TOKYO - Until they heard the details of Nissan Motor Co.'s three-year restructuring plan here Oct. 18, many of the automaker's suppliers hoped against hope that life might go on much as before.
Toyota Motor Corp., after all, had wrapped its protective arms around core suppliers such as Denso Corp., and Nissan suppliers were hoping their traditional ties to the mother also could continue.
Those hopes have been dashed. Nissan's tradition-shattering cost-cutting program, together with the guarded welcome it has been given by the Japanese government and unions, made it clear that radical change is the order of the day for Japanese automakers and their suppliers.
'From now on, Nissan is not concerned with the keiretsu,' said a spokesman for Unisia Jecs Corp., a core Nissan supplier that derives 70 percent of its sales from the group.
Under the program drafted by COO Carlos Ghosn, Nissan's supplier ranks will be slashed from 1,145 to 600 over the next three years and costs reduced by, respectively, 8 percent, 7 percent and 6.5 percent a year.
The targets closely mirror the cuts Ghosn imposed at Renault SA as executive vice president of the French automaker.
Many of Japan's suppliers have uncompetitive global volumes and need to invest heavily to keep up with the industry's rapidly evolving technology. Even the bigger companies in the Nissan supply chain, such as Calsonic Corp. and Unisia Jecs, see a need to radically reshape their businesses and focus on areas of strength.
'Within a couple of years we have to establish a global supply base,' said a spokesman at Unisia Jecs. 'We have to review the market needs and fulfill them very soon.'
Unisia Jecs is focusing on steering systems and engine components, the spokesman said.
Trevor Bonner, president of CLEPA, the Association of European auto parts manufacturers, predicts that the reorganization of the Japanese auto industry will mean new business for European and North American suppliers.
'Maybe not by setting up new plants, but through acquisitions of existing operations,' Bonner said. 'I was quite surprised by the depth of the cost cutting that is foreseen in the Nissan plan.'
A new climate
Thierry Dreux, managing director of Valeo SA's Japanese subsidiary, Valeo Japan Co. Ltd., conceded that the French supplier has not won much new business to date from Japanese automakers.
'But we think the industry's restructuring is going to mean that the Japanese OEMs are going to have to rely more on their suppliers,' he said. 'They are going to need global outside companies to come in and help them bring the technology level up.'
Indeed, Valeo has moved swiftly to take advantage of the new climate.
In late October, the company announced a joint venture with Nissan affiliate Unisia Jecs to develop and produce clutches. The joint venture, Valeo's first manufacturing operation in Japan, will be built around the Japanese company's existing clutch division, which had sales last year of about $95 million.
Early last month, it set up a major venture with Zexel Corp., the big Bosch Corp. subsidiary that is a global leader in climate control and injection systems. The venture, which doubles Valeo's worldwide heating, ventilation and air-conditioning business, will operate 14 plants in the United States, Japan, Thailand, Korea and China and have sales of about $1 billion a year.
According to Japanese press reports, Valeo is in discussions with Jatco TransTechnology Ltd., Nissan's wholly owned transmission subsidiary; Ichikoh Ltd., transmissions; and Exedy Co. Ltd., a clutch maker.'The Renault-Nissan deal opened the way for our investments,' Dreux said. 'But Nissan will not be the only customer. We must supply other customers to be competitive. We want to expand.'
Valeo is talking to Toyota Motor Corp. and Honda Motor Co. about other projects, Dreux said, and expects to announce more tie-ups with Nissan and Mazda suppliers in the next few months.
Some are confident
But not all Japanese suppliers will be forced into international partnerships or takeovers to survive, industry executives and analysts point out.
Those companies with extensive international business already, such as Koyo Seiko Co. Ltd. and Kayaba Industry Co. Ltd., intend to bid aggressively for new business, both from Nissan and other companies. Kayaba, already a major supplier of shock absorbers to Ford Motor Co. in Europe and the United States and to Renault, is confident that it will remain a Nissan supplier.
'We can get new business from Nissan,' said Mamoru Kato, Kayaba's manager of overseas business development. Under Nissan's new one-supplier-per-platform policy, he said, 'We have been asked to quote for the new March/Micra (small car).'
Hiroshi Inoue, president of Koyo Seiko Co., also is confident about his company's ability to weather the new storm. The company, the world's leading producer of electrical power-steering systems, is a major supplier to Nissan partner Renault and has plants in Europe, the United States and Southeast Asia, as well as Japan.
'Nissan has used its keiretsu suppliers almost exclusively until now, but that will change,' Inoue said. 'We have refrained from pursuing Nissan business, but we intend to become much more aggressive about it now.'