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Web-only Exclusives
November 30, 2000

From Our Correspondent: Hirohito and the War
A conversation with biographer Herbert Bix

From Our Correspondent: A Rough Road Ahead
Bad news for the Philippines - and some others

From Our Correspondent: Making Enemies
Indonesia needs friends. So why is it picking fights?

Asiaweek Time Asia Now Asiaweek story

WHEN REFORM STARTS AT THE TOP


c o v e r    s t o r y
How to Rebuild: That is the question for Crisis-hit companies laden with debt and overcapacity. The region's recovery depends on their answers

Economies: What's ahead for 16 leading economies

c a s e  s t u d i e s
Investing: Two views of rising regional markets

Bad Loans: "Mr. Condom" tries to save the "Krung Thai-tanic"

Early Bird: Hanglass benefited from pre-Crisis downsizing

Corruption: Cleaning up Garuda Indonesia

Taboo No More: Japan's Hoya gave up employment-for-life

v i e w p o i n t
Viewpoint: The need to reform Thailand's social values

ASK JAPAN FUND MANAGERS which company they reckon to be a model of successful restructuring and many will point to Hoya Corp. When many of Japan's blue-chip firms chalked up more losses in the fiscal year ending in March, the optical products maker posted a record $148 million in net profits, up 44% on the previous year. Revenue rose 4% to $1.7 billion on the back of strong sales of laser equipment and vision-care products. The impressive results were due to robust demand in Europe and the U.S. - overseas markets account for 28% of Hoya's turnover.

Hoya's bright performance amid the gloomy business climate has turned its chairman Suzuki Tetsuo and president Yamanaka Mamoru into poster-boys for what Japanese call risutora. Yes, restructuring. The media and other firms now seek their views on corporate re-engineering and how to inject new thinking into old enterprises. While Hoya may be unusual among Japan's stuck-in-the-mud companies, more enterprises are gradually accepting that they must follow suit if they are to avoid being buried alive.

Early this decade, Hoya saw its profits fall by half, as Japan's economy slowed and the 1980s economic boom went still. Most of its production and sales were domestic, meaning Hoya faced high costs, while sales dropped. Suzuki had been president since 1957, successfully diversifying the medium-sized, family-run optical-glass maker into a leading manufacturer. In 1993, he became chairman, ceding the CEO slot to Yamanaka, his brother-in-law and son of the company founder. With Suzuki as chief strategist and Yamanaka his faithful, soft-spoken general, the new partnership launched a drastic rescue mission. "We faced the crisis much earlier than other Japanese companies," says Yamanaka, 60. "That motivated us to restructure much earlier than others."

Bold leadership is still a rarity in Japan. Indeed, Both Suzuki and Yamanaka were initially criticized for being too tough. But their decisiveness proved to be the key to success. One of Yamanaka's first moves was to streamline operations, trimming profit-poor divisions and investing in growth sectors. Sales at the crystal division, for example, had been falling, while its aging workforce was growing more costly. The strong yen was losing Hoya business to Eastern Europe. Meanwhile, the potential for high-tech goods such as glass memory disks for PCs was looking strong. Yamanaka reorganized Hoya's 22 subsidiaries into just seven. He invested more in the high-end electro-optics segment that now accounts for 48% of total turnover. He revived cash flow by selling little used properties. And he shifted the company's focus from notching higher pre-tax profits to improving return on equity.

Perhaps the most difficult task was cutting down the workforce. Since lifetime employment is a hallmark of Japanese society, Yamanaka knew he had to move fast to counter the taboo. He halved the number of managing directors to eight and removed more than half of the section and division chiefs. An early-retirement scheme was devised for those over 55. During Yamanaka's first year as president, he cut the staff roster by a third. "We had no other choice," Yamanaka says solemnly. He has since implemented more reforms, replacing seniority-based promotion with a merit system. "It has been tough on older workers, but the younger ones are more motivated."

Another part of Yamanaka's restructuring was to turn the company into a global player. To do so, he had to improve efficiency. In 1997, Hoya launched the second phase of its restructuring. Yamanaka split operations into five autonomous segments, three of them actual subsidiaries. Each segment manager is responsible for his sector's planning, product development, marketing, personnel, and profits. The result: Hoya has trimmed costs further.

Hoya also expanded target markets and production facilities overseas. Transferring production to China, Singapore and Thailand, where the company's biggest lens-making plant is located, also cut costs dramatically. "In the near future, I would like half our business based overseas," says Yamanaka.

The makeover continues. Yamanaka has adopted a "shareholder's value-added" (SVA) formula - essentially return on equity with the cost of borrowing factored in - to assess performance. He has applied this evaluation method to each group segment, as well as to free-standing projects. To enhance transparency, the company is disclosing performance data every quarter, including reports on each business segment. This has boosted Hoya's popularity among shareholders and fund managers. In 2001, assuming it is allowed by law, Hoya plans to further consolidate by setting up a holding company to oversee worldwide operations. Says Suzuki, still energetic at 74: "You have to take action and not make excuses." A lesson all companies should heed.

Reported by Murakami Mutsuko/Tokyo


This edition's table of contents | Asiaweek home

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