A sponsor for Nova? The Nikkei remains doubtful

33 Responses to “A sponsor for Nova? The Nikkei remains doubtful”

1. On behalf of the Lay on November 5th, 2007 9:20 am

   As a professional concern the administrators are clearly interested in being successful, but in so doing aren’t they implicated in the public relations pageantry of the process, and can they not help but do this in one form or another? Isn’t it a necessary extension what they’re doing in the first place? I can imagine why someone would have leaked that twevle sponors are interested in helping rehabilitate Nova. I can’t imagine, however, this being true. The campaign (which wasn’t actually a diffcult one) to place Nova’s buisness failures squarely on Sahashi has, at the very least, given the appearance of a relatively reformed management. But still, this is stretch. Nova’s current liabilites are incredible; is there a word for its long-term liabilites? If Nova is broken up, how so, and what does it look like in the aftermath?

2. WG on November 5th, 2007 1:18 pm

   I can imagine why someone would have leaked that twevle sponors are interested in helping rehabilitate Nova. I can’t imagine, however, this being true.

   That’s what I’m hearing from people. At least, there can’t be twelve companies interested in taking it all over. There are probably several that want a piece of the action, to let them expand just a bit in one area, but what would they really get? A location with bank rent due might be cheaper than getting a new lease, but would the landlords even go for that?

   It’s amazing that so few people seem to believe a word of what’s being said, or have faith that these guys know what they’re doing.

3. nokimo on November 5th, 2007 5:22 pm

   When will it all end? I got a call from Foreign Personnel today that they have recieved my resignation. I can’t believe he’s volunteering his time. How many Nova staff and officers are still getting paid?

   I heard a few days ago that all the AAMs were invited to Tokyo for a meeting. Nova was paying their transportation. How does that work? How many other meetings are taking place among the Japanese staff that we don’t know about?

   I remember hearing that the bankruptcy administrators had set a date of November 5th to decide on a rehabilitation plan or give up and liquidate. Is that still in effect?

   Why are hard facts so hard to come by? The Labor Office interviewed monkeyman a few days ago. What are the results of that? Why isn’t he in jail.

   I want Nova to stop. Now. Pay as much as can be paid to students, staff and teachers and end it!

4. Ron Vanden on November 5th, 2007 6:38 pm

   “I want Nova to stop. Now. Pay as much as can be paid to students, staff and teachers and end it!”

   My sentiments exactly.

5. Ron Vanden on November 5th, 2007 6:44 pm

   This was posted today on NOVA’s website:

   To All Instructors and Staff Members

   We explained on October 26th that we would determine the prospects by today (November 5th) regarding whether an appropriate sponsor could be found, and that if this was found to be viable we would proceed to select a sponsor, otherwise there would be no choice but to start bankruptcy proceedings.

   Since that time we have been approached by around 10 companies, and we have started considering the details and screening these companies. We would like to determine the sponsor by Thursday this week (November 8th) at the latest, and we would like to prioritize the protection of as many as students as possible, and ensure the job security of as many as staff members and instructors as possible.

   As we will proceed in this way, we ask that you wait at home until November 8th. We plan to hold another explanatory session when the stage of a definite announcement is reached, which we will notify you of later.

   Interim Trustees:
   Toshiaki Higashibata
   Noriaki Takahashi

6. On behalf of the Lay on November 5th, 2007 7:51 pm

   Wait at home? Really! That’s laughable. The trustees are stalling.

   “We plan to hold another explanatory session when the stage of a definite announcement is reached, which we will notify you of later.”

   So what exactly is the November 8th announcement all about?

7. Huth on November 5th, 2007 8:13 pm

   Wow…that’s unimpressive. Please tell me that no one is actually sitting at home waiting for these guys to decide their future. I imagine people either have other work or have realized it’s best to get out of the country by now.

8. Bp on November 5th, 2007 8:40 pm

   Sounds like the trustees are using the same fax template that Saruhashi used. November 8th will most likely be the date that they announce they need just a few more days..

9. saneman on November 5th, 2007 8:41 pm

   Gee, they sound just like Sahashi. It will be decided by such and such a day, ahh actually please wait until this day……..Whats next, we are deeply sorry, the dark clouds blah blah, please wait.

10. nokimo on November 5th, 2007 9:12 pm

    How are these two trustees different from Saruhashi and his faxes promising to pay, promising to pay, promi . . . .

    We are screwed!

11. Crease on November 5th, 2007 9:43 pm

    They seem to be utilizing classic Sahashi stalling tactics here. Wait until the 19th, wait until the 25th, wait until the 5th, wait until the 8th. These guys learn fast; Sahashi must be coaching them (but then they would have said “around November 8th”. I heard that AAMs were calling instructors to see whether a restructure/return to work was possible, some friends said they would. Now that’s unbelievable. Mystery investors? Sounds familiar. The rumor is Wal-Mart wants to get their hands on Nova.

    Wait at home, good idea, if you haven’t been evicted. Probably the only place you can go now you haven’t been paid for 6 weeks, have no health insurance and no money.

    I wouldn’t trust Nova to change very much even if a sponsor was found, the AAM’s will be the same so the mentality will be the same. They will still be using that sad excuse for a textbook. The company is rotten to the core, it should just die so everyone can move on and so English teaching in Japan can finally shake off the Nova legacy.

12. Another Angry NOVA Teacher on November 5th, 2007 10:02 pm

    I was waiting ‘at home’ up until today. I was hoping i would have the chance to join the ‘New Nova’ get my back pay and then quit. Just had enough and today I faxed in my resignation to finally get it over with.

    Ive had a job lined up back in Australia for a few weeks, i was just hoping to gain a small piece of vengeance before I flew out (ie get money that rightfully belongs to me anyway). Im sure lots of other instructors are/were thinking the same thing.

13. Ano Ne on November 5th, 2007 10:57 pm

    I was speaking to one of my private students this evening. He came in and asked whether I knew the nova lawyer. I wasn’t sure what he meant at first but it turned out he personally knows Toshiaki Higashibata, one of the trustees. He told me he’s a decent guy who has done pro bono work to help people out in difficult situations and tends to dislike shady businesspeople (like saruhashi.) He also told me he oversaw another big meltdown like nova’s - Recruit I think it was - and was a fairly well known face. I’m not saying he can pull rabbits out of hats for the people who’ve been ripped off by nova but, if what the student said is correct, he sounds like the right man for the job.

14. MetSahashiManyTimes on November 6th, 2007 10:29 am

    I think the teachers ought to give the administrators a chance. Sahashi, as it turns out, was a criminal in my view and has thoroughly destroyed what was once a decent franchise. The administrators have a tough job. I personally think no firm will take over Nova as is with all its obligations. I may be wrong, but I met Sahashi almost everyday to try to help him raise funds to bail out his company. In the end I failed because he was a unable to present his case to investors. One man rule only works when things are going very well and growth/earnings paper over mistakes. When he needed help, he was alone. Back to the topic, the administrators have no incentive to deceive teachers, give them the benefit of the doubt. And I think the teachers and your union ought to be taking a non-hostile stance to the administrators and any company they bring in to discuss a takeover. No white knight company will want to come in and take over a company with a hostile and angry union at its core. There’s not much downside to good relationship from here on out, and there certainly is upside. Hey I truly wish you guys luck. I tried my best to help before it all hit the fan.

15. Huth on November 6th, 2007 11:40 am

    MetSahashiManyTimes, You don’t really seem to know much about the situation at all. I’m suspicious of your claims. I agree that no one will buy them out, but it’s because the business model itself is not very good, not just because Sahashi did so much damage.

    The administrators have a tough job - which is exactly why I don’t feel confident they can do it. If it were an easy job, I’d feel good about it. What Sahashi did doesn’t matter. The business model is simply not that good.

16. MetSahashiManyTimes on November 6th, 2007 1:45 pm

    I guess your the expert Huth. You seem to be able to judge how much I know based on the little that I have said. Who can argue with that? No point in arguing with someone of your phenomenal knowledge. My point was simply that the teachers should work with the administrators. I leave the comments about the business to you since you are the expert.

17. MetSahashiManyTimes on November 6th, 2007 2:04 pm

    On second thought I agree with Huth. Shocker business model. Sales doubled in seven years to 2004, and it was nearly the case that gross profits also doubled. Operating profits were also strong and might have been stronger if Sahashi wasn’t lavishly spending SG&A. This guy burst onto the scene in the early 1980’s and at one time nearly built a monopoly market share in his business and basically ran it successfully for 20 years. At least if you measure success quantiatively. Terrible business model. Yes, I think Huth is right. Now don’t take what I have written above to suggest I think Sahashi was a good business manager. Rather, he got lucky, his model is designed to work and sustain itself as long as student numbers are rising, and he was able to break the rules now and then while the government looked the other way. As well, the basic business model of high volume- low cost seems to me to have worked for awhile. Yes, quite awhile. Sahashi’s mistake was not recognizing that he could treat students and teachers much better and it would add value to the model. And, despite your suspicions Mr. Huth, I did meet Sahashi almost everyday for a week before the collapse and you know what? You remind me alot of him.

18. Ken Worsley on November 6th, 2007 2:51 pm

    MSMT,

    Thanks for your comments. There are a few unhelpful commenters who seem to enjoy provoking people and pounce on comments. I recommend ignoring them.

19. W. Anthony Malcolm on November 6th, 2007 3:33 pm

    Does anyone think there is the possibility of a group of firms coming in and taking over the show? Does Japan even have a consortium system where a group of like minded companies band together to do something and feed a specific interest? That, to me, would be the most viable option. Although, what would the management be like?

20. MetSahashiManyTimes on November 6th, 2007 4:04 pm

    Mr. Malcolm. As part of the process of trying to find a solution to Nova’s problems, other English schools were queried as to their interest. The problem there turned out to be twofold: 1) Nova was too big for them to swallow, and 2) they were aware of some of Nova’s problems. You see, Nova’s business model called for students to put up the cash for their lessons ahead of time. The money turned out to be free, non-interest bearing, cash for the firm to do what they wished with. But rather than hold that cash in safe assets in case of the advent of a perfect storm, the company invested it unwisely or just plain squandered it. Now that students have begun leaving (did you realize that student numbers were falling even before the court decision earlier this year?), the company has had a negative cash flow. Best I could tell, the company was able to generate positive cash flow monthly of about 1bn yen. But now the outflow is about 4bn per month as they are obligated to return some of that prepaid cash to students. So they have a shortfall. Worse the news and rumours get, the more students leave. So from virtuous cycle to viscious circle. One of the reasons I failed to help Sahashi raise money is he was asking for between 4-6bn yen in equity linked investment. All good so far. But he couldn’t tell investors how he came up with that number. When we dug deeper we realized that he was asking for cash that would only sustain him for about one or one and a half months. So his hypothesis? He said when the announcement of the funds was made, in conjunction with a very positive mid-term plan for restoring profitability etc, the sun would rise and shine on Nova and students would stop leaving. That just didn’t seem to make sense. On top of that, he couldn’t produce even a simple sources and uses financial statement that demonstrated the figure he said he needed was reasonable. So now that the viscious cycle has begun, any firm thinking to take over Nova has to have a reasonable chance of stopping the outflow. But with all the news and media attention on Nova, even other schools are struggling now. Very difficult to save this franchise I reckon. I feel for those English teachers that were not responsible and now having to leave their apartments. A lawyer should be consulted or weigh in here but my understanding of the laws here suggest that none of those teachers should leave and that their landlords don’t have the rights to evict them. I am not sure if they can really turn off the electricity but I doubt it. I wish someone would comment on this as some of those teachers are signing documents to agree to leave and I suspect they don’t really have to.

21. Ken Worsley on November 6th, 2007 4:21 pm

    A lawyer should be consulted or weigh in here but my understanding of the laws here suggest that none of those teachers should leave and that their landlords don’t have the rights to evict them

    Absolutely. The one piece of advice I feel confident in giving is never sign anything without aking
    a lawyer what their opinion of it is.

    I do think the firm would be more likely to be broken up than run by a consortium. There isn’t enough time
    to get the management in place, it seems.

22. Crease on November 7th, 2007 12:11 am

    Seems a sponsor is found, G Communications (G Education). They have some English schools in Hokkaido (EC English) and plan to open just 30 Nova branches (3%) at first. Check out this link for some info on the company. http://www.letsjapan.org/?q=horror_in_hokkaido.html

23. Eto on November 7th, 2007 1:02 am

    http://www.nikkei.co.jp/news/main/20071106AT5D0604406112007.html

24. Guy on November 7th, 2007 1:03 am

    The sponsor has been announced:

    http://www.yomiuri.co.jp/atmoney/news/20071106i117.htm?from=main1

    30 branches to be opened again initially, eventually 200.

25. WG on November 7th, 2007 1:26 am

    EC English? Aren’t they infamously bad?

26. Huth on November 7th, 2007 1:31 am

    There are a few unhelpful commenters who seem to enjoy provoking people and pounce on comments. I recommend ignoring them.

    Being a skeptic is unhelpful? I just don’t buy the story.

    despite your suspicions Mr. Huth, I did meet Sahashi almost everyday for a week before the collapse and you know what? You remind me alot of him.

    Sorry that you feel so defensive about my skepticism. That’s such an easy insult to toss around. If someone you’ve never met reminds you a lot of someone, I take it you’ve never met the other person as well.

27. Ken Worsley on November 7th, 2007 3:09 am

    Huth, you’re out of line. One and only warning.

28. MetSahashiManyTimes on November 7th, 2007 4:04 am

    Hey Ken, thanks for your words of support. Shame that some posts cannot just be kept off this site as I think it is, on the whole, very education and worthwhile. To Huth, I would suggest you don’t “buy the story” because you haven’t done enough homework on the company. The sharp growth over the years of this firm suggest something was done right. You cannot accept that. I spent months looking over this company’s figures and also received much that was not made public. I have been an analyst in Japan for 17 years, it is what I do for a living. Your post was not skepticism, it was insulting. I would suggest your not adding value. There is, by the way, much more to tell on this Nova story. One of the interest aspects Ken is the role of the government. There are some things that Sahashi notes that are probably true. I believe the government encouraged him to grow as rapidly as he did and looked the other way on his transgressions for awhile. Then, the bureacrats being what they are, decided to hit back hard and, literally, put the livelihood of many teachers at risk and may nearly destroy this industry as they have done with the sarakin and the housing companies recently. I know alot of the details on Sahashi’s interaction with the government. I know that the government looked over his contracts and methods once in the past and told him, with verbal guidance, that he was not afoul of the new contract laws adopted a few years ago. This is the primary reason Sahashi was bold enough to take his case to the courts….alas he was a fool.

29. Ken Worsley on November 7th, 2007 4:37 pm

    I think it was back in 2004 that METI greenlighted Nova’s refund policy, though commentators at that time thought it was clearly illegal anyway. It was in the news then, but not much was made of it.

    There has been a quick change to side with the consumer. Saruhashi probably did not depend on the Supreme Court ruling against him and METI coming down so hard, but METI has been doing that in other industries as well. I agree that a lot has been allowed to go on and the crackdown has been tough, but it’s good to see that the government is finally realizing that bad business practices in the services industry are literally causing pain in the economy.

    I don’t think the government has dealt with things in the best way possible, but I never counted on them being competent enough to. After Aneha, any construction firm that did not work the expectation of stricter regulations in the future into its risk management probably suffers from a lack of competent management.

30. Garrett on November 7th, 2007 11:14 pm

    Ken, you’re onto something. Ultimately, Saruhashi was a fool for not adjusting to the changing tide of consumer protection and for depending on an illegal practice condoned only by a verbal assurance from often politically-motivated bureaucrats on whom there is little practical check. Japanese law is codified, not common law, I’d assume (possibly incorrectly, I grant) that using verbal guidance as the basis for a defense against an infringement of written laws or regulations is unlikely to work.

    More to the point, whatever Nova’s successes in the past, however well its business model once worked, posting losses for a couple of years and being barraged by customer complaints, but not making customer satisfaction a priority in a service business is just stupid, bad business.

    On a lighter, far more trivial note, MSMT, you might be in a position to answer a question that sparked many a trivial debate: When did Saruhashi start calling himself Sahashi, was that a legal name change, and why did he do it? Have his family also changed their names? (This is actually a question, not a snarky trivia test or anything.)

31. MetSahashiManyTimes on November 8th, 2007 6:30 am

    Ken, Garrett, you guys are spot on. Sorry I don’t know when Sahashi decided he didn’t like the Saruhashi pronunciation of his name, but I know he really didn’t like to be called Saruhashi. Bottom line with this guy is that he grew arrogant and therefore stupid. He apparently had made some big decisions (rolled the dice) related to his company’s strategy a few times over the previous decades and things always turned out well. His “roll of the dice” a few years ago to enter a period of hyper growth was, in retrospect, a mistake and his last roll. Financing it with debt compounded the risk. And, Garrett, as you rightly point out, not adjusting to the new environment from about 2004-05 was the nail in the coffin. When I brought investors in to see the man, he was chain smoking. That used to be more normal in Japan but at least now on those rare occasions where it is done a spokeman usually asks the guest if it is alright. He also answered his cell phone in the middle of meetings and just left the room a few times without saying anything. The first meeting I had with him was in a Tokyo version of his love hotel office. I asked him never to use that room again. Alas, he wasn’t the right guy to represent the company in its time of need.

32. WG on November 8th, 2007 1:11 pm

    >>When did Saruhashi start calling himself Sahashi, was that a legal name change,

    Are you implying that Saruhashi did something legally?

33. G.communication announced as sponsor for Nova : Japan Economy News & Blog on December 2nd, 2007 11:31 pm

    […] the Nikkei is right, G.communication will take their share and the rest of Nova will be liquidated. I had been hoping (but not really expecting) that some sort of regional breakup would happen, and that more people would be able to keep their jobs. I did not expect anyone to assume […]

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