Flailing Japanese companies, government turn to U.S. recovery ‘guru’

by Tomoko Otake

Japan, still struggling to find a way out of its bad-loan quagmire, is looking for salvation from a “guru” credited with turning around whole sectors of U.S. industry.

While remaining noncommittal on any business deals here, Jay Alix has been keenly watching Japan and giving government officials and businesspeople tips on how to get debt-ridden companies back on their feet.

Working as a certified public accountant in New York 25 years ago, Alix was curious about why so many companies were unprofitable.

Curiosity and a close examination of the problem soon became a business. In 1981, he set up a consultancy in suburban Detroit. Around the same time, he was asked to become “president” of a failing company — at the age of 24.

Alix turned the 50-employee electrical appliances wholesaler around, improving the way books were kept, selling off excess inventory and merging the company with another wholesaler.

Word got around, and soon contracts from bigger companies started rolling in.

AlixPartners Holdings today has 275 “turnaround managers,” “workout artists” or “company doctors,” as they are interchangeably called.

While the idea of outsiders giving management directives initially raised eyebrows, the visible results have gradually won them over, according to the 47-year-old Connecticut native.

It is also winning Japan over. Alix was invited to Tokyo in December and was visiting again last month to speak to financial experts about his 25 years of experience as a turnaround manager. One of the conferences was an April 24 meeting to launch the Japanese Association of Turnaround Professionals in Tokyo.

“If we have a sick child, we will truly take our child to the doctor,” Alix told a crowd of 700. “So, too, we must take the sick company, our corporate children, to the company doctors to help them heal and stay well.”

In an interview, Alix suggested that Japan should create a “hospital bank” to separate all of the nation’s bad loans from banks and repair businesses that are struggling with the help of outside specialists.

“I think what’s best for Japan would be to form a new ‘main bank,’ a bank to hold all the trouble,” he said. “This would make the main banks healthy very fast, and would put all the problems in a place where doctors know how to fix them quickly.”

The Industrial Revitalization Corp., which will go fully operational on May 8, has incorporated the concept of turning around sick businesses through outside consultants. Under the IRC, however, bad loans will stay with their banks.

The “hospital bank” is a bolder concept, as it would soak up all of the bad loans from all the banks.

Alix was cautious not to criticize the Japanese government, hailing recent public- and private-sector moves to resuscitate debt-laden businesses as a hopeful sign for corporate recovery in Japan.

But even IRC officials have readily admitted there is a dire shortage of company doctors in Japan. Alix remained noncommittal on whether AlixPartners, or Questor, a $1.2 billion private equity fund he jointly founded in 1995, will branch out to Japan.

In February, Nomura Securities Co., which is operating its own fledgling turnaround business in Japan, was reported to be in talks with AlixPartners about possible tieups here.

Nomura is not yet in a position to announce any progress in the deal, said Takeo Sumino, deputy general manager of the financial institutions department at the nation’s biggest brokerage, adding that Alix is merely “exchanging information” with Nomura, just as he has with various government agencies here.

Alix said he has done “extensive research” on Japan over the last eight or nine months, speaking with business czars, including Nissan Motor Co. President Carlos Ghosn and Jack Smith of General Motors, about business practices here and even hiring university professors and lawyers to carry out research for him. This research, however, is more of an “intellectual pursuit” than an investment, he said.

“The more I learn, the more I do not understand,” he said with a chuckle. “I would only do this if people in Japan thought this was a good idea.”

Alix said the last thing he wants is to be associated with the likes of “vultures” — a breed of foreign investors he described as coming to Japan to make quick money. Alix declined to name any investors in this category.

“Many people have made money in Japan from America, the vultures, who bought the companies, bought the assets, made a fast profit, and they didn’t fix the company and make it better, have it go on and live, have it grow, have it provide jobs,” the soft-spoken yet fast-talking Alix said.

A widower with two daughters, Alix said his perspective on life has changed dramatically since losing his wife in a drowning accident in August 2000. He now focuses on helping people, he said.

Alix is not rushing to decide whether he can help Japan Inc. or not, and he has no need to. After 25 years of living in the fast lane, he now has “enough money” to get by.