Giving up self-led restructuring for the Industrial Revitalization Corporation (2004)

A company built on scale, handing scale back

The heart of this decision seems to lie less in the crisis itself than in who would control it. Takagi Kunio’s insistence on a self-directed rescue backed by private funds was not merely a matter of pride; it was also a judgement that falling under a competitor would drain the company of people and morale. But once two rounds of financial support had failed to restore any operating strength, the main banks had little logic left for absorbing a third round of losses, and the gap between banks in a hurry to reclassify the exposure as performing and a management determined to stay independent could not be bridged. The way the self-help plan was progressively edged toward the agency’s own draft suggests how narrow the available choices had been from the start.

What was left was the path by which a company built on the pursuit of scale gives scale back. Repudiating the general merchandise format and splitting the store operations from the store real estate amounted to the retirement of the very business model that price destruction had carried to the top. The framework of a public body taking an over-indebted company under management and rebuilding it would spread from here, with Daiei as the precedent. Even so, given that the specialization in food supermarkets drawn up under the agency did not stop the shrinkage or the successive transfers of control that followed, this decision can be seen as no more than the entrance to the restructuring. How to wind down a company that is too big to fail remains a subject with no settled answer.