Teaching the St Helens way in Japan

May 28 2008 by Alistair Houghton, Liverpool Daily Post

The ex-chief of glassmaker Pilkington has secured a key role in Japan. Alistair Houghton reports

WHEN Stuart Chambers was named chief execu-tive of Japan’s Nippon Sheet Glass, it raised eyebrows in Tokyo.

Now the man who used to be boss at glassmaker Pilkington plans to teach the St Helens way of business in the Land of the Rising Sun.

Having a Gaijin – foreigner – at the helm makes NSG a rarity on the Japanese stock market, and analysts were quick to proclaim that he had pushed through the “bamboo curtain” to secure such a prestigious role.

Chambers was chief executive of Pilkington before it was taken over by NSG in 2006, and was already NSG chief operating officer.

The deal was not a reverse take-over – NSG remains headquartered in Japan – but Pilkington was twice the size of the original NSG.

The Japanese group bought Pil-kington because it wanted to move outside its Japanese and East Asian heartland – and Pilkington, operat-ing in 26 countries, fitted the bill.

Japan has a reputation for conser-vatism and even protectionism in business. Chambers, who is happily adjusting to life in Japan, would not put it so bluntly – but he says Japan-ese companies must change and adopt the flexible and international approach of companies like Pilkington if they are to thrive.

He said: “Forget NSG – Japan Inc needs to change for its own good.

“Public companies in Japan that need to continue to expand inter-nationally to be successful in the future have to make the transition from being Japanese or Asian busi-nesses to being global businesses.

“A number have done it success-fully, like Toyota, but of those that have tried to do it through acqui-sitions, some have really struggled.

“People are looking at this exam-ple with quite a lot of interest, not because we’re super big or impor-tant but because we’re doing some-thing that’s relatively untested.”

Japanese employees are becoming aware that they will have to adapt to Pilkington ways.

“A lot of the employees and managers are expecting that the whole group will be run like the Japanese company used to be run,” he said.

“To be a successful global com-pany, you cannot just do things the Japanese way. For example, do you just promote someone because they’ve got older and they’ve been around for longer?

“We need to adopt internationally relevant processes. They happen to be things Pilkington used to do.”

Asia is familiar territory to Chambers. He was born in Brunei to a family working in the oil industry, spent his childhood in Singapore, and describes himself as “interna-tional to my blood and bones”.

On graduating from University College London, he joined Shell at its Stanlow refinery, in Ellesmere Port, as a process technologist, studying in the evenings at Birkenhead Technical College. He spent another seven years at Shell, moving into sales and marketing, before moving into management at confectionery giant Mars.

Chambers joined Pilkington in 1996 as a group vice-president, becoming chief executive in 2002.

It was Pilkington that developed the float glass process to produce flawless sheet glass – now 90% of the world’s glass is made that way and the process is licensed worldwide.

By the mid-1990s, Pilkington had some 39,000 employees around the world and operated in 26 countries, but had plunged into the red.

Chambers said: “By the mid-1990s it had got ahead of itself, adding people and costs, but had lost focus on being operationally efficient and being profitable. That was partly because licensing income from tech-nology was partly supporting profit and loss, but we had our eye off the ball in operations on the ground.”

That led the management team to launch the Step Change programme to cut costs. Over 10 years, the com-pany’s workforce fell to 24,000 – but its turnover remained unchanged.

NSG first acquired a shareholding in Pilkington in 2000, and in 2001 upped its stake to over 20%.

Chambers says the group’s chair-man, Yozo Izuhara, was thinking about a bid for Pilkington at that point, but it took time to get the sup-port of the board. The first formal bid was made in late 2005 and negotiations began.

Crucially, Pilkington’s own turnaround plan was bearing fruit, and so the group was able to hold out for a higher offer than the initial £2.07bn bid.

Chambers said: “If NSG had got its act together, it could have bought the company for less. But that’s life.” Pilkington accepted a £2.2bn bid from NSG in February, 2006, and the deal was confirmed in June.

NSG now employs some 2,000 people in the North West, predomi-nantly at its four St Helens sites and its research site in Lathom, near Ormskirk.

It is a far cry from days when Pil-kington employed 15,000 people in St Helens, but the company’s regional roots remain important to Cham-bers, who chairs the North West Business Leadership Team of senior regional business leaders.

Some of NSG’s key nerve centres are now based in the North West. Chambers is proud to point out that the group’s global IT team, with ex-pertise in several languages, thanks to the former Pilkington group’s global reach, is staying in St Helens.

Last month, the company ann- ounced plans to invest £40m in one of its sites in the town, safeguarding more than 230 jobs. That investment was secured thanks to a £3m grant from the Department for Business, Enterprise and Regulatory Reform – a move Chambers sees as a positive commitment to UK manufacturing.

“It wasn’t very clear whether we would put the investment in the North West of the UK or in Germany,” he said. “All things being equal, it would have made more sense to go to Germany. But the Government decided this sort of investment in technology gave a good opportunity to create real qual-ity jobs and prosperity. It was prepared to put up a grant that tipped the balance.”

When BTR made a hostile take-over bid for Pilkington in 1986, it led to demonstrations in St Helens as the board, unions and local politi-cians joined to repel the approach.

The NSG deal, however, went through without fuss. That, says Chambers, is a sign of how the UK has become used to foreign com-panies changing hands.

“In Japan, there is a completely different view,” he said.

As there was little overlap bet-ween Pilkington and the old NSG, Chambers says there was never any question of major job losses. The takeover has, in fact, meant that the Pilkington name is bigger as it expanded into new Asian markets.

NSG has decided to brand all of its building and automotive glass busi-nesses – including the former NSG flat glass businesses in Japan, Mal-aysia and Vietnam – under the Pilkington name.

Flat glass production makes up 90% of NSG’s business and made up a whopping 98% of the former Pilk-ington business. But not everything in Chambers’s garden is rosy.

Last year, Pilkington was fined more than £100m by the European Commission for being part of a “price-fixing cartel”. It has decided not to appeal against the fine.

The company is also awaiting the result of a European investigation into alleged price-fixing in the automotive glass sector. Chambers, on legal advice, will not talk about either case.

The world economic downturn is also hitting NSG hard. Last week, the group announced its 2009 profit could be down as much as 60% on this year’s £246m, thanks to chal-lenging economic conditions and rising raw material and fuel costs.

Chambers is fearful of a potential recession as the credit crunch con-tinues to bite, but says the short-term problem is rising energy and fuel costs. Prices of raw materials such as soda ash are also rising. But he says the long-term prospects re-main bright, and that cost-cutting steps in Japan will pay dividends.

Chambers now spends just a quar-ter of his time in St Helens. Half his time is spent in Tokyo, while his remaining time is spent at other NSG plants worldwide.

Tokyo was a largely unfamiliar city to Chambers, but as he gets to grips with speaking Japanese and finding his way through the urban jungle, he has grown to love his second home.

Chambers’s enthusiasm for his job shines through, but he admits that leaving his Cheshire-based family for such long periods takes its toll.

His two daughters are away at university but son Oliver, 15, still lives at home.

“He expects me to be on the touchline watching him play rugby or cricket,” Chambers said.

“It’s tough when I’m not there. It was my birthday on Sunday, which I couldn’t get home for. For me, it’s no big deal, but I’ve learned that for my son it was a real disappointment.”

alistairhoughton