‘Don’t bring factories home, it only adds to risk,’ Nidec CEO says

KYOTO — Reshoring manufacturing is not the solution to supply chain disruptions, says the CEO of Japanese motor maker Nidec, arguing that the coronavirus pandemic makes the case for more globalization rather than less.

Shigenobu Nagamori, who founded the company in 1973 and grew it into the world’s largest motor manufacturer, with annual sales of roughly 1.5 trillion yen ($14 billion), spoke with Nikkei about the impact of a crisis he called “World War III against an invisible enemy.”

Excerpts from the interview follow.

Q: Corporations’ cross-border supply chains have been cut off, leading to the argument that globalization has reached the limit. How to you see this problem?

A: The opposite is true. We should have more [globalization]. Bringing all supply chains back home only increases risks. I thought that we had diversified risks by having factories in more than 40 countries, but I failed to think fully about supply chains for parts. I deeply regret that. We will think about how to respond if coronavirus infections spread again, and we will realign our posture over the next several years.

I hope that the coronavirus will weaken the “my country first” ideology and lead to a better way. To develop drugs for the prevention and treatment of  COVID-19, we are going to need international cooperation. After listening to what world leaders are saying, I believe that they are doing some soul-searching.


This Nidec factory in China makes components for industrial robots. (Photo by Naoki Watanabe)

Q: The spread of the coronavirus is completely different from such past economic shocks like the global financial crisis.

A: During the Lehman crisis, no matter how much the economy slumped, we kept saying, “Let’s work for the company.” But this time, protecting oneself and one’s family comes first, and the company comes next. We have more than 120,000 employees. I have never thought more seriously about human life than now.

Q: Many companies are petrified by the ferocity of the coronavirus.

A: We are fighting World War III against an invisible enemy today. Our company has factories in more than 40 countries, so information is coming at us from all directions. We set up a system in which I, as the leader, can grasp the entire picture and make all the decisions.

Q: Corporate acquisitions and other investment is slowing down.

A: Cash is king now. Even if the purchase price of a company is down 30% from last year, the value of cash has increased by a factor of five or 10. One hundred million yen is worth much more than last year. Investments should not be taken lightly until the future becomes clearer.

China drove the global economy during the Lehman crisis, but this time around no country is the leader economically or politically. A business leader needs to act nimbly, keeping in mind the risk that the global economy will remain in a slump even after the coronavirus goes away.

Q: Telework is growing rapidly in Japan since the government’s emergency declaration.

A: The landscape will be completely altered after the coronavirus crisis ends. We’ll see a rapid change in which telework is embraced. We’ll see more cases where a person working for a company in Tokyo builds a big house with a home office in Yamanashi Prefecture [west of Tokyo]. Companies should fundamentally improve their work environment, in ways like raising wages instead of paying commuting allowances and setting up satellite offices.

Q: What can business leaders do to prepare for the post-coronavirus world?

A: They should not just chase profits, but should think about how to coexist with nature. There are some theories that global warming affects how viruses spread. Business cannot go against nature. I think the current crisis serves as a lesson.

For 50 years, I did business by believing that my methods were all correct. But the current situation made me realize that I was wrong. I did not trust telework. But now I want to make the company a worker-friendly one where employees are happy, even if profit temporarily declines. I thought of about 50 things to change to achieve that goal. I hope that other Japanese business managers come up with their own methods, using the time they have now to reflect.

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