March 11, 1999|By NEW YORK TIMES NEWS SERVICE
TOKYO -- Once again, the future of Japan's second-largest car maker, Nissan Motor Co., is uncertain.
The announcement yesterday by DaimlerChrysler AG that it was walking away from negotiations about acquiring a controlling stake in Nissan and in its equally troubled truck-making affiliate, Nissan Diesel, ended one topic of speculation and debate only to renew another: What will happen to Nissan? With known debts of more than $20 billion, declining sales in two of its three main markets, a cost structure that is high even by Japanese standards and uncertain plans for fixing its problems, the outlook is grim.
"It's true, our negotiations about a tie-up with DaimlerChrysler have ended," said Masataka Saito, a Nissan spokesman. "Other negotiations about potential tie-ups are continuing."
Renault SA has said it was talking with Nissan, but those discussions were believed to be far less advanced than the ones with DaimlerChrysler. Analysts consider a deal between Nissan and Renault a long shot because of the French car maker's relatively small size and its balance sheet, which, while much improved, still bears a high level of debt.
At the Geneva Motor Show, Louis Schweitzer, Renault's chairman, said the company was proceeding with an in-depth study of its options related to Nissan, although he warned that the hurdles were high.
Those hurdles -- Nissan's debts and its very traditional Japanese management -- are what are believed to have stymied a deal with DaimlerChrysler.
"I'm telling my clients that this deal broke down because it could not get over the hurdles posed by the debt and by the issue of control," said Peter Boardman, an auto analyst at Warburg Dillon Read in Tokyo.
Boardman said, however, that DaimlerChrysler's exit did not throw Nissan into any more of a crisis than it already faced.
"Nissan has many good qualities -- its engineering, its assets -- and it has positive cash flow, so it's not facing a crunch," he said. Nissan already has established a $4.1 billion standby line of credit with a group of 10 banks to help survive hard times.
But many say Nissan is in a financial squeeze. Its banks, led by the Industrial Bank of Japan and Fuji Bank, are not sound enough themselves to lend it more money, and so it has kept itself alive by issuing large sums of short-term commercial paper, which is bought by the Bank of Japan, the nation's central bank.
"Effectively," one analyst at an investment company said, "it's moot to talk about a government bailout of Nissan because the government is already bailing it out."
The government Development Bank also has provided about $7 billion in credit to Nissan. That generosity has been compared to the U.S. government's 1979 bailout of Chrysler Corp., which consisted of loan guarantees that gave the company access to the money it needed to turn itself around.
Pub Date: 3/11/99
