Japan steel merger to join No. 2, No. 3

NKK-Kawasaki still will trail Nippon in annual production

Big cost savings expected

April 14, 2001|By BLOOMBERG NEWS

TOKYO - NKK Corp. and Kawasaki Steel Corp., Japan's No. 2 and No. 3 steelmakers, said yesterday that they have agreed to merge under a holding company to cut costs and meet tougher standards imposed by auto companies.

The two will set up the holding company in October 2002 and reorganize in April the following year. The new company will have annual domestic steel production of 25 million tons, 10 percent behind No. 1 Nippon Steel Corp., the companies said.

They haven't decided on a merger ratio. Their combined market capital is $6.5 billion, about half Nippon Steel's.

Steelmakers are trying to keep pace with consolidation among carmakers and electric appliance makers, which are cutting costs themselves and expect standardized steel.

The companies expect cost savings of 60 billion yen a year.

Neither company outlined plans for job cuts or plant closures. NKK has 39,600 employees and Kawasaki has 30,700.

Kawasaki Steel warmed to the deal after NKK announced several cost-cutting measures this year, analysts said. The steps included selling its headquarters building, merging its shipbuilding operations with Hitachi Zosen Corp., and writing off a loss at its U.S. steelmaking subsidiary.

"Those moves made a difference, winning confidence for the integration from Kawasaki as well as investors," said Norihide Tsuji, an analyst at Shinko Securities Co. "I want to keep a close watch on how they tackle sticky issues, such as employment, to generate savings."

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