My Japanology / Smooth communication vital to smooth business integration

Kanshiro Sonoda/The Yomiuri Shimbun

Pontus Haggstrom, president and CEO of FCA Japan Ltd., speaks to The Japan News in Minato Ward, Tokyo.

The Japan News Pontus Haggstrom, president and chief executive officer of FCA Japan Ltd. (see below), has had a career of more than 25 years in the automotive industry. The Swedish native has spent 20 of those years in management positions in Japan. Recently, The Japan News sat down with Haggstrom to talk about Japan, the industry, his company and himself.

Q: Your company’s sales look brisk, particularly of Jeep, American SUVs (sport-utility vehicles).

Haggstrom: Last year, we reached a very important milestone. We sold over 20,000 cars for the first time among our five brands — Jeep, Chrysler, Fiat, Abarth and Alfa Romeo. When we started the integration between Fiat and Chrysler, we were selling about 8,000 cars. We grew to more than double.

A few years ago we launched this strategic mission that we called the 139 plan, and it entails selling 10,000 units through each of our three distribution channels or our brand combinations. It’s like a 360-degree strategy, and we will most probably exceed 10,000 units of Jeep this year. That means that we are reaching the objective two years before our target date, which was 2019. So that’s really positive; and for our Fiat and Abarth brands, which we basically categorized as one franchise for us, we will also reach 10,000 units. Abarth by itself is one of the fastest-growing foreign brands in Japan.

Q: The company launched a new Alfa Romeo Giulia recently.

A: Alfa Romeo sales have been weak so far this year, but we expected that because we didn’t have any product news until September, when we launched a new Alfa Romeo Giulia. From November, more or less, sales of Alfa Romeo will start to grow again quite a lot. Next year, we hope to have a very strong year with Alfa Romeo.

We are just now launching a new Jeep Compass. So as we move into next year, we have the new Giulia, we have the new Jeep Compass, and then next year we are launching more new cars. We are launching the first SUV from Alfa Romeo. We try to feed our growth or to provide more choice for customers little by little with new products.

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  • Kanshiro Sonoda/The Yomiuri Shimbun

    The FCA Japan headquarters houses a unique space called the “Green hill,” which was proposed by Pontus Haggstrom to facilitate communication. Employees often hold meetings there.

Q: What about the Chrysler brand?

A: Chrysler is part of our line-up, but [there is only] one model for us. It’s the Chrysler 300, which is a large full-size sedan. It’s the same size as a Toyota Crown or Mercedes E-class. The total segment is going down — shrinking every year — because fewer and fewer people buy big sedans in Japan.

Q: German brands have had a strong presence in the imported car market in Japan for a long time.

A: Sales of imported cars have been growing little by little over the last several years, and it’s very encouraging because the share of imported cars is still very low. It’s smaller than any other country in the world, and of course we want to penetrate more of the Japanese market with our brands. You talked about the German cars, but I think you have a couple of things happening.

One is that the foreign manufacturers are making more effort in Japan, so there are more brands, more products. People sometimes talk about automakers shifting focus to China, but I think foreign automakers are still putting a high, very high value, on the Japanese market and consumers. So we all try to introduce more vehicles. There are more, [and] there are cheaper import cars like the Fiat 500. You can now buy a Fiat for under ¥2 million. There are many foreign cars that you can buy for under ¥2 million. Ten years ago that was impossible.

Q: Do you have any thoughts about the change in the Japanese perception of import cars?

A: I think that there are two things. One is that the foreign car makers have done a lot to improve quality and extended warranties, and offer maintenance programs.

I think it’s also a generational thing. You have the generation, maybe the baby boomers, who experienced the growth of the import car market in the early 80s. Those cars were very different. So there was, you know, the 1989 Lexus that was born.

In those days, foreign cars, maybe in some aspects, didn’t have as high quality, and they were not adapted for the Japanese market ... But those people may still remember the foreign cars that maybe they had problems with, and it was a very emotional choice — they were expensive, and maybe not so reliable.

For Jeep, for example, our average buyers are the youngest among the import makers, 35 or something like that. And those people who got their driving license maybe around the millennium, maybe 2000, they don’t have that history and they approach foreign cars with, how should I say, with fairness, with an open attitude. When they experience and drive their cars, they see that, “Oh, this is great.” So I think it’s a generational change.

Q: Two of your big companies merged and you had to integrate those two cultures into one.

A: It was a very interesting journey, a very interesting experience because we had a corporate integration happening and then in parallel we had an integration happening in Japan. I came from Fiat. Fiat hired me, so I came into the Fiat side of the business, and we had an office in Shinagawa [in Tokyo]. It was small, red colors, glass, organic shapes, very Italian – stylish, but not practical.

And our Chrysler office was in Odaiba — wood on the walls, very American, heavy, cubicles — and we were thinking ... of course people have their [preference], talking to the U.S. for many years or talking to Italy for many years, and they had passion for the brands.

So one of the things we did was this office; the physical change, we did on purpose. We could have squeezed everybody into one of the other offices, but we decided that we needed a fresh start physically. So I think that helped a lot, and then we were very clear with exactly what would happen, again with communication, because when you talk about integration, people think about losing their jobs, they think about many negative things — uncertainties — and we were very honest, transparent, about the steps we would take, when we would take them, what the impact would be so that people would as much as possible be comfortable and be part of the change process.

And then we actually started focusing very much on our brands to show people that this was an operational integration.

Q: I noticed your office is quite open.

A: We purposely made an open office so that people had to communicate with each other — not little boxes where people can hide.

We purposely started these kinds of quarterly communication meetings. We purposely started to have small parties in the office to break down the barriers and to encourage communication. And I think very quickly people realized that they were actually part of something bigger, something stronger, something more organized that would generate better results for the business and give them greater opportunities.

And we are quite interesting because we have so many brands. Even though we are one group, we deal equally with Italian culture, with American culture, we have a regional office in China.

Q: You reorganized your sales channels as well. How difficult was it for you, and what was the greatest obstacle?

A: I think actually we didn’t have huge problems. Part of the reason is that we communicated very early and very clearly. We explained to our partners that in two years, this is what we want, what we are thinking about. These are the steps — one, two, three. So please join us, please understand the strategy and let’s move towards this vision of sales and vision of dealerships ... Our dealers basically understood, accepted it and finally thought it was very positive.

Q: Because you have spent a long time here, could you give me a brief idea of what you think of Japanese corporate culture in general?

A: I’ve spent time in many other countries too. There are pros and cons with every corporate culture. I think one of the good things in Japan is that when you decide something, basically people move. I think the power of the collective is very valuable. In Europe, you would decide something and then people decide if they want to join or not.

In Japan, I think once you decide and you go, people move. And everybody moves at the same speed and with the same focus, and that’s very powerful. But to make the train move requires more. You need to put in more effort beforehand than in other countries, but the results after, I think, are much greater. So that’s one of the reasons I spend a lot of time trying to communicate a lot, spend a lot of time on ... meetings, planning meetings, realignment meetings, so that everybody understands what the direction is. Not just the direction, but why. It’s very important, right? Why we are doing this and how to do it ... and when everybody is comfortable, the train moves. And when the train moves, it’s difficult to stop. You have momentum. And I quite like that. But you need to spend time upfront to plan and prepare and communicate.

Q: If that’s a pro, what’s a con?

A: I don’t think there are too many cons, but maybe I’ve been here too long.

Funny gifts from Japan

Q: When and why did you come here the first time? What were your impressions back then?

A: I came here in 1989. My father was in the automotive industry. He traveled frequently to Japan, and when I grew up as a teenager, he would come back with funny gifts — a big Buddha and big strawberries — from Japan, or with interesting stories. I developed this certain curiosity about Japan. So when I went to business school, I managed to get a scholarship and an internship, and I came to Japan because I wanted to see Japan for myself.

So I started as an intern at Volvo during my business studies, and it was 1989, I was 24 years old, it was still in the middle of the bubble.

Q: When Japan was climbing up through a bubble economy.

A: It was a very positive time to be in Japan because everything was possible, everybody was happy, and I had a really great impression of Japan. So much so that I ended up staying here, and I started a company with some friends and we ran that for a while, and then I went back and finished my business degree.

But I had already fallen in love with Japan, and so when I left business school, I was fortunate enough [that my] first job was in Japan. So as soon as I finished business school, I stepped on a plane and moved back to Japan and started working for Saab, a Swedish car company, which at that time was part of the GM [General Motors] group. And then I worked my way up in different positions and left Japan, [then] came back to Japan.

So there was always some kind of boomerang, some kind of magnetism ... that sucked me back to Japan. And the same thing happened nine years ago. I was working for GM in Europe in Germany, and I got a call from Fiat to ask me to join them and go to Japan. I was very happy to come back, of course.

Q: Which aspect of Japan were you particularly drawn to?

A: I realized that I think Swedish character traits are quite similar to Japanese. I like the fact that Japanese show a lot of respect for other people. Japanese tend to listen before they speak. In some cultures, they speak before they listen. [Japan] has become home.

This interview was conducted by Japan News Assistant Editor Takeshi Nagata.

Pontus Haggstrom was appointed president and CEO of what was then Fiat Group Automobiles Japan Ltd. in 2008. In 2012, he was also made president and CEO of what was then Chrysler Japan Ltd. He has since been the driving force behind the operational integration of both companies — starting with the establishment of Fiat Chrysler Japan (Now FCA Japan Ltd.), also in 2012. He has also worked at Volvo, Saab and General Motors. Haggstrom is the longest-serving CEO among the major imported car brands in Japan. He was born in 1965 and has lived and worked in numerous countries.

■ FCA Japan Ltd.

Established in 2012. The company adopted its current name in 2015 and “restarted” as one of the biggest car importers in Japan. FCA Japan offers five brands: Alfa Romeo, Abarth and Fiat from Italy, and Chrysler and Jeep from the United States. The company achieved annual sales of over 20,000 vehicles in 2016. The 2017 figure is expected to be higher. FCA Japan has about 100 employees. Net revenues of the parent company, Fiat Chrysler Automobiles, in fiscal 2016 reached €111 billion. Worldwide combined shipments reached 4.7 million units in 2016.Speech

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