan because it was headed up by a member of their own family, Ghosn responded “which is it to be? That Nissan collapses or your uncle’s company collapses?”

For how complex and tough life is these days in the global automotive supply chain, this comment in the Financial Times recently was very revealing:

“We manufacture part of one component for the Nissan Qashqai. We purchase raw materials from Taiwan, we manufacture in the UK in a Japanese owned factory. Our customer is in Germany, where our product is bonded together with products from other countries. Our customer’s customer is in France, where the bonded component is integrated into a car component. The component is shipped to Sunderland and becomes a part of a “British” car.

How Mrs May and her merry band are going to sort this mess out is beyond me, and I suspect beyond them.

The development time lines for the most basic of automotive components is two to three years, which means that we are already “post Brexit” for new business development. How do I persuade customers to invest in new product development with us when nobody has a clue on what basis I might sell eventually sell my product to them, and given rules of origin, in some cases on what basis they might sell their product to their customer. We have good relationships with our customers, but at the end of the day they are running their business for their benefit and may well decide its just not worth the uncertainty and risk.”

Carlos Ghosn is “reassured” by Theresa May saying that the British government would be “extremely cautious” in maintaining Nissan’s Sunderland UK factory’s competitiveness. But he may nonetheless think some rebalancing is in order.

European pride + global standardization = long debates

The European senior management team of a business which had been newly acquired by a Japanese company complained to me about being treated as if Europe was one homogenous country, when in fact they only had offices in 5 very different countries in Europe, with a headquarters in Germany. “It’s true, we know how to work with each other in Europe – after all Europeans have been living and working together for hundreds of years, but it seems strange that on paper we’re supposed to be a tri-regional structure of Europe, North America and Asia, and yet North America has only two employees and Asia has no regional headquarters, with Taiwan, China, Korea and Japan being managed separately”

This was just a small company, but actually I have seen similar situations in many other much larger Japanese multinationals. It’s partly that Europeans are very sensitive to their status –and want to be treated on a par with other regional heads – and this means the European definition of regions, with Asia as one region.

But it’s also due to a justifiable concern that if the company is meant to be offering global products and services, it needs to have a well-balanced global structure operating off common platforms, systems and processes. If the company grows by acquisition, you often end up with very different portfolios of services and products from country to country, incompatible processes and systems and no clear idea of how revenue and costs should be shared across the regions which are contributing to the global offering.

This can cause huge, long running arguments, partly because standardizing trade, production processes and technology are interrelated issues. Once you decide what products and services are global and what are local, you have the basis for splitting revenue accordingly. But you have to be careful this does not lead to regional organisations focusing on their local products and services, refusing to participate in global contracts because they make more profit out of local contracts.

Once you know what you are offering globally, you can standardise the technology – such as having all the company’s websites running off the same content management system, or production running off the same platforms or sales and purchasing using the same global accounting system.

Sometimes Japan headquarters has to swallow their pride for the sake of speed and efficiency. I was impressed that Nomura, when it acquired Lehman Brothers, decided to move their dealing onto the Lehman platform, because they judged it to be technically superior and faster than trying to integrate platforms or shift everyone onto the Japanese system.

Nobody wants to deal with these problems because they are so complex and lead to fights and easy resistance by those claiming that the global standard is not going to work in their markets. But unfortunately, if you do not deal with these issues soon after an acquisition, they fester and become even more difficult to resolve.

This article was originally published in Japanese for the Teikoku Databank News and appears in Pernille Rudlin’s new book “Shinrai: Japanese Corporate Integrity in a Disintegrating Europe” – available as a paperback and Kindle ebook on Amazon.

Category: Japanese business in Europe

Not just Toyota – the Brexit rebalancing has already started

Free pdf of Top 30 largest Japanese employers in UK

British customer service has improved – or is it just the technology?

Poland, migration and the future of the EU

Trump brings back teenage memories – for me and other Europeans

Brexit accentuates structural trends and cultural differences in Europe

Overcoming British negativity

The story of Japanese companies in the UK continues to be the story of the UK economy overall in 2016

Free pdf of Top 30 largest Japanese employers in UK

Employers need to change to encourage Japan’s milliennials to be mobile

Why Nissan matters more to the UK than the UK matters to Nissan

European pride + global standardization = long debates

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