川重社長解任 合併で混乱招いた社内抗争劇

The Yomiuri Shimbun June 17, 2013
Kawasaki Heavy power struggle keeping market on tenterhooks
川重社長解任 合併で混乱招いた社内抗争劇(6月16日付・読売社説)

It is unusual in Japan to see the head of a major company suddenly dismissed. The market is now watching with a sharp eye the confusion caused by a power struggle within a major company.

Kawasaki Heavy Industries Ltd. dismissed President Satoshi Hasegawa and two other directors during an ad hoc board meeting on Thursday. The three had been pushing merger talks with Mitsui Engineering & Shipbuilding Co. The company also said it decided to scrap the integration talks.

Shigeru Murayama, who was promoted to president from senior vice president, said “a strong sense of distrust had developed” regarding their assertive way of pursuing the merger talks because the three had acted as if “the integration was a foregone conclusion.” It was an agonizing decision to dismiss them, he added.

What happened is in effect a palace coup staged jointly by Murayama and others to stop the merger plan with Mitsui Engineering.

In the shipbuilding and heavy machinery industry, Kawasaki Heavy is the nation's second largest company and Mitsui Engineering is the fifth. News reports revealed their integration talks at the end of April. If realized, the integration would have created a giant company with combined consolidated sales approaching 2 trillion yen.

Japanese shipbuilding companies once dominated the global market. Today, however, Chinese and South Korean rivals have overtaken Japanese companies.

It happened mainly because Japanese firms have suffered from a becalmed global shipbuilding market after the so-called Lehman shock and the negative effects of the super strong yen. They are also at a disadvantage to other Asian rivals in cost competitiveness.

Surviving fierce contest

Mizuho Corporate Bank, the main bank financing Kawasaki Heavy and Mitsui Engineering, acted as a middleman in their merger planning. The plan can be seen as one tactic aimed at survival in a fierce global contest.

In January, shipbuilding companies related to JFE Holdings, Inc. and IHI Corp. were integrated. Moves by Mitsubishi Heavy Industries, Ltd. and Imabari Shipbuilding Co., Ltd. to enhance their partnership apparently pushed Kawasaki Heavy and Mitsui Engineering toward the possible merger.

Within Kawasaki Heavy, however, opinions about the integration were greatly divided. Supporters and opponents to the merger plan apparently had different views on the actual businesses of the company.

Shipbuilding accounts for only 10 percent of Kawasaki Heavy’s sales. Manufacturing of trains, aerospace equipment and motorcycles is considered the company's major business.

Many strongly opposed the merger plan, arguing that it was expected to create synergies for the shipbuilding section but would not benefit the other unrelated sections much.

Industrial reorganization

Against this background, we urge Kawasaki Heavy to reflect on its past conduct of not disclosing important management information to the market at appropriate times. The company initially denied the preliminary merger talks but suddenly admitted them on Thursday.

Attention will now focus on what management strategies the two companies will develop in the wake of the merger talks being scrapped.

The new Kawasaki Heavy president said the company will continue to study the possibilities of integration, merger and acquisition, and partnership, but the specific proposals Murayama will make remain to be seen. It is also important for the company to readjust its relations with the main financing banks.

Meanwhile, Mitsui Engineering, whose business performance is sluggish, has a rocky road ahead.

The government revealed its policy to support industrial reorganization as a measure to enhance competitiveness of Japanese companies. However, the failed merger negotiations between Kawasaki Heavy and Mitsui Engineering proves that industrial organization is never an easy job.

(From The Yomiuri Shimbun, June 16, 2013)
(2013年6月16日付 読売新聞)

by kiyoshimat | 2013-06-18 07:11 | 英字新聞

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