TOKYO - The rumored acquisition by Daimler-Benz AG of a controlling stake in Nissan Diesel Motor Co., Japan's No. 4 truckmaker, is increasingly viewed here as a done deal that will launch consolidation of the country's strung-out auto industry.
That marks a sea change in Japanese thinking. Confronted by the prospect of significantly more competitive global players like DaimlerChrysler AG, Japanese carmakers suddenly realize they cannot remain insulated from the world's auto-industry consolidation.
ALMOST ALL VULNERABLE
Analysts and industry executives agree that almost every Japanese maker is vulnerable except Toyota Motor Corp., whose market capitalization of nearly $100 billion puts it beyond the reach of most companies.
'If you consider the yen's current weakness and the historically low level of the Tokyo stock market, this may be a good moment for a foreign investor to buy a Japanese firm,' Toyota President Hiroshi Okuda said recently. 'That's a risk certain Japanese companies face.'
To be sure, most Japanese companies still say they want to stay independent. But in Japan, effective control of a company can be acquired with about a 33.5 percent stake.
NISSAN DIESEL ATTRACTIVE
In buying control of Nissan Diesel, Daimler would get a relatively cheap entry into Japan at a low point in the cyclical truck industry and gain market savvy while plotting its next move. Nissan Diesel's operations in China and Southeast Asia also are attractive.
Nissan Diesel would benefit from a parent willing to devote time and money to its restructuring. Nissan Motor Co., which now owns about 39 percent of Nissan Diesel, would unload a major headache.
After Daimler takes over Nissan Diesel, several analysts say they expect it next to go after Fuji Heavy Industries Ltd., maker of Subaru cars, for its bus business.
Some see that as just another stepping stone to a major consolidation of DC and Nissan.
'It's pretty obvious they're going to try to bring all of Nissan into the Daimler group,' said Tokyo-based Peter Boardman, auto analyst for SBC Warburg Ltd.
Fuji and Nissan belong to the Fuyo Group. That group's weak bankers, led by Fuji Bank Ltd. and Industrial Bank of Japan Ltd., had to allow Yamaichi Securities Co. to go bankrupt last year because they did not have deep enough pockets to keep it afloat.
'I think Fuyo sees Subaru as something that's not critical to the group - the shareholding relations are much looser there, and could be undone more easily. It's a potential target,' said Edward Brogan of Salomon Smith Barney Japan Ltd.
Noriaki Hirakata of Morgan Stanley Dean Witter also sees Fuji as a great takeover candidate.
'The cost would be low, Subaru's niche is well established and they don't have hidden liabilities like Nissan itself,' he said.
'The problem is, with such a small product line, where's the
synergy?' with a company like DaimlerChrysler.
Instead of Fuji, Hirakata says, Daimler would be better off buying Mitsubishi Motors Corp., or at least its truck operations.
That would boost Nissan Diesel's market share in Japan from a market-lagging 19 percent to more than 35 percent, while paving the way for cost cuts, he said.
Or, said Boardman, Daimler could acquire and combine both Nissan and Mitsubishi.
'Daimler's goal is not just to become a truckmaker in Asia, or have a position in the truck segment in Japan, but to be a force in Japan to compete with Toyota,' he said.
BALKING AT DEBT
Analysts agreed, though, that foreign firms that otherwise might be tempted to buy Nissan itself, or Mitsubishi, will balk at taking on their crushing debt.
Nissan's debt is estimated at around ¥4 trillion, or about $30 billion, compared to parent-only sales in the year ended March 31 of an estimated $26.7 billion. Automotive debt alone, excluding financing borrowings, totals $16.5 billion.
At much smaller Mitsubishi, auto debt is about $11.3 billion, against estimated sales of $18.8 billion.
'At some point, Daimler's going to want some return on its investment,' Boardman said. 'If there is so much debt they'll never get a return, why bother?'
Still, Mitsubishi's name is high on lists of weak Japanese players that, like Nissan Diesel, could be gobbled up. Other, stronger companies may take the DC route of joining with a similarly well-off partner to become stronger.
Among the strong independents, Brogan pointed to Honda Motor Co. and Suzuki Motor Corp.
The best partner for Honda, Brogan said, would be BMW.
Honda could use 'a presence in Europe with a partner who has deep pockets,' he said. Both companies have strong balance sheets. They also share lingering technical ties from Honda's prior involvement in BMW's Rover unit.
Moreover, the pair's strong engineering cultures would mesh. In contrast, several analysts said,
a Honda merger with other European carmakers such as Fiat or Renault would be a cultural and product mismatch.
'BMW and Honda make sense,' said Brogan. 'You don't have to be a full-line automaker, you just have to be a profitable one.'
