By Mariko Sanchanta
As an American about to become CEO of a Japanese company, Craig Naylor is a rarity.
Later this month when he assumes the helm of Nippon Sheet Glass (TKS:JP:5202) Co.—a big maker of sheet glass for the auto and construction industries—he'll become one of a handful of foreign chiefs of Japanese firms. His peers include Howard Stringer of Sony Corp. and Carlos Ghosn at Nissan Motor (TKS:JP:7201) Co.
In a rare move in Japan, where lifetime employment and seniority-based hierarchy is the norm, Nippon Sheet Glass conducted an external CEO search and chose Mr. Naylor after eight months, wooing the 61-year-old out of retirement after a long career at DuPont Co.
The company already has one of the country's more outward-looking cultures. After buying U.K. glassmaker Pilkington PLC two years ago, which was twice its size, Nippon Sheet Glass made English its official language. Four members of its board are foreigners. But Mr. Naylor says further diversifying his staff and identifying talented younger managers are among his first priorities.
He'll need top talent to tackle Nippon Sheet Glass's formidable challenges. It's been hit hard by a drop in demand for automotive glass. The company reported a net loss of 41.3 billion yen, or about $451 million, for the fiscal year ended March 31, compared with a loss of 28.3 billion yen the previous year. The company gets about 40% of sales from Europe, and shares have fallen since April 30 in the continent's debt crisis.
Mr. Naylor is betting on emerging markets for growth, especially South America, Eastern Europe and China. Nippon Sheet Glass recently unveiled a joint plan with Compagnie de Saint-Gobain (PAR:FR:SGO) SA, its French rival, to build a new flat glass plant near Sao Paulo to supply Brazil's construction market.
In an interview, Mr. Naylor shared his plans for managing the company back to growth.
WSJ: You lived in Japan from 1987 to 1991 while was working at DuPont. What did you learn then that you can apply now?
Mr. Naylor: For this job, the most important lesson was being on the receiving end of plans developed by headquarters [at DuPont], back in Delaware, and looking at the plan from a Japanese market perspective and realizing it wouldn't work here. It may be good for the U.S., but it's a U.S. plan transported to Japan without much local flavor baked into it.
I decided after going through a number of those types of iterations that if I was ever running a global business, I would create a multicultural, multiregional team that would have input into the strategy —not just for implementing the strategy, but for creating the strategy.
WSJ: Do you think Japanese companies are behind peers in terms of adopting global practices and hiring more outsiders to join their board?
Mr. Naylor: I have observed the DuPont board and I have been on the Delphi board, and those boards are more multicultural in their make-up.
But if you ask most boards of multinational U.S. corporations if they would like more non-U.S. representation, I'll bet most of them would say yes. They're not satisfied. So I don't think they've reached the promised land either.
WSJ: Does everyone at Nippon Sheet Glass speak English?
Mr. Naylor: The company has declared English as the language of the company. [But] I have been telling staff to purge idioms and slang from business communications. You have to get that stuff out because it's unintelligible to the Japanese.
Some people believe that the onus is on the Japanese to learn English, but in the meantime the responsibility is on the English-speaking people to make yourself understood. You need to meet them more than halfway. When I first came to Japan I tried the idioms and spent 15 minutes explaining why this idea doesn't have a snowball's chance in hell.
WSJ: What are your most pressing tasks?
Mr. Naylor: The most pressing task, I think, is improving our financial performance: earnings and cash flow so we can achieve the level of financial flexibility that we need to be more aggressive in our pursuit of capital, new acquisitions, whatever it might be.
WSJ: Are there tentative signs that automotive or building industry demand is starting to recover?
Mr. Naylor: There are some signs, particularly in the emerging markets, that both automotive and building demand have stabilized and are improving. It's not the V-shaped recovery that people are talking about—it's not that dramatic, but it is improving.
WSJ: Where are you growing in emerging markets?
Mr. Naylor: At the top of our list is South America, Eastern Europe and China. We have a very strong position in South America and there are good economic signs down there, particularly in Brazil. And [in] China, the raw demand for the building and car industry is growing like crazy. Most people think China is a low-grade, commodity market, but very rapidly the value-add segment of the market is growing quite fast.
Write to Mariko Sanchanta at firstname.lastname@example.org