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Interview

Layoffs will cost you in the long run, Iris chairman warns

Veteran executive confident that employers protective of workers will reap rewards

Companies must make use of all government subsidies and find a way to keep its staff, Iris Ohyama Chairman Kentaro Ohyama said.

TOKYO -- Corporate Japan has acquired crisis management experience firsthand in recent years. Having lived through the earthquake, tsunami and Fukushima nuclear disaster of 2011, Chairman Kentaro Ohyama of consumer products maker Iris Ohyama is battle-tested.

And the 74-year-old is convinced that laying off staffers for short-term relief will only come back to bite employers later, he told Nikkei in a recent interview.

The company is moving face mask production from China to Japan, qualifying it for a new government subsidy aimed at realigning supply chains. Since taking the helm at age 19 with the death of his father, Ohyama has spent more than five decades making decisions that impact those who work for him.

Companies that grind through painful times by protecting employees generate an intangible asset that will make all the difference when the world finally bounces back from the new coronavirus, he says: loyalty.

Excerpts from the interview follow.

Q: Why did you decide to invest in mask production?

A: Our company has been making masks since 2007 to protect us from pollen and yellow dust. We began just with our Dalian plant in China, but we set up a production line at our Jiangsu plant as well in 2013 amid growing demand in Japan, China and South Korea. We helped supply both Dalian and Jiangsu with masks when the coronavirus outbreak spread in Wuhan.

Eventually, Japan's patient count also began to soar, making masks a scarce commodity here. We were thinking that we need to do something just as the government reached out to us, and we decided to invest in mask production in Japan as well.

Q: What are some similarities between Iris Ohyama's response to the current outbreak and to the Fukushima disaster in 2011?

A: After the 2011 disaster, we increased output of LED lights to help the country conserve electricity. This time, we were able to greenlight mask production by renovating an existing but unrelated factory. Both of these moves were possible because we always kept some floor space free in our facilities.

Q: Do you expect the coronavirus outbreak to have a greater impact on Japan than the 2011 disaster?

A: We knew there was a 10-year reconstruction plan after the 2011 disaster, and there was a lot of demand related to that. But it's hard to predict how the coronavirus outbreak will play out, and many businesses are struggling to plan for the future. That's a big difference.

Q: Based on Japan's experience in 2011, what should leaders of large corporations do now?

A: Many Japanese companies have a high capital-to-assets ratio and stable management. While the purpose of a business is to earn money and make profit, the Japanese people also need to be doing well. If companies rashly lay employees off, consumer spending will take a long time to recover even after the outbreak ends.

Business leaders must protect jobs so their workers don't have to dip into their savings. They need to use government subsidies and other measures to mitigate any impact on individual households.

Q: This situation is tough on small businesses.

A: Small and midsize companies with small reserves won't be able to get by if domestic consumption stops for half a year or a year. The government should provide funds so they can keep people employed.

Q: Some businesses have already begun downsizing staff, owing to lost business from the coronavirus crisis.

A: Japan has a chronic labor shortage because of its aging and shrinking population. After the 2011 disaster, companies that let go of employees to deal with short-term losses had trouble hiring and lacked the manpower to take advantage of rebuilding-related demand. That ultimately slowed down their recovery.

On the other hand, companies that toughed it out and protected jobs through the hardest times earned more loyalty from their employees and bounced back faster. I think companies should be patient and avoid cutting jobs for a year after this coronavirus crisis.

Ohyama has run his company for more than five decades, since his father died when he was 19. (Photo by Tokuyuki Matsubuchi)

Q: Will the global coronavirus pandemic alter Iris Ohyama's globalization strategy?

A: No. Taking masks as an example, there's a severe shortage in the U.S. and Europe. We plan to expand mask production beyond China and Japan to the U.S., Europe and South Korea. I believe that as nationalism grows in certain countries, there will be more of a preference for producing important assets domestically.

Q: The inability of companies in outlying areas to reach Tokyo and other big cities is endangering their survival.

A: The coronavirus has transformed retail. Take a company like ours that focuses on home electronics and daily necessities. We have shifted a lot of sales channels from physical stores to online, reflecting demand from people stuck at home.

In e-commerce, it's better from a competitiveness standpoint to be based in a smaller city than to make products in a large city and ship them around the country. Now is the time for regional companies to consider making a serious push online.

Q: You often say that "crisis means opportunity." What do you want to tell the business owners of Japan?

A: Japan's gross domestic product growth could turn negative, but it's hard to see there being a major slump over the long term. After the outbreak peaks, even if a V-shaped recovery is impossible, we should be able to maintain a foundation for day-to-day life. Rather than focus on the negatives, people should try and capture new demand.

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