The last recapitalization, and doubt over the going concern (2005)

Capital could buy time, but not a structure

What this placement showed, one can argue, was the fact that an injection of capital can postpone the hour of crisis but cannot itself change a business structure that does not earn. Sanyo’s real problem was not a thin equity base but a business design in which none of its investments, spread in every direction, could win on scale. The $2.7B (¥300bn) from three financial firms lifted the capital-ratio figure, but it could not reach the loss-making structure, and the next year the limit surfaced as a going-concern qualification.

The choice to bring in a journalist as chairman and CEO — its aim of changing a stagnant decision-making from an outside vantage is understandable — still could not reach a turnaround without the judgment to appraise businesses and the power to execute. Nonaka’s distrust of the financial institutions and Sano’s frank, almost resigned words mirror from the inside where this rebuild ran aground. That the time bought with capital was never spent through to structural reform seems to have summoned the next decision: the surrender of independence.