The Nissan Prince Merger
JAPAN'S two auto giants,
Nissan Motors reinforcing itself in
1966 when it merged with fourth-rated Prince Motors - and the industry's recognised leader,
Toyota Motor Company, were preparing to battle it out for leadership that year. Despite the merger, Toyota remained the Goliath, a big Nagoya firm, in an impartial reckoning of statistics all backed up by the authoritative Japan Automobile Industrial Association. Toyota's
1966 sales figures were 35.7 percent of the home market, which was ahead, not just of Nissan and Prince, taken separately, but of the two with their shares lumped together, as if they were already in merger operation. The Nissan-Prince share came to 31.9 percent.
Figures for the latter half of
1964 showed that Toyota's net after-tax profits ran to A£6.6 million, well ahead of Nissan's A£5.2 million and Prince's A£900,000. Nissan-Prince, as matters then stood, would shade Toyota in sales, if the merger were already operating, and also in the amount of capital investment. Toyota however sprinted to the fore in percentage of net profits to sale - 6 percent as against Nissan's 4.9 percent, 3.2 for Prince and even 4.6 percent combined. And though the merging pair would have just double Toyota's assets, Toyota held a better position in respect to both short and long-term borrowing.
In
1964 Toyota produced 369,200 units, compared with Nissan's 259,346 and Prince's 69,469 units. Toyota dropped astern of the pair in sedan output (700-2000 ccs) with 158,326 units, or 38.5 percent against Nissan-Prince's 163,247 units (39.7 percent), but is ahead in small trucks with 200,728 against 156,103 units, 37.7 percent against 29.4 percent. In total capitalisation,
Toyota pointed to its A£86 million as outstripping the tandem of the future, its total number of employees was ahead by 3187, its total mechanics by 727, and its branch offices by seven. Nissan-Prince, on the other hand, talked about its having 1525 more salesmen than its Nagoya-based rival; as having more dealers and 580 more service stations and repair shops.
Industry talk had Toyota's dealer network in far sounder financial shape than either Nissan or Prince, Prince in particular. This was because Toyota's network had been longer in business, was better entrenched with headquarters, and operated on a more specialised basis, dealing in only one make of vehicle. Nissan and Prince dealt with the entire range of their respective companies' products. Some four billion yen went into the Nissan/Prince merged enterprise during
1967, the money coming from the Japan Development Bank on a loan basis, approved by the Ministry of International Trade and Industry. This stood apart from the ordinary commercial banks' line of credit, and was given "because the firm will make a positive contribution to exports and will also be able to trim production costs by dint of mass production".
But this big sum still had to be repaid and at a stiff 8.7 percent interest rate, almost as high as the interest rates pertaining at "city" commercial banks. Moreover, with annual capital spending totaling about 35 billion yen, 4 billion somewhat paled in contrast. Nissan-Prince had to face up to this as well as the fact reality of competition in models. Nissan's Cedric and Prince's Gloria were in sharp rivalry in the luxury class, so that with the merger, one or the other needed to forge ahead, forcing the other to drop out of production altogether. The same reality faced Nissan's Bluebird and Prince's Skyline in the 1500cc passenger car range, and again with Nissan's Fair Lady and Prince's Gran Turismo in the sports car line.
"A merger is meaningful," claimed one auto industry analyst at the time, "when one firm complements the other, and thus effaces the other's shortcomings. But Nissan and Prince would only seem to duplicate one another's production efforts and results." Nissan's then new Oppama plant and Prince's Maruyama works were 35 miles apart, and that was another production handicap. If the plants had of been adjacent, joint production growth could have been realised, corners could have been cut, costs pared down, and more standardised products turned out at less cost in greater numbers.
In the mid 1960s about 70 percent of total output costs in Japan were accounted for by materials bought from suppliers and fabricated by sub-contractors with 30 percent production cost at assembly lines. Nissan-Prince were able to buy greater amounts of materials and thus, theoretically, cut down prices, but in fact Japanese auto makers had already brought pressure on sub-contractors and suppliers to pare down their prices, so that further price cuts were hardly in the offing. Toyota did not think the
1966 Nissan-Prince merger would harm their prospects. What it did question was what good the merger would bring to Nissan, and to Prince - one or the other only logically standing to gain - and what gain to the industry as a whole.
