Teetering JAL pins hopes on management guru-turned-monk

Japan Airlines CEO Haruka Nishimatsu cut his pay, ate in the company cafeteria and even took the bus to work to help cut costs, but he couldn't stop the once-venerable carrier's financial tailspin.

His anointed successor Kazuo Inamori, a respected entrepreneur and ordained Buddhist monk, is expected to oversee much more radical cutbacks at the debt-ridden airline, which is widely expected to file for bankruptcy this week.

Inamori, the honorary chairman of Japanese high-tech maker Kyocera Corp., is being parachuted into JAL's cockpit by the government to replace Nishimatsu, who is set to step down despite being hailed for his humble management style.

Inamori admitted this week he was a novice in the airline industry.

But he is one of Japan's most well respected business executives and management gurus, having founded both Kyocera and a company that later became part of KDDI Corp., now Japan's number two telecommunication company.

"He's a great entrepreneur, and perhaps entrepreneurship is what JAL badly needs," said Geoffrey Tudor, a principal analyst at Japan Aviation Management Research and former JAL employee.

Inamori is "a very successful man in his own right. He didn't have any personal connections with important or influential people. He worked hard. He has a great personal ability," said Tudor.

"I think Mr. Inamori will help boost the morale of JAL employees," he added.

Inamori, who turns 78 years old on January 30, is a champion of deregulation and a philanthropist who entered the Buddhist priesthood at a temple in Kyoto in 1997 after retirement.

The Kyocera founder created his own "amoeba management" theory whereby each unit of a company makes its own plans under the guidance of an "amoeba leader."

Members of the unit pool their knowledge and effort to achieve business targets, giving all employees an active role.

In one of his books, "Respect the Divine and Love People," Inamori says his management philosophy is based on the many obstacles he has overcome.

"In both my professional and personal life, I have struggled with many dead-end situations which caused me endless agony," he wrote, according to excerpts on his website.

"In those difficult circumstances, I would always go back to the fundamentals and ask myself, 'What is the right thing to do as a human being?' Everything I do in my work is based upon this fundamental principle."

After contracting tuberculosis at age 13, when his home was also destroyed in an air raid, Inamori went on to study engineering and started a small ceramics company that he would transform into a leading high-tech maker.

Now he is Japan's 28th richest person with an estimated wealth of $920 million, according to Forbes Rich List.

He faces a daunting task turning around JAL, which is expected to file for bankruptcy protection on Tuesday to make it easier to overhaul its debts and implement other measures likely to include about 15,000 job cuts.

While the airline -- deep in the red -- is expected to keep flying during its restructuring, equity investors are expected to lose most or all of their money.

Many shareholders have already bailed out and JAL's market value now stands at just $210 million , having plummeted by $1.8 billion in a week.

JAL's financial implosion, analysts say, is the result of a decade of industry crises, management missteps and burdensome government policy that has seen the former state-owned flag carrier lurch from crisis to crisis.

"If you look back there is a trail that leads to pretty much where we are now," said Peter Harbison, executive chairman of the Centre for Asia Pacific Aviation, a Sydney-based consulting firm.

"It's a combination of years of protectionism, of being too close to government, of not taking the really difficult decisions. Not all of JAL's decisions are taken in a fully brutally commercial way."

JAL is hamstrung by heavy costs stretching back to its days as a state-owned flag carrier, as well as Japan's high landing fees and political pressure to service unprofitable routes to small domestic airports, experts said.

JAL has had a troubled record since its 1987 privatisation and a complex merger with domestic carrier Japan Air Systems which was finally completed in 2004 after years of negotiations and integration difficulties.

Asia's biggest airline was also hit hard by the worst global recession in decades because it has sizeable international flight operations.

"The Japanese market is ultra-sensitive. In times of financial crisis the money goes under the futon," said Tudor.

 

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