Nissan Motor Co.'s decision to dismantle its keiretsu network of vendors could spur a wave of acquisitions by Western rivals.
Last week, Nissan bluntly offered Japanese suppliers three alternatives: Get competitive, get a new partner, or get out of the business.
Nissan's call to arms comes as Carlos Ghosn, the company's Renault-appointed COO, announced plans to slash Nissan's worldwide supplier base from 1,145 companies to 600 by 2002.
In an interview with Automotive News, Emil Hassan, Nissan's top North American purchasing executive, added that Nissan will make smaller cuts in its North American network of 300 suppliers.
But he had a blunt warning for Nissan suppliers.
'Unless they do something to help us during this period, they might keep our business one more year,' Hassan said. 'Regardless of who they are, if they don't meet our targets, they're out as a Nissan supplier.'
The edict's likely effect in North America: A shift of Nissan business to North American and European suppliers. Its likely effect in Japan: A scramble among Nissan's traditional suppliers to find global partners.
THE GATES OPEN
The shake-up has begun. During the past 10 months, Western suppliers have made 11 acquisitions or investments in Japanese companies, according to First Union Securities Inc. in Charlotte, N.C. Most of those deals were concluded after Renault announced on March 17 that it would buy 37 percent of Nissan.
'We are now seeing the opening of the gates of Japan,' said David Strickler, a former Nissan executive and an analyst with First Union Securities.
Nissan - which has an equity stake in 1,394 suppliers, dealers and other affiliates -is spurring foreign investment by selling its interest in hundreds of affiliates. Of all those operations, only four are 'indispensable,' according to Ghosn.
Contract assembler Nissan Shatai is one of the four companies, Ghosn said, while JATCO TransTechnology Ltd. is not. JATCO, a transmissions manufacturer, has good technology and will be able to stand on its own, he said.
JATCO was created recently after Nissan bought out Mazda Motor Corp.'s share in their former joint venture. Nis-san merged the venture with its own in-house transmission operations.
What other affiliates are on the 'can't sell' list? Ghosn won't say. Publicly identifying all four indispensable companies, he said, would tip his hand on the future of Nissan Diesel Motor Co.
Some Western suppliers already are moving in on Nissan's keiretsu. Delphi Automotive Systems Inc. of Troy, Mich., recently bought 6 percent of Akebono Brake Industry Co. from Nissan.
Another example: TRW Inc. plans to launch an airbag sensor venture in Manchester, Tenn., with Kansei Corp. Nissan owns 29 percent of Kensei. The venture will be called TRW-Kansei Electronics.
Hassan, who oversees Nissan's North American purchasing from his office in Smyrna, Tenn., warned last week that Nissan no longer will give preferential treatment to the hundreds of mostly small parts makers in which it owns a financial stake.
'I don't see us continuing to be straddled with the prices of the little widget-maker in Yoko-hama,' said Hassan, Nissan North Am-erica Inc.'s senior vice president of quality, purchasing and logistics.
'If you're not as competitive as the big (suppliers), you've got to become competitive. ... If you can't do that alone, join with the big guy and do it through a partnership. ... And if you can't do that, just give it up.'
But, he warned, U.S. firms should not be cocky.
'Some of these major parts companies still have something to learn from that Yokohama widget maker,' Hassan said. '(But) the widget maker probably won't be able to compete on price, and price is a damn important issue right now.'
However, small Japanese suppliers are skilled at kaizen - the art of constant improvement - and at converting research into product innovation.
Those skills will come in handy for Western suppliers who are participants in Project TIGER. Prior to the Renault merger, Nissan's U.S. operations had begun an ambitious cost-cutting effort in which it asked suppliers for voluntary cost reductions and product innovations.
Purchasing managers will use suppliers' TIGER results as a report card to consider future business, Hassan said.
'Those who are helping us during this period will become our long-term partners,' he said. 'Those who sit back and assume we will carry them will no longer be Nissan suppliers. And there are a bunch of them who are going to get dropped.'