Merger Mayhem In Japan

MERGER MAYHEM IN JAPAN

ROUNDUP

SUZUKI AND KAWASAKI, Japan’s number three and four motorcycle producers, announced this past August in Tokyo that they would form a “strategic business relationship.” Areas of collaboration will include product development, original-equipment supply, commonizing parts and components, joint purchasing and manufacturing. This is being done to make the two companies’ motorcycle businesses “more profitable despite increasing globalization and intensifying competition.” The two companies will begin this relationship in the areas of cruisers, motocrossers, scooters and AT Vs.

The immediate cause is a cash shortage in Japan, resulting from the continued servicing of bad loans that date to the burst of the country’s realestate bubble several years

ago. The central bank refuses to further ease the money supply until a definite plan for banking reform is in place. Bank stocks and industrial output are falling.

Unemploymentnormally non-existent in Japan-is now at 4.8 percent. Domestic sales of motorcycles are only 25 percent of what they were at peak.

Commenting on the situation, Yamaha’s Bob Starr said, “This is a competitive business, and it requires new and attractive models to stay in the market. Developing those models takes cubic dollars, and right

now, with the Japanese economy the way it’s been for the past few years, that money is particularly hard to get.” An underlying cause is the aforementioned globalization and intensifying competition, most of it coming from China in Asian markets, but some arising from Europe’s reborn motorcycle makers.

Suzuki is said to be putting what cash it has into its automotive division. Kawasaki Heavy Industries has large low-return investments in sunset industries such as steel and railcars, and so needs to boost the success of

any division-like motorcyclesthat actually makes money.

Rumor even suggests that Yamaha, Japan’s number-two producer, may seek an alliance with mighty Toyota, the giant of Japanese auto-makers.

Kawasaki’s Bob Moffitt remarked, “There’s very little to say at this point. We have an agreement in principle. We’re looking at a large number of meetings between the two firms in the days to come. We have no real information. Basically, we just have a press release.”

That release asserts that “Suzuki and Kawasaki will preserve autonomy in the area of marketing and sales, with each company using its own brand and sales network as before.” The two companies may in time share things such as engine controls, for example, but GSX-Rs and ZXs will remain separate and distinct.

“Developing new models takes cubic dollars, and right now, with the Japanese economy the way it’s been for the past few years, that money is particularly hard to get.”

Kevin Cameron