Nissan, once leading invader of the West's car markets, sacks 21,000 in desperate bid to survive

The workers at Nissan's large Murayama plant, in western Tokyo, must have known it was coming. Ever since Japan's second-biggest car maker was rescued by the French car group Renault in March their factory has been widely tipped as the first casualty.

The workers at Nissan's large Murayama plant, in western Tokyo, must have known it was coming. Ever since Japan's second-biggest car maker was rescued by the French car group Renault in March their factory has been widely tipped as the first casualty.

But no one in Japan had expected the axe to fall quite so hard. In addition to Murayama, Nissan is shutting three other plants with the loss of 21,000 jobs - 14 per cent of the workforce - as part of a trillion-yen (£6bn) cost-cutting plan.

The strategy, devised by Nissan's new chief operating officer Carlos Ghosn, known in France as "le cost-killer", also entails a 30 per cent cut in the company's production capacity in Japan and a reduction in its suppliers from 1,450 to 600.

Nissan's Washington plant in the UK, the most productive car factory in Europe, has escaped the cutbacks and indeed looks due to expand further with a £100m grant from the Department of Trade and Industry.

But in Japan they know only too well how enthusiastically Mr Ghosn, a Brazilian-born Frenchman, lives up to his nickname. The scale of the cuts reflects the parlous state of Nissan. Its debts stand at$36bn (£21bn), a product of the hugely over-ambitious international expansion that Nissan embarked on a decade ago. This year it will suffer estimated losses of Y60bn (£350m).

"Actually, this is a real shock to me," one young worker from Murayama said last night as he left the plant. Some of the employees at Murayama were transferred from Nissan's Zama factory, which closed in 1995, the first Japanese car plant to be closed since World War II.

Although Mr Ghosn's promises of drastic changes will please investors, who have been driving up Nissan's stock price, they will do little to reassure most Japanese who have grown up with an entrenched job-for-life culture. At a time of high unemployment in Japan, even the Government's reaction was noticeably restrained.

"The tough employment conditions conflict with companies efforts to restructure," the Chief Cabinet Secretary, Mikio Aoki, said after the announcement. "We must work very hard to secure jobs in the current severe labour market."

Nissan was always regarded as one of the leading lights of Japan Inc. and its employees used to wear the corporate pins in their lapels with pride.

But that corporate logo, which represents a rising sun across a blue sky, has become an embarrassment. Mr Ghosn was quick to admit staff across the firm are frustrated by the Nissan brand, which has become so unpopular with customers that its cars are always priced cheaper than comparable rival models, whether in Japan, Europe or the United States.

"Nissan is in bad shape," Mr Ghosn said. "We cannot afford to come up with soft solutions. We have to have drastic solutions."

For the Japanese those drastic solutions have increasingly meant foreign firms coming in to buy up weak companies and turn them around. In the car industry Ford led the way, buying a controlling stake in Mazda in 1996, which after six years is finally back in profit.

In the financial industry the changes have been more dramatic. US investment bank Merrill Lynch bought up most of the collapsed Yamaichi Securities and another group of US investors, led by Ripplewood Holdings, is likely to buy the Long-Term Credit Bank of Japan. Both firms were leading players in Japan's financial sector. Other Japanese firms still strong enough to go it alone, including Sony and Hitachi, have promised their own sweeping job cuts.

This arrival of foreign investment and wave of risutora, or restructuring, comes at a time of falling union membership in Japan. Workers seem disenchanted with their unions' failings to secure the once-traditional annual wage increases. Just 22 per cent are in unions.

Trade unions have failed to justify their steep membership fees or appeal to part-time staff and workers in new service industries, the Yomiuri newspaper lamented in an editorial at the weekend.

At Nissan, Mr Ghosn hopes that many of the workers from the plants due for closure will be transferred to new jobs or given early retirement. He even spoke a few words in halting Japanese to encourage staff to support the plan. But many workers will join the unemployment queues.

Nissan's chairman, Yoshikazu Hanawa, clearly took on board the severity of the changes his board approved yesterday. "Failure is not an option," he said in a prelude to Mr Ghosn's announcement. "I believe I am not overstating the situation when I say that today is the most important day for the future of Nissan."

The shock of the Nissan cutbacks is all the more profound since the company, in common with much of corporate Japan, used to pride itself on providing workers with a job for life. Nissan car plants are single status meaning that all employees, from the director downwards, dress in the same blue overalls and eat in the same canteens.