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November 30, 2000

From Our Correspondent: Hirohito and the War
A conversation with biographer Herbert Bix

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From Our Correspondent: Making Enemies
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Asiaweek Time Asia Now Asiaweek story


The struggling carmaker seeks foreign help

By Jonathan Sprague and Murakami Mutsuko / Tokyo

IN 1996, WHEN FORD of the U.S. raised its stake in Mazda to 33.4% from 25% and sent a Scotsman to run the Japanese carmaker, Japan gasped. Newspapers cried that a new "black ship" - like the U.S. warships that forced Japan to open to the world in 1853 - had arrived, and executives muttered about the dangers of corporate nottori (hijackings) by gaijin (foreigners). Today, editorials intone about the inevitability of globalization, and Nissan, Japan's No. 2 and the world's No. 6 carmaker, is openly seeking foreign capital to shore up its shaky position. "It is a new era, where international partnership is welcome as a positive act, and an option for Nissan not only to survive but to leap forward," says industry analyst Matsushima Noriyuki of Nikko Salomon Smith Barney in Tokyo.

Foreigners certainly are making inroads into Japan's once impossible-to-crack market. The change is most pronounced in financial services, but it is spreading. "The auto industry is catching up to this trend," says Mazda's new American president, James Miller. Besides Ford's link with Mazda, General Motors in December raised its stake in Isuzu, a mid-size car and truck maker, to 49% from 37.5%. Nissan is being courted by two suitors, the recently-merged German-American giant DaimlerChrysler and France's Renault. The Japanese company is reportedly willing to sell a major chunk, less than 50% so that it retains management control, but more than the 33.4% the investor needs to hold veto power.

What top Western carmakers want goes beyond Japan to the entire Asian region, where Japanese marques hold nearly 90% of the market. "We aim to boost sales in Asia from the current under-10% of total sales to 20%-25% within 10 years," DaimlerChrysler co-chairman Juergen Schrempp said in Tokyo last week, where he held talks with Nissan. "We are willing to consider acquisitions or equity participation to achieve this goal." Nissan offers super-efficient factories around the world, a strong line of compact cars where Western makers tend to be weak, and leading-edge technology in fuel-efficient and low-pollution engines. However, its large debts make any deal difficult. Daimler-Chrysler has been negotiating since 1997 to take over Nissan Diesel, the Japanese company's truck unit, before it recently expressed its interest in the parent. But Schrempp and co-chairman Robert Eaton left Tokyo saying only that discussions had been "constructive."

As for Nissan, it needs all the help it can get. "We will consider anything, including a capital tie-up, if the prospective partner is a plus for Nissan," president Hanawa Yoshikazu says. The company lost $116 million in the fiscal year ended March 1998. Weak sales at home and in the U.S. ballooned inventories. Its costs remain high compared to its rivals. And its $22 billion in interest-bearing debt is a heavy burden. Nissan launched a far-reaching restructuring plan last May, but the company is still lagging. Fresh capital will be a big help. Even more important in the long run will be the cost reduction, product development and marketing benefits of being part of a larger company. Mazda halved its debts and returned to profit after Ford took control. But Nissan may find it harder to live with a foreign partner. "It will not be the same at all," says Robert Shanks, a Mazda director of corporate planning. Ford and Mazda built up relations for 25 years before the takeover, he points out. Nissan has never had anyone looking over its shoulder.

And the recent wave of Japanese mergers and partnerships is different from merger-mania in the West, where healthy companies often join forces to strengthen their competitiveness. In contrast, Toyota and Honda, Japan's top and third carmakers respectively, have said they plan to stay independent. They can afford to. Both reported record profits last fiscal year. So far only the weak are open to foreign suitors. But that may change as the auto industry evolves and as the once-impregnable Japan Inc. cracks, says Nikko Salomon's Matsushima. "The Japanese auto industry will never be the same," he says. "This is a time of enormous restructuring of Japanese businesses amidst the worst recession in a century, during which the ancien r»gime will be destroyed." As global capital and management ideas seep into Japan Inc., the now strong and independent may one day find themselves lagging.

This edition's table of contents | Asiaweek home



U.S. secretary of state says China should be 'tolerant'

Philippine government denies Estrada's claim to presidency

Faith, madness, magic mix at sacred Hindu festival

Land mine explosion kills 11 Sri Lankan soldiers

Japan claims StarLink found in U.S. corn sample

Thai party announces first coalition partner


COVER: President Joseph Estrada gives in to the chanting crowds on the streets of Manila and agrees to make room for his Vice President

THAILAND: Twin teenage warriors turn themselves in to Bangkok officials

CHINA: Despite official vilification, hip Chinese dig Lamaist culture

PHOTO ESSAY: Estrada Calls Snap Election

WEB-ONLY INTERVIEW: Jimmy Lai on feeling lucky -- and why he's committed to the island state


COVER: The DoCoMo generation - Japan's leading mobile phone company goes global

Bandwidth Boom: Racing to wire - how underseas cable systems may yet fall short

TAIWAN: Party intrigues add to Chen Shui-bian's woes

JAPAN: Japan's ruling party crushes a rebel ž at a cost

SINGAPORE: Singaporeans need to have more babies. But success breeds selfishness

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