Mitsubishi clings to tradition in face of change

Mitsubishi clings to tradition in face of change

By Chester Dawson

TOKYO (AP): Life-time employment. Seniority-based promotions.
Cozy ties between member firms. The Mitsubishi group's
traditional ways of doing business were hailed in the 1980s as
the keys to rocketing to the pinnacle of Japan Inc. -- and world
industry.

Those traditions have earned Mitsubishi a darker reputation in
the 1990s: stick in the mud.

As Japan searches desperately for an escape hatch out of its
deepest recession since World War II, the venerable Mitsubishi
empire has emerged not as a symbol of success, but a lesson in
what's wrong with the Japanese way of doing things.

"The changes facing the Japanese economy are not short-term,
but structural, so the Mitsubishi group is pulling Japan back by
sticking to old ways," said Hiroshi Okumura, a professor in the
business studies department at Tokyo's Chuo University.

At Mitsubishi, the signs of malaise are in the ledger.

Japan's slide into recession has brought a drop in profits and
revenue at most Mitsubishi firms, including Mitsubishi Electric
Corp., Mitsubishi Motors Corp. and Nikon Corp. Only four of the
group's 25 core companies with publicly traded shares posted
increases in profit and sales for the fiscal year ended in March.

The group, made up of companies with large stakes in each
other, was dismembered after World War II. Mitsubishi was rebuilt
in the decades after the war, and now faces its toughest
challenges since grappling with the oil shocks of the 1970s.

"The crisis which confronts the Mitsubishi group is much more
serious than it was 20 or 30 years ago," said Minoru Makihara,
chairman of Mitsubishi Corp., a trading house at the center of
the group.

That's quite a blow for Mitsubishi, whose core companies
oversee more than 250,000 workers in firms with combined earnings
of roughly 30 trillion yen (US$216 billion) -- larger than the
entire economy of Austria.

Making products ranging from beer to rocket engines, the
Mitsubishi group has grown in tandem with Japan's transformation
from a feudal backwater in the 19th century into the world's
second-largest economy.

Just a few years ago, Mitsubishi seemed an emblem of the
Japanese challenge to corporate America. But the group's fortunes
peaked not long after its real estate arm, Mitsubishi Estate Co.,
snapped up Rockefeller Center in 1989. That jewel in the group's
crown was sold off -- at a loss -- seven years later as Japan's
economic miracle unraveled.

The economy is not coming back anytime soon. In a report
issued in July, Japan's Economic Planning Agency warned of a
marked decline in industrial labor productivity -- and called for
overhauling the traditional employment and management models
which have been championed by Mitsubishi.

At issue are the paternalistic business practices
characteristic of much of Japan Inc.: cooperation among related
firms and cradle-to-grave benefits for loyal workers. Mitsubishi
even runs a matchmaking service for its employees named after its
distinctive red trademark -- the "Diamond Family Club."

Among the staunchest defenders of Mitsubishi's conservative
style is Kentaro Aikawa, chairman of Mitsubishi Heavy Industry
Ltd. and de facto head of the group. He recently earned the
enmity of shareholders by speaking out publicly in favor of
putting company jobs ahead of profits.

Coming from a business baron those remarks sound odd. But they
are very much in line with the corporate principles laid down by
Yataro Iwasaki, the scion of a samurai clan who founded
Mitsubishi in 1873.

Once nurtured by government subsidies, Mitsubishi has long
harbored a commitment to broad national interests. Iwasaki's zeal
for public service is enshrined in the first of the group's
business principles: corporate responsibility to society.
Still, the fabled unity of Mitsubishi has begun to fray.

"The individual companies have to survive by themselves. They
cannot depend on help from the group," said Yoshihiro Sakamoto, a
former top trade ministry official who now serves as an advisor
at The Bank of Tokyo-Mitsubishi Ltd.

A solution to the group's woes has so far eluded the chief
executives from 28 core Mitsubishi firms, who gather once a month
for a brainstorming session in a top floor suite around a long
oval table, with a wooden Buddhist deity decorating one wall.

But some voices within Mitsubishi are calling for a drastic
restructuring to shed troubled units. Others seek more moderate
steps such as trimming bloated payrolls by getting rid of
unneeded workers.

The burden of history is heavy, however.

"Japanese companies are destined to make cutbacks whether we
like it or not," said Katsuhiko Kawasoe, president of Mitsubishi
Motors Corp. "But Mitsubishi can't be the first to do so."