OK, Plan B then: March 13, 1999
From The New York Times
Japan Signaling Its Intention to Keep Nissan Motor Going
By STEPHANIE STROM
OKYO -- The Japanese government sent the clearest signal to dateThursday that it would not
allow the struggling Nissan Motor Co., Japan's second-largest automaker, to collapse.
"It is the responsibility of Japan's industries, financial institutions and the government to assist a
leading industry," Kaoru Yosano, the international trade and industry minister, told a news
conference after a Cabinet meeting.
He said the government would provide adequate assistance to Nissan and that he had not heard
that the company was having difficulty raising funds. Technically, it hasn't -- largely because the Bank
of Japan, the central bank here, has guaranteed its commercial paper, or short-term debt.
Nissan's outstanding commercial paper jumped fourfold from 1997 to 1998, securities analysts who
follow the company have said.
Another government entity, the Japan Development Bank, has extended a $700 million loan to the
company. Nissan also has a $4.6 billion line of credit from a group of banks.
But the fact that Nissan has had to tap the government coffers is a good indication that its traditional
sources of financing, led by the Industrial Bank of Japan and Fuji Bank, have told it they cannot
provide more money. Ever since DaimlerChrysler AG announced on Wednesday that it had decided
not to pursue an interest in Nissan, the Japanese press has predicted that Nissan will make a deal
with Renault SA, the French car company, by next week. Keiichi Tsuboi, a Nissan spokesman,
confirmed that the two companies were in discussions, but he had no further comment.
The Japanese press suggested that the company was pressing to conclude a deal by March 31, the
end of its fiscal year, although there was no obvious reason for that deadline.
Based on Nissan's stock price at the close of trading Friday, the sale of a 33.4 percent stake in the
company, the level that would be required for a buyer to have a seat on the board and veto power,
would bring in somewhat more than 500 billion yen, or $4.14 billion at current exchange rates.
At that price, such a large piece would be difficult for Renault, which has net cash of about $2 billion,
according to Morgan Stanley Dean Witter. Analysts have said that given the limitations of Renault's
own balance sheet, it is probably aiming to buy a stake of somewhere between 20 percent and 30
percent.
Nissan's board is likely to be more comfortable with Renault, analysts said. "I'd expect Renault to
be a more passive partner than DaimlerChrysler would have been," said Steve Usher, an automotive
analyst at Jardine Fleming Securities.
One former executive said that the board had been divided on the issue of how much control to cede
to a partner, an issue that has emerged as perhaps the biggest obstacle in merger and acquisition
activity in Japan.
According to the executive, several directors objected to a deal with DaimlerChrysler because they
felt they would have to resign if Nissan surrendered a 33.4 percent stake, the minimum the German
automaker was seeking.
Many of the board members rose through Nissan's management hierarchy, along with the president,
Yoshikazu Hanawa, and are sensitive to the issues of saving face and protecting jobs, the former
executive said.
Meanwhile, the company continues to chip away at its problems. Usher, one of the few analysts who
has been sanguine about Nissan's prospects, expects Nissan to have reduced its debts by about
400 billion yen at the end of the fiscal year.
If the company used the proceeds of the sale of a stake to pay down debt, the cash from the sale
combined with the reductions already made would bring Nissan within striking range of its goal of
reducing its debt by 1 trillion yen by the fiscal year 2000, which starts April 1.
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