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AUTO INDUSTRY SHAKE-UP: Wave of Global Realignment Reaches Japan June 26, 1998 No sooner had the stunning news of a merger between Daimler-Benz AG of Germany and Chrysler Corp.--one of the Big Three U.S. automakers--been announced than it was reported in mid-May that Daimler had made a de facto acquisition of Nissan Diesel Motor Co. This was a clear signal that the global wave of realignment in the auto industry had finally reached Japanese shores. Not even such top automakers as Toyota Motor Corp. and Honda Motor Co., with their fleet of popular models in the United States, can rest easy. The 11-company setup in Japan's auto sector is wavering, and further cross-border tie-ups are forecast. Daimler May Buy Nissan, Too When the Daimler-Chrysler merger is completed, Toyota will slip from third to fourth place in the world ranking of annual sales among automakers. Just four days after the merger announcement, reports revealed that Nissan Motor Co., which ranks second in Japan behind Toyota, was engaged in wide-ranging negotiations with Daimler on not only the sale of Nissan Diesel but also the production and marketing of the group's trucks and commercial vehicles. Nissan has been struggling with depressed domestic sales and slumping overseas business, and its financial report for the term ending March 1998 showed declines in revenues and profits and a loss on a consolidated basis. For this reason, Nissan has formulated a large-scale restructuring plan, including a 30% cut of its 50-model line-up and the sale of part of its head office building. The negotiations for a tie-up with Daimler is seen as a part of these restructuring efforts. There is also a growing possibility that Daimler will soon announce capital participation in Nissan Motor itself. Other Japanese automakers are also following the realignment trend closely and coming up with their own strategies. Toyota, for example, has decided to raise its capital stake in light-vehicle manufacturer Daihatsu Motor Co. and truck-maker Hino Motors Ltd. to nearly 50% and 34%, respectively. The objectives here are to bolster Toyota's influence in the two companies and streamline the division of labor within the group to eliminate internal competition. Eleven companies had coexisted profitably in Japan's auto industry
for the past three decades. But recently, Mazda Motor Corp. chose
to move under the Ford umbrella, and both Isuzu Motors Ltd. and
Suzuki Motor Co. have agreed to capital participation from General
Motors. This trend toward consolidation can be expected to gain
further momentum from now on. Falling yen and share prices are making Japanese companies bargains for foreign buyers. The market value of Nissan Diesel is only about 50 billion yen (360 million dollars at 140 yen to the dollar), and on paper, Nissan Motor itself can be purchased for a little more than 500 billion yen (3.6 billion dollars). This is just a tiny fraction of the 12 trillion yen (860 billion dollars) that the Daimler-Chrysler merger is valued at. There may thus never be a better time for European and U.S. companies to lure Japanese firms into their fold. Moreover, the U.S. magazine Business Week reported in its June 1, 1998, issue that if Japanese carmakers do not think about mergers now, they run the risk of being left behind in the global regrouping of the auto industry and losing a golden opportunity to purchase others or sell themselves. After finance and telecommunications, the auto industry is now shaping up to be another sector where Japan is being pressed to join the global realignment trend.
 Edited by Japan Echo Inc. based on domestic Japanese news sources.
Articles presented here are offered for reference purposes and
do not necessarily represent the policy or views of the Japanese
Government.
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