Nissan Stalls Out
Once a paragon of Japan's industrial might, the car company symbolizes what went wrong in a country that could do no wrong
By FRANK GIBNEY JR.

In Japan, putting your company on the acquisition block is so shameful that the expression for it--miuri--literally means "selling your body." So it must have been excruciating in January for Yoshikazu Hanawa, president of Nissan Motor Co., to publicly offer for sale significant stakes in Japan's second-largest automaker (after Toyota). What must have been even more humiliating is that when Nissan's suitors looked under the hood, they became even less interested in this clunker, with its $22 billion in debt and a lineup of flashless cars. The word around the auto industry is that the $49-billion-a-year company ought to be left to wither. Says James Harbour, a leading U.S. automobile analyst: "A merger with Nissan is absolutely the worst idea I've ever heard of."

Whoa. Just a decade ago, Nissan was synonymous with Japan Inc., the business goliath that was devouring America. The auto company's fuel-thrifty sedans and zippy 240Z sports car put the fear in Detroit long before the Toyota Camry or Honda Accord ever saw a drafting table. Nissan's success gave weight to the myth that Japanese companies were run by enlightened executives teamed in frictionless synchronicity with workers to produce superior cars. In his best-selling book The Reckoning, David Halberstam suggested that the U.S. auto industry, namely the Ford Motor Co., would be consigned to a never-ending game of catch-up with the likes of Nissan, a company driven by the Japanese "demonic need for excellence."

These days Ford is a global predator with a $23 billion war chest and a market value several times larger than Nissan's. Racked by an economy in an eight-year decline, Japan has a demonic need for the cash and expertise of foreign bankers and takeover experts who are buying, at deep discount, chunks of the country's financial and industrial base. "What has really happened this decade is the true inability of the Japanese to manage in a difficult situation," says Maryann Keller, ING Baring Furman Selz managing director, who has studied Japanese industry for 30 years. Once unthinkable, the idea that foreigners might "save" Japanese companies is becoming commonplace. Witness Merrill Lynch and its absorption of Yamaichi Securities, or General Electric Capital and its $6.5 billion proposed takeover of Japan Leasing Co., one of the top firms in its field. Or Goodyear's bid to control Sumitomo Rubber Industries. If it is shameful to be acquired by foreigners, at least Nissan president Hanawa is far from alone.

Only a handful of companies have ever lived up to the Japan Inc. myth, and Nissan isn't one of them. Certainly its manufacturing and engineering prowess are world-class. And Nissan still builds first-rate automobiles. It simply doesn't make the right kind, nor does it know how to sell them. "We've failed to understand what the market wants," Hanawa told Time. "We're reflecting upon that." Deep meditation is more like it. Nissan has been paralyzed by its own bureaucracy and a legacy of tension between its top managers and labor bosses in Japan. The company's decline illustrates why instead of being poised to vault into the fast-paced, globalized 21st century, so much of corporate Japan is still shackled to a management tradition that hasn't changed since the 1970s.

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