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Risk Management in the Japanese Auto Industry
Nissan COO Shiga Toshiyuki’s Take on Overcoming Crisis

After the March 11 disaster dealt a severe blow to Japanese manufacturers, Nissan earned international praise for its swift recovery from the crisis. Shiga Toshiyuki talks about his company’s approach to risk management and strategy for growth in the face of adversity.

Shiga Toshiyuki

Shiga ToshiyukiChief operating officer of Nissan Motor Co. Born in 1953. Joined Nissan in 1976 after earning a degree in economics from Osaka Prefecture University. Served in a variety of posts in the company, including general manager of the Asia and Oceania Operation Division’s Jakarta office and general manager of the Alliance Coordination Office, which forged Nissan’s new relationship with Renault S.A. in 1999. He became a senior vice president in 2000 and COO in 2005. Since 2010 he has also chaired the Japan Automobile Manufacturers Association.

INTERVIEWER The earthquake and tsunami that struck Japan on March 11, 2011, dealt a serious blow to Japan’s automobile industry and, indeed, to the industrial sector as a whole. Nissan’s speedy response to this crisis received a lot of attention in the foreign press. Faced with the sort of disaster that comes along once in a thousand years, how did you decide what to prioritize in your response?

SHIGA TOSHIYUKI One of the biggest factors in our favor was the fact that we’d experienced so much in the period leading up to the disaster, and had built up know-how about what to do. In 2007, my third year as chief operating officer, the Chūetsu Offshore Earthquake struck Niigata Prefecture. A key supplier in the city of Kashiwazaki suffered serious damage, and we were unable to produce any vehicles for a time as a result.

Until then we had thought we were doing everything we needed to prepare for a quake—making our structures more quake-resistant and so on—but we weren’t ready for this kind of interruption to our flow of parts from suppliers. This experience taught us the importance of appropriate instructions from headquarters in a disaster situation, to support our suppliers and make sure our own sites can carry on functioning. In October 2007 we began running disaster response simulations as part of our training.

As the chief of Nissan’s Global Disaster Headquarters, I was in charge of these simulations, which were altered a bit each time we ran them to expose us to a variety of potential situations. Actually, the first simulation drill we did after moving to our new global headquarters in Yokohama took place on February 21—less than three weeks before the earthquake struck on March 11.

For this exercise, we set up an emergency headquarters on the eighth floor of our building, complete with a row of desks and telephones, and practiced the first-stage tasks to be carried out following a disaster: checking on employee safety and contacting our own plants, our affiliates, and our suppliers to see how they were faring. We also discussed what to do, as we learned the full picture of the damage, in terms of deciding when to restart production or addressing supplier and logistical issues as we moved toward getting back online. In the drill we covered all these tasks in the space of about two hours.

The real thing hit at 2:46 in the afternoon on March 11. I was on the twenty-first floor of our headquarters at the time, and I immediately gave the order for the Global Disaster Control Headquarters to go into action. Around a half-hour later, I’d made it down the stairs to the eighth floor, and everything was set up just as it had been three weeks earlier—the desks and phones in place, the emergency equipment all ready for use. To this day I remember clearly how this drove home the importance of being prepared for disaster.

In our February drill we worked on the assumption that we’d be opening our headquarters to people who were unable to return home following a quake. This preparation served us well, too. We figured we’d need to have food on hand not just for employees but for these stranded commuters as well. On March 11 we cooked all the rice we had and made it into 1,800 onigiri rice balls. We also had a stock of more than 2,000 blankets, which kept a lot of people warm that night.

INTERVIEWER So the planning and preparation you’d done in advance enabled you to make the right decisions when the time came?

SHIGA That’s right. I think three things are essential: being fully prepared for disaster, carrying out drills, and going into action as quickly as possible after a disaster strikes. Our preparations were not limited to our Yokohama headquarters. Our plants closer to the epicenter, in Tochigi Prefecture and in Iwaki, Fukushima Prefecture, also came through the day relatively well thanks to regular preparedness drills. These facilities suffered damage: conveyor machinery fell down from the ceiling and the cupola on top of the casting plant toppled over. But there wasn’t a single injury. This was entirely the result of preparedness.

Some time after the earthquake I spoke with people from the plants, and their comments boiled down to this: they had done the drills so many times that when the real thing came they had the muscle memory to do what was necessary without thinking. If a quake hits while you’re casting molten aluminum, for instance, you can’t just run away—if that liquefied metal spills onto the factory floor it could start a fire. So the workers’ first move was to close the lid, and only then did they head for safety themselves. I was amazed that these people had the presence of mind to do all this in the midst of that shaking.

Corporate Revival as a Formative Experience

INTERVIEWER In July 2011 Moody’s Japan upgraded your company’s rating, which I understand was in part a positive evaluation of your risk management. What lies at the heart of Nissan’s ability to handle disaster so skillfully?

SHIGA As I said, we were able to respond quickly thanks to our regular training and preparation. During the recovery process that followed, though, I think we drew heavily on the management methods introduced as part of the Nissan Revival Plan that Carlos Ghosn rolled out when he became COO in 1999.

Generally speaking, companies tend to split up the tasks of disaster response. If a factory is damaged the production division will deal with the situation; if a supplier is harmed the purchasing division handles things. At Nissan, though, we have what we call “cross-functional teams.” These bring together people from many divisions to tackle tasks. Each individual division has its own traditional ways of approaching an issue, which can lead to barriers between different groups within the company. Bringing them together in this cross-functional arrangement helps to create new ideas instead.

We’ve defined the business principles to be upheld by all employees in what we call the “Nissan Way.” The first mindset outlined in this document focuses on just this sort of cross-functional thinking: the importance of diversity and openness to different views.

To take one example, after the earthquake we received a report that a supplier’s facility had collapsed, leaving it unable to produce parts. People from our purchasing division got together with their counterparts from our manufacturing and maintenance groups, and they went right to work to get the supplier back on its feet. Once we realized that we could source replacement parts from a different firm, our engineering department began testing straightaway. When it became clear that delayed delivery of electrical parts was going to keep us from outfitting some vehicles with navigation systems, our sales division began contacting customers to let them know. There’s no roundabout discussion between different divisions, with one side saying “we don’t have parts” and the other saying “then have purchasing go and round some up.” An environment is in place where everyone can work as one team.

It was an especially pleasant surprise to me when our engineers, who normally work only day shifts, moved to an around-the-clock schedule to perform quality checks and testing on the replacement parts. I believe this may have been the first time in Nissan’s history for engineers to work night shifts. Their efforts let us know right away that these parts would work in our vehicles, and we got back to volume production in the shortest possible time.

All of this goes to show that the cross-functional culture that’s been nurtured at Nissan since it began its recovery in 1999 has truly proved its worth in this time of crisis.

I’d like also to note the positive effects of our “cross-regional” approach. The March disaster caused delays in the production of parts in Japan, in turn impacting Japanese companies’ production in plants overseas. In our case, though, we saw very little drop in our production outside Japan. Immediately after the quake, we brought factory managers from all over the world—the United States, Europe, China, Thailand, Indonesia, and so on—to the Nissan Motor Honmoku Wharf, our main distribution base in Japan. In all there must have been around a hundred people there. All these people from different parts of the world worked to coordinate the logistics. They looked at the production situation in their own countries and the progress in getting parts manufacturing back up to speed in Japan, and they figured out the most effective way to allocate the available parts worldwide. There was no scrambling to get shipments of rare parts for their own factories. This was cross-border teamwork aimed at keeping our global production from falling off. Diversity is one pillar of the Nissan Way, of course, but I was still moved to see how naturally our people achieved this level of cooperation.

  • [2012.02.22]
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