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After the stunning industrial merger between Daimler-Benz AG and Chrysler Corp. announced last week, reports that Daimler Benz is also negotiating for a business tieup with Nissan Diesel Motor Co. has jolted the Japanese automobile industry.

A move by Daimler-Benz toward the heavy truck manufacturing affiliate of Nissan Motor Co., according to industry people and analysts, is likely to spur some Japanese automakers to find partners for mergers or cooperative ties to survive intensifying global competition.

“Japanese auto manufacturers must be sensitive to these moves,” said Shoichiro Toyoda, chairman of both Toyota Motor Corp. and the Japan Federation of Economic Organizations(Keidanren). “I’m sure there will be more tieups to respond to the rapidly changing market.”

Nobuyoshi Yoshida, president of Automotive Business Practice Institute, Inc. says major European and U.S. car makers see three key factors in surviving the 21st century: creating emission-free vehicles, fuel-efficient vehicles and vehicles that can guarantee safety. “That’s what the Daimler-Chrysler alliance is seeking to achieve,” he said. “And Nissan Diesel’s deal matches their need to include a diesel engine maker in the group.”

Yoshida said the two auto giants see potential in Nissan diesel’s high-technology engine development. As for Japan’s auto industry, Yoshida warned that unless domestic automakers move swiftly into strategic tieups, they will lag far behind their globalizing competitors.

But they face a major roadblock: trillions of yen of debt, a factor that, analysts believe, will make finding partners difficult. For Nissan Motor Co. and Mitsubishi Motors Corp., in particular, forming some kind of alliance with other auto manufacturers could be their ticket to survival in the 21st century. Both, however, are suffering from sluggish sales at home and in North America — heavy additions to their already weighty debt burdens.

Nissan’s sales in the U.S. in 1997 declined 2.9 percent to 728,377 units; sales by Mitsubishi showed only a slight 1.1 percent increase to 187,126 units. An auto analyst at a foreign securities firm said a rumor — that Nissan may be seeking an alliance with Daimler-Benz and Chrysler by using Nissan Diesel as a stepping stone — is unlikely to be true.

“People are forgetting that Nissan, with its huge financial debt, is not very attractive to foreign automakers,” the analyst said. “Even if it sells Nissan Diesel’s shares to Daimler-Benz and Chrysler, it can only raise several tens of billions of yen.” Nissan’s total debt is reportedly estimated at 3.8 trillion yen as of the 1997 business year.

In addition, some analysts point out that MMC, which has been left out of the Daimler-Chrysler deal despite its long cooperative relationship with both companies, may be urgently looking for a strong partner. But economic turmoil in Asia has damaged the carmaker considerably; MMC expects to post a consolidated net loss of 110 billion yen for the 1997 business year, which ended March 31.

So far, Toyota and Honda Motor Co. are the only two that industry experts think are likely to remain independent; they are stable and doing well in North America, the world’s biggest car market.

While Toyota has maintained its No. 1 position in the domestic market, Honda’s sales in the 1997 business year reached 764,931 units, surpassing MMC, which had been No. 3 for the past 7 years. “If Toyota is to purchase other automakers, it will be companies in either South America or the southern part of Europe, where there is more room for growth,” said Kaoru Kurata, an analyst at Goldman Sachs LTD. “But otherwise, Toyota is unlikely to enjoy merit in purchasing other major automakers.”

Japanese automakers currently have neither the money nor the vision to take over other major automakers, a situation made worse by the serious economic slump at home and in the region, Yoshida said. “Unless Japanese automakers get well as quickly as possible,” he said, “they will be the losers in this global race.”

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