The Kawai turnaround: bringing the core business back to profit (1990)

Where to apply your strength, rather than chase scale

What President Kawai Isamu faced in this reconstruction was less the plugging of the financial hole than the deeper mistake of a mid-size maker trying to earn through the same mass production as the majors. Competing on scale in a market gripped by Toyota and Nissan, Fuji Heavy — lacking their shared parts and dealer networks — would only saddle itself with high costs. That a manager who had come up through production walked the test track, the factories and the dealerships himself and rebuilt from the shop-floor numbers of inventory, quality and cost gives the turnaround a character quite unlike bank-led mass-production management. The choice to earn by narrowing to its strong fields would carry forward into the later North American SUV business.

That said, a reconstruction sustained by one leader’s magnetism also cast a shadow. Command strong enough to make an executive say he “had never imagined a single leader could change a company this much” was, turned over, next door to an atmosphere in which it was hard to object to the top. The defect concealment that 日経ビジネス pointed to in 1997 as the fruit of “a culture that couldn’t speak up under reconstruction-first,” and Chairman Kawai’s arrest the following year, in 1998, show that a reconstruction’s success can invite a breakdown of another kind. Where to apply your strength rather than chase scale — Kawai’s question left both its light and its shadow.