Japanese business in Europe

Hitachi Energy to expand operations in Sweden

Hitachi Energy has announced it will invest $4.5bn in its Swedish and Indian operations over the next three years. Hitachi Energy is the product of Hitachi’s acquisition in 2020 of ABB’s power grids business. ABB was itself the product of the merger of the Swiss Brown, Boveri & Cie and the Swedish Allmänna Svenska Elektriska Aktiebolaget in 1988.

In Sweden the investment will go towards expanding an existing factory and building a new plant, which will include a research and development center. It is expected the investment in Sweden and India will lead to an additional 3,500 employees. Hitachi Energy already has over 1,000 employees in Sweden.

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Fujikura to close AFL Telecommunications Europe in UK

It has just been disclosed in their latest annual report that AFL Telecommunications Europe will close. The company manufactured and distributed fibre optic cables in Swindon, UK, employing nearly 100 people. AFL Telecommunications was acquired from Alcoa by America Fujikura in 2005. The decision to close was made in March 2024, and after consultation, it was decided to wind up the company by the end of 2024.

AFL Telecommunications continues to be headquartered in the USA, and has subsidiaries AFL Telecommunications UK (formerly FibreFab, acquired in 2013 – which develops, assembles and sales fibre optic components and data networking products), AFL Telecommunications GmbH in Germany and AFL Telecommunications Poland Sp. z.o.o. in Poland – a manufacturing operation which was opened in 2023.

UPDATE: Italian company Tratos Cavi has acquired AFL Telecommunications Europe and UK as of 3 July 2024

Top 30 Japanese companies in EMEA – not much growth in 2023

We have finalised the Top 30 rankings for the largest Japanese employers in the Europe, Middle East and Africa region (free download below). As before, the extent to which Japanese companies take the UN Sustainable Development Goals pretty seriously has had a noticeably positive effect on disclosure of data and transparency. But there are still some laggards in terms of the metric we focus on, which is the number and location of employees outside of Japan.

Overall, the year from 2021/2 to 2022/3 has been one of very little growth for Japanese companies in Europe.

83% of companies have the majority of their staff overseas

More often than not, the detail on human resources in terms of diversity and inclusion in the various sustainability reports published by Japan headquarters is all about employees in Japan. And yet, 83% of the companies in our rankings have more than 50% of their employees overseas. Those with less than 50% of employees overseas are the ICT companies – NTT, Fujitsu and NEC, along with Toyota and Asahi Glass. In some cases no clear figures were given for Japan and overseas employees, so we estimated them based on employee numbers give for consolidated (Japan and overseas) and non-consolidated (which we took to be the Japan parent company).

The non-disclosers

NTT does not disclose the number and location of its staff, which is perhaps excusable as the huge consolidation and reorganisation of its group companies and overseas acquisitions is still working its way through.

The two recruitment giants, Outsourcing and Recruit are notably lacking in transparency on employee numbers. The excuse may be that is difficult to calculate numbers on a consistent basis, given that in some countries, temporary workers on their books will count as employees. Outsourcing has had to delist from the Tokyo Stock Exchange and may be bought out by Bain, following investigation for fraud and inflating revenues and expenses. We estimate Outsourcing is now the second largest Japanese corporate employer in Europe, after Sumitomo Electric Industries, pushing Yazaki to third place.

The other companies who do not disclose regional data on employees are Sony, Toyota Tsusho, Japan Tobacco, Dentsu, Toyota Industries, Kyocera, Mitsubishi Electric and Mitsubishi Corporation. Japan Tobacco does not even disclose how many employees are outside Japan at all. Some estimate can be made by looking at the employee numbers given for each location, on their website however.

No growth?

The lack of data from Outsourcing makes it very difficult to estimate the trend for the whole Top 30. We think their acquisitions in Europe over 2018 to 2021 may have grown the European workforce to 48,000. If we assume that this held level in 2022/3, then there are around 629,000 employees working for the biggest Japanese companies across the region and growth was only around 1%.

The only companies who grew significantly in the region from FY 2021/2 to FY 2022/3 were Daikin (10%) and Dentsu (6%). Shrinkage was noticeable in the automotive sector – Nissan (-22%) . Toyota Motor (-5%) and Toyota Industries (-6%). Honda has dropped out of the Top 30 since the closure of manufacturing in the UK, but has shrunk further by 3%. NSG, which supplies automotive glass, has shrunk by 5% over the year.

The influence of Europe through acquisitions

The total employed in EMEA as a proportion of all employees in the Top 30 companies is 16%. Those companies with significantly above that proportion of employees in EMEA are NSG, Outsourcing, Japan Tobacco, Toyota Tsusho and the Asahi Group. The Asahi Group acquired many beer and alcohol brands in Europe around eight years ago, which was also when Toyota Tsusho acquired CFAO, a France headquartered company with substantial operations in Africa. NSG acquired Pilkington in 2006 and Japan Tobacco acquired Gallaher in 2007.

The lack of any large scale acquisitions since 2021 is undoubtedly one of the factors behind the lack of growth of Japanese companies in the region.

Click the link below for a free pdf of the Top 30 Japanese employers in the EMEA region:

FREE DOWNLOAD OF TOP 30 JAPANESE COMPANIES IN EUROPE, MIDDLE EAST & AFRICA

Selling off the tiger cubs

Something that we’ve been noticing for a while is that Japanese trading companies (sogo shosha) have been divesting long held assets, particularly in Japan and in the UK. These assets are known as toranoko or tiger cubs, meaning a treasure in Japanese. It seems the sogo shosha are no longer afraid to sell assets if they do not meet their desired investment efficiency or if the proceeds from the sale exceed medium- to long-term profit expectations.

In the case of Mitsubishi Corporation (who have recently declared they no longer want to be referred to as a trading company), this has included selling off 50% of Lawsons, the convenience store chain, in Japan and in the UK, Princes Foods has been up for sale since 2022.

These divestments are partly to do with the current President, Nakanishi Katsuya, coming from the typically hard headed and unsentimental Heavy Machinery group, making a big break from his predecessor Kakiuichi Takeo’s strategy. Kakiuchi came from the Foods Group and was President of Mitsubishi Corp from 2016 to 2022. Mitsubishi Corp increased its stake in Lawson in 2017, having become the main shareholder in 2001, taking over from Daiei. You might think from the name that Lawson is an American company – and it was, originally, eventually becoming CircleK. More here on Wikipedia.

Other divestments in the food business are of shareholdings which pre-date Kakiuchi – Mitsubishi is also looking to reduce its stake in KFC Japan, the majority of which it acquired in 2007. Princes Foods was acquired in 1989 and in turn has its roots in Mitsubishi’s involvement in canned food dating back to before WWII.*

The divestments are not just in food. Mitsubishi also sold its 20% stake in Fujifilm Diosynth to Fujifilm, in June 2023 and sold off various mining ventures that year too. Other sogo shosha are also divesting in the UK and elsewhere. Sumitomo Corp and its partner Osaka Gas pulled out of a UK water company and an American tyre retailer – the rumour persists they may want to sell off the UK’s Kwik-Fit and associated tyre wholesaling businesses as well. Itochu Corporation also sold its consumer finance business in Indonesia last year.

As to where the money made is then invested – the answer is mainly not Europe, and a focus on energy, minerals and digital. Mitsui is investing in Taiwanese off shore wind power, Mitsubishi in a US data center, Itochu is buying back Itochu Techno Solutions, Marubeni is investing in a Chilean copper mine and Sumitomo Corporation in an Australian LNG project.

*Update 28th May – Mitsubishi Corporation has just announced that it has agreed to sell Princes for £700m to Italian company Newlat.

MUFG Bank to invest in Hitachi’s UK based EV bus business

Hitachi set up two companies in the UK in 2023 – Hitachi ZeroCarbon Battery Holding and Hitachi ZeroCarbon Ltd – which lease storage batteries for EV buses. The company has expertise in the maintenance and management of storage batteries, and provides storage batteries on a flat-rate subscription basis.

MUFG Bank has just announced that it will initially invest £7.4m in the business and will further increase its investment in line with Hitachi ZeroCarbon’s business expansion. This is part of its “business co-creation investment” strategy whereby it is increasing the supply of risk funds through co-investments in companies’ new businesses and investments in startups. So far, it has invested in companies such as Astroscale Holdings, a Japanese company which is working on removing space debris.

Japan’s Oji completes acquisition of Finnish film and packaging producer Walki

Japanese paper and packaging group Oji Holdings Corp completed the acquisition of Finnish film and packaging producer Walki Holding Oy in mid April 2024. Walki was owned by One Equity Partners since 2018. It has 17 production facilities in Finland, Germany, Belgium, Spain, France, Poland, the UK, and China and employs more than 1,700 people.

Oji owns two other European subsidiaries – Kanzan Spezialpapiere in Düren, Germany – with around 300 employees, and the Italian manufacturer of packaging and filling machines, IPI, which it acquired in 2023.

Oji Holdings Corporation was ranked as the sixth world’s largest paper & pulp company in 2022 and has nearly 38,000 employees, 156 subsidiaries worldwide, 86 manufacturing sites throughout Japan, forestry operations in Australia, Brazil, Canada, China, Germany, New Zealand and other countries around the world. Oji Holdings Corporation is listed at the Tokyo Stock Exchange with a market capitalization of approximately US$4bn.

Muji Europe to appoint administrators

Muji Europe Holdings, the UK based parent company with 55 retail outlets in Finland, France, Italy, Germany, Spain, Portugal, Switzerland and Denmark, Ireland and Poland, has filed for administration. It is using the UK “pre pack” administration often favoured by retailers, whereby the sale of the business has been agreed before the administrator is formally appointed.

It is therefore expected that the stores will continue to operate and the staff will continue to be employed.

Muji has said “this is part of a planned strategic restructuring of the business and Muji’s management expect to conclude a deal shortly.” Muji or rather its parent company Ryohin Keikaku had been rumoured to be considering moving the European headquarters to Germany in 2018 because of Brexit. It now has a bonded warehouse in the Netherlands and its warehousing and logistics base is within the EU. We wonder therefore whether this is not just a process for shutting down the UK HQ and setting up a new one in the EU.

Muji Europe Holdings had 168 employees in the UK in 2015/6 and now has only 31. Ryohin Keikaku Europe, also based in the UK, has 143 employees.

As the correspondent for the Toyo Keizai business magazine puts it “there is no need to take it so seriously…its influence in Europe and the United States is limited, and the company has shifted to expanding its sales channels to East Asia”. It has 494 stores in Asia, where recent store openings have been concentrated. The US operations went into bankruptcy in 2020. Ryohin Keikaku’s profit has been declining, so clearly some measures need to be taken. In the Japanese domestic market, these measures have mainly been around opening in more rural areas, often as a concession inside supermarkets, and becoming more locally rooted in terms of the product line up.

Update – Ryohin Keikaku board meeting of April 8th decided that:

“In order to develop our European business in the future, we have decided to liquidate Muji Europe Holdings to eliminate the debts and credits between the parent and subsidiary, and transfer the business to our wholly owned subsidiary, MUJI Europe Limited (UK, hereinafter “MEL”). The company decided to inherit the company and continue the business of its European companies. In conjunction with this reorganization, the company plans to implement structural reforms, including the withdrawal of unprofitable stores and review of its cost structure, in order to improve profits and strengthen its financial base.”

Largest Japanese companies in the UK – 2023

We’ve decided to stop trying to compile the Top 30 largest Japanese employers in the UK by corporate grouping. Partly this is because a substantial number of Japanese companies in the UK have become branches, so do not report their employee totals to Companies House. Another reason is that corporate groups have restructured substantially through divestment, so there are more subsidiaries which are equity affiliates rather than part of the consolidated company group, or are owned by KKR Japan (does this make them Japanese or not?). Finally, many of the largest Japan-owned companies were acquired through acquisition, but are not particularly “Japanese” in terms of their branding or executives.

Instead, we thought we’d look at the largest single Japan-owned companies – and it turns out that there are 31 who have over 1,000 employees. The full list can be downloaded for free on the link below.

The new entrant into this Top 31 in 2023 was Snowfox, a food processing company acquired by Zensho. Snowfox owns Taiko, who make sushi for Waitrose and Sainsburys and also owns the YO! Sushi restaurant chain, as well as chains in the USA and Canada.

In terms of growth, we already covered the fact that some of Dentsu UK’s and Dentsu International’s growth was due to the consolidation into Dentsu UK of its regional subsidiaries in Leeds, Edinburgh and Manchester, but there does also seem to be organic growth, and growth by acquisition too. The other companies showing double digit growth are mostly in the services sector – Yusen Logistics, Mitsubishi HC Capital and NTT Data. Only one manufacturer is showing double digit growth – Fujifilm Diosynth Biotechnologies – a contract development and manufacturing organisation in Teesside.

The automotive sector has shrunk further – Nissan, Marelli (formerly Calsonic Kansei) and Honda Motor Europe had smaller workforces in 2023 than in 2022. Toyota has yet to file its accounts for 2023.

At risk of shrinkage or closure in the years to come look to be Hitachi Rail, whose contracts being built at its Newton Aycliffe plant come to an end in 2024 and Fujitsu, who has told staff that they will run down their Ireland operations, taking on no new contracts. This could be a pilot for what is to come in the UK.

Click here for free download of the largest Japanese companies in the UK 2023

Germany’s AEQUITA acquires German subsidiary of Japan’s Nifco

AEQUITA has added another Japanese company to its collection, following its acquisition of Nisshinbo’s TMD Friction last year. It will acquire the German subsidiary of Nifco, which was itself a German company KTW, acquired by Nifco in 2014. Nifco Germany develops and produces injection-molded plastic components for the automotive industry, with around 766 employees in Germany, as well as operations in the USA and Serbia.

We assume this acquisition does not impact Nifco UK (which was Elta Plastics, acquired in 1990) or Nifco Poland, which we believe to be a greenfield investment. Nifco had already sold its Spanish subsidiary to Grupo Taurus in 2022.

What do Nissan’s partnerships with Honda and Mitsubishi Corporation mean for Europe? Not a lot.

Honda and Nissan signing a non-binding Memorandum of Understanding on producing key components for electric vehicles and artificial intelligence in automotive software platforms is a further sign that Japanese car manufacturers are drawing their horns in and regrouping to focus on the Japanese domestic market.

It is also further evidence that Nissan’s alliance with Renault is rapidly withering away. As part of the capital restructuring, Nissan was meant to be investing €600m in Renault’s EV subsidiary Ampere. Renault announced in February 2024, however, that they would not float Ampere after all. Renault also announced in February that they were discussing EV platform sharing with Volkswagen.

Now Nissan have just announced that they have signed another MOU – with Mitsubishi Corporation – “to explore a new joint initiative in next-generation-mobility and energy-related services utilizing electric vehicles (EVs) to contribute to solving regional societal issues and to creating vibrant future communities”. Mitsubishi Corporation owns 20% and Nissan owns 34% of Mitsubishi Motors- the junior partner in the Nissan and Renault alliance.

What unites all of these announcements is the threat from China of cheap EVs. The response has been very regional – Honda was meant to be tying up with GM, but now it looks like Honda, Nissan and Mitsubishi group companies (and also Hitachi) are huddling together, and back in Europe, Renault and Volkswagen are getting cosy. So we can’t expect to see Honda to return to manufacturing in Europe yet – but we may see the fruits of the collaboration with Honda being assembled in Nissan plants in Europe, and if the regional initiatives in Japan on mobility, autonomous driving and renewable energy come to fruition, perhaps versions of this may find their way to Europe.

Category: Japanese business in Europe