JAPAN TAKING WAIT-AND-SEE APPROACH TO GM BANKRUPTCY

UNCLAS SECTION 01 OF 02 TOKYO 001238

SENSITIVE
SIPDIS

STATE FOR EAP/J, EEB/TRA
PASS TO USTR FOR AUSTR CUTLER AND M. BEEMAN
PASS COMMERCE FOR K. ROTH AND D. BARZDUKAS

E.O. 12958: N/A
TAGS: EIND ETRD PREL WTRO JA
SUBJECT: JAPAN TAKING WAIT-AND-SEE APPROACH TO GM BANKRUPTCY

SENSITIVE BUT UNCLASSIFIED. CONTAINS PROPRIETARY
INFORMATION.


1. (SBU) SUMMARY: Japanese officials and auto industry
representatives expressed concern at the announcement of
General Motors' bankruptcy, but not alarm. Ministry of
Economy, Trade and Industry (METI) Minister Toshiro Nikai
pledged unspecified financial support for Japanese small and
medium-sized manufacturers affected by GM's situation, but
METI and Ministry of Foreign Affairs (MOFA) officials
downplayed the Minister's reported statement and said the GOJ
does not see a need for specific action at the moment. While
the GOJ has been monitoring the situation in the auto sector
for months, working level officials report they do not see a
serious impact on Japanese automakers. The head of GM's
Japanese unit said the firm will continue operations in
Japan, while competing automakers and auto parts
manufacturers expressed hope for a quick rebound of the U.S.
auto industry. END SUMMARY.

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NEGLIGIBLE IMMEDIATE IMPACT; SOME CONCERN FOR
PARTS MANUFACTURERS
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2. (SBU) Neither GM nor rival auto manufacturers forecast a
direct, immediate impact on operations in Japan as a result
of GM's formal Chapter 11 filing and restructuring
announcement. General Motors Asia Pacific (Japan) President
Rick Brown told a press conference the firm will continue
operations as before under the new GM parent company and that
the Japan unit anticipates no layoffs. Brown added the
restructured GM will retain a joint-venture in Canada with
Japanese automaker Suzuki Motor Corporation. According to
media reports, Suzuki's President and CEO, Osamu Suzuki,
stated he expects the bankruptcy filing's impact to be
limited. (Note: According to GM headquarters' June 1 press
release announcing the Chapter 11 filing, none of GM's
operations outside the U.S. are included in the U.S. court
filings or court-supervised process. End note.)


3. (SBU) Toyota Motor Corporation President Katsuaki
Watanabe reportedly said his firm will continue to operate
the New United Motor Manufacturing Incorporated (NUMMI)
joint-venture in California with GM and that Toyota would
consider assisting GM if requested. Toyota's America's
Project Division General Manager Hiroyuki Fukui also told
Consulate Nagoya his firm has talked with GM about the future
of NUMMI, which employs about 5,000 people, and agreed to
continue the joint-venture. The President of Isuzu Motors
Ltd., which produces light trucks for GM North AMERICA on a
contract basis as well as diesel engines and cabin
components, made a similar offer of support in a statement to
the media.


4. (SBU) Some media attention in Japan has focused on the
fate of auto parts manufacturers who serve GM. An analysis
by a U.S. research firm reportedly found approximately 60
percent of the 158 firms that supply GM also supply Japanese
automakers. Makoto Aikawa, Sales and Marketing Deputy
General Manager at Denso Corporation, Japan's largest auto
parts manufacturer, told Consulate Nagoya his firm hopes GM
will be reborn as a leaner, albeit smaller, company. Denso,
which has about USD29 million in accounts receivable with GM
and is listed among GM's top fifty creditors, will proceed
with the Critical Vendor Program that will be implemented
following the Chapter 11 filing. Aikawa also said he is
concerned about potential protectionism that could develop in
the U.S. that would encourage consumers to buy only products

TOKYO 00001238 002 OF 002


manufactured in AMERICA by genuinely "American" firms. He
noted Denso wishes to continue business with GM and has
manufacturing plants in the U.S.


5. (SBU) Separately, Honda External Affairs Division Deputy
General Manager Naoto Muraoka told emboff Honda does not
anticipate a significant impact on its operations; the vast
majority of Honda's suppliers are separate from GM. Muraoka
also expects the industry will recover from its current
problems, albeit slowly.

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GOJ MONITORING THE SITUATION
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6. (SBU) According to media reports, METI Minister Nikai
stated June 1 the GOJ is prepared to use public funds to
support Japanese small and medium enterprises affected by
GM's bankruptcy. A METI automobile division official later
told emboff Nikai's statement was an off-the-cuff comment to
reporters. She claimed that if the need becomes apparent,
the GOJ will provide support to Japanese firms struggling
with cash flow problems due to the GM bankruptcy. METI has
been monitoring the situation and exchanging information with
Japanese auto-related companies since last fall, the official
said, but to date METI has not received negative reports from
Japanese industry. The official does not anticipate a
serious impact on Japanese automakers.


7. (SBU) Separately, a MOFA Second North AMERICA Division
official told emboff Nikai's statement was likely an
unofficial rendering of official press guidance that the GOJ
will "continue to look into the situation and deepen our
examination in order to avoid disorder or confusion in
Japanese auto and related industries." The official added
Nikai's comment apparently surprised officials within METI as
well.


8. (U) Consulate Nagoya contributed to this cable.
ZUMWALT