Mitsubishi struggles while Daimler, Nissan snuggle
07:33 a.m. May 12, 1998 Eastern
By Edmund Klamann
TOKYO, May 12 (Reuters) - Japan's troubled Nissan Motor Co is snuggling
up to a big strong German carmaker that could ease its burdens, but Mitsubishi
Motors Corp , another struggling auto firm, looks set to go it largely alone.
Nissan Motor, the world's sixth largest carmaker, on Tuesday revealed further
details of areas where it may cooperate with Daimler-Benz AG .
Daimler last week said it plans to merge with U.S.-based Chrysler Corp to form
the world's fifth largest carmaker, and on Monday said it was also talking to
Nissan about a possible tie-up in commercial vehicles.
But Mitsubishi Motor, which once had cozy ties with both Daimler and Chrysler,
has since drifted away from the two.
Aside from some joint projects with Sweden's AB Volvo , analysts expect it will
try to maintain its independence despite its struggle with heavy losses and
intensifying global competition.
''Mitsubishi Motors has had a strong sense of identity as a member of the
Mitsubishi group, which is very powerful globally,'' said Takaki Nakanishi,
analyst for Merrill Lynch Securities Japan.
''But that's not enough anymore to survive in the auto industry. They must step
out of the Mitsubishi group and establish cooperative relationships.''
Mitsubishi Motors, hit hard by the Asian currency crisis and sluggish sales at
home, estimates it racked up a hefty loss of 110 billion yen in the fiscal year to
March 31. It will announce final earnings results later this month.
The company has embarked on a drastic cost-cutting plan, but analysts said
more is needed.
''My sense is the company feels that with restructuring efforts it will be able to
return to profitability,'' said SBC Warburg Japan analyst Peter Boardman. ''The
market is moving faster than their cost-cutting. They're going to have to do
something more structural.''
Mitsubishi has a joint plant in the Netherlands with Volvo that is scheduled to
make 300,000 compact passenger cars this year, and the two firms are studying
the possibility of jointly developing low-emission truck engines and other areas of
cooperation in the truck sector.
But Volvo has also appeared standoffish.
Last Thursday, after the Daimler-Chrysler merger announcement, Volvo chief
Leif Johansson said he did not expect his company's car business to be involved
in any mergers. And last October, Johansson said his company was interested in
further cooperation with Mitsubishi, but on a project-by-project basis rather than
as a major alliance.
Merrill's Nakanishi added that, while the Mitsubishi-Volvo relationship could
develop into a strategic tie-up, they were too small -- even together -- to be a
truly global player.
Nissan, which saw profits fall sharply last fiscal year, on Tuesday said its talks
with Daimler would include the possibility of the mutual supply of engines and
transmissions, platform-sharing for vans and light trucks and technical
cooperation at a Daimler plant in Brazil.
Analysts said Mitsubishi was taken by surprise by the Daimler-Nissan
negotiations.
Chrysler once held a 24 percent stake in Mitsubishi, before the threat of
bankruptcy forced it to liquidate what remained of the stake in 1993. In 1991,
Chrysler sold Mitsubishi its half of a U.S. joint production plant.
Mitsubishi still supplies Chrysler with nearly half of the 200,000 passenger cars
the plant makes each year, as well as V6 engines, a Mitsubishi spokeswoman
said.
Nikko Research Center analyst Noriyuki Matsushima said that if
DaimlerChrysler linked up with Nissan and severed the supply deal with
Mitsubishi, it could mean trouble for the plant.
''(The supplies to Chrysler) are necessary to maintain utilisation rates at the U.S.
factory,'' he said.
He expected, however, that the current arrangement will continue for at least
three years, while DaimlerChrysler's managers may continue to take cars for an
even longer period.
Investors on Monday greeted the Daimler-Nissan talks by buying shares of both
Nissan and Mitsubishi on expectations both companies would benefit from
consolidation in the sector.
On Tuesday they apparently saw a Daimler-Nissan agreement as good for
Nissan, but bad for Mitsubishi, which is now fading from the DaimlerChrysler
picture.
Nissan shares ended on Tuesday 5.3 percent higher at 457 yen, after gaining
nearly 10 percent on Monday, while Mitsubishi Motors ended down 2.93
percent at 365 yen.
((Tokyo Equities Desk +81 3 3432-9052
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