Structural reform from the 1999 emergency measures, and shrinking assets and headcount against ROA (1999)

A reform that waited for the numbers to go bad

The character of this reform is compressed into a single word: shimeta — “good, at last.” A reform that expels in one go the contradictions accumulated over a long history cannot be done in good times, Yoshikawa Hirokazu said. Put the other way, through the four consecutive years of rising sales and profit that ran to the year ended March 1998, neither assets nor headcount were touched. It appears to have taken bad numbers — a slump in copper metal prices and an ordinary loss in smelting — before voluntary retirement of more than a tenth of the workforce and a $670.2M (¥76bn) reduction in total assets were finally begun.

Even so, the 5% ROA set for three years was not reached; it landed at 4.5%. The smelting division, positioned as the core of the reform, still returned only 0.36% divisional ROA in the final year, and had to book a $80.6M (¥10bn) valuation loss on raw-material inventory before it could cut its entanglements at all. Much of the improvement in the numbers came from the items easiest to compress — inventory, cash and deposits, idle assets. Rebuilding the earning power itself did not finish in those three years; it was carried over into the next medium-term plan.