Japanese business in Europe

What impact will Tokyo Metro’s stake in the Elizabeth Line operating company have?

Tokyo Metro and Sumitomo Corporation have 17.5% share each of consortium that won the 7 year contract to run the Elizabeth Line, meaning Hong Kong owned incumbent MTR lost. Sumitomo Corporation is looking to develop commercial and retail opportunities around stations – as happens in Japan and is beginning to happen in London Underground stations. Tokyo Metro’s incentive for getting involved is that it did not attract institutional investors when it listed on the Tokyo Stock Exchange last month, because of lack of growth opportunities in Japan, where population is declining.

But what impact will Tokyo Metro have on the actual operations of the Elizabeth Line? I share the Toyo Keizai correspondent’s scepticism as to whether it will “breathe a breath of fresh air into the British railway industry in the form of ‘Japanese railway culture'” There no indication as yet that Tokyo Metro will be starting a subsidiary in the UK, nor that any Tokyo Metro staff will be transferred to London.

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Mitsui establishes electromagnetic steel sheet processing company for EVs and power plants in Poland

Japanese trading company Mitsui & Co has announced that it will establish an electromagnetic steel sheet processing company, Polskamit Steel in Skarwimiez in southern Poland. Polskamit will process, stock, and inspect electromagnetic steel sheets used in motor cores for electric vehicles such as hybrid electric vehicles (HEVs) and battery electric vehicles (BEVs), as well as transformer cores used in power plants and substations. It is scheduled to start operations in April 2026.

Mitsui first established, in 1993, an electrical steel sheet processing company in the Netherlands and then in the Czech Republic. Mitsui also set up Mitsui High-Tec Poland in 2018, employing around 88 people, providing lamination press processing of in-vehicle motor cores for electric vehicles.

According to US research firm BloombergNEF, Poland is a major producer of lithium-ion batteries, ranking second in the world after China and first in Europe in terms of national battery production capacity in 2022.

Japanese shipping company NYK to invest in British-Irish sea urchin farming and biodiversity venture

Japanese shipping company NYK is investing in Urchinomics, a British-Irish venture which will feed up starving sea urchins so they can be sold for food – and also support biodiversity.

Kelp forests on the seabed are being eaten up by an overabundance of sea urchins. Kelp forests are “blue” carbon as they absorb and store CO2 from the atmosphere through photosynthesis and they also support marine biodiversity by providing a habitat for small fish and other aquatic life.

The lack of kelp food means that the sea urchins are not edible. Urchinomics will collect them, feed them on other natural food and then use the profits from sales of urchin (known as uni, a delicacy in Japan) to reinvest in collection of urchins but also restoration of the kelp forests.

A new job for the 21st century – urchin rancher.

Unidon photo By Totti – Own work, CC BY-SA 4.0, https://commons.wikimedia.org/w/index.php?curid=68677193

Japanese car companies consolidate into two camps – in the UK too

Recent reports that Mitsubishi Motors is to join the Honda-Nissan alliance show that Japanese car companies are forming two camps – Toyota and Not-Toyota.

According to the Nikkei, Mitsubishi Motors, which is 34% owned by Nissan, will work with Honda and Nissan to finalise the details of their partnership on electric vehicle development, including standardising in-vehicle software that controls cars.

Even before the competitive pressures from China and Tesla in electric vehicles became apparent, what has happened to the Japanese car industry in the UK over the past decade has been an omen of what was to come. Mitsubishi Motors sold off its Nedcar operation in the Netherlands, its only manufacturing plant in Europe, to VDL in 2012. Nine years later it shut down its UK sales company, the Colt Car Company, a joint venture originally with Mitsubishi Corporation. In the same year, Honda shut down its Swindon plant, leading to several other automotive suppliers who were reliant on Honda withdrawing from the UK too. Honda’s European headquarters continues to be based in the UK, however.

Nissan’s commitment to the UK is clear from a recent announcement that it will lead MADE NE (Manufacturing, Automation, Digitalisation, Electrification North East) with local government partners to create open access training facilities in Sunderland, covering education from primary school to apprenticeships, with a particular focus on EV and battery manufacturing.

MADE NE will also support support targeted industrial innovation projects with funding and equipment.

Toyota has two “Lean Management” centres, at its plants in Burnaston, Derbyshire and Deeside in North Wales, open to any non-competitive organisation who wants to develop people and processes in the Toyota Way.

Poland revisited

It’s been just over three years since I last wrote in this column about Poland. Then, the EU was about to freeze funding to Poland because of their violation of the rule of law. I warned in my article that although Poland was clearly very attractive to Japanese companies, with stable economic growth over three decades and a cheap but educated labour force, this was not enough for long term sustainability if legal and state institutions were not stable, independent and transparent.

Now, after his victory in the October 2023 elections, Donald Tusk has become Prime Minister, replacing the former ruling Law and Justice (PiS) party. Tusk has arrested two politicians for abuse of power and has presented the justice reforms needed to unfreeze EU funds.

The number of people employed by around 300 Japanese companies in Poland has continued to grow despite the political and legal instability, to over 60,000, fourth in Europe after the UK, Germany and France. According to a recent JETRO survey*, Poland is seen as the most promising market by Japanese companies in Europe, for the fifth year running. This is a reflection both of its relatively large population and that it is still a developing economy.

The importance of Poland to Europe, both culturally and economically, was brought home to me again on my recent trip to Warsaw and Krakow. Although the largest Japanese employers in Poland are the manufacturers such as Sumitomo Electric Industries, NGK and Toyota, there are substantial numbers working in the services sector. I was there to deliver training to a newly established shared services group for a Japanese electronics company. Shared services has become an increasingly common feature of multinationals in Europe, whereby there are hubs in several countries, supporting all the European operations with logistics, HR, IT and legal services.

I went to Krakow, not for work, but to see the Manggha Museum of Japanese Art and Technology. It is named Manggha because this was the pen name of Felix Jasieński, a 19^th century art connoisseur who collected Japanese artists such as Hiroshige. He donated his collection to the National Museum in Krakow where it was seen by the a young Andrzej Wajda, later to become a famous film director. Wajda later donated money to fund the Manggha Museum, which opened in 1994, supported by the Japanese government.

The JETRO survey also showed that Japanese companies have a strong interest in supporting the rebuilding of Poland’s neighbour, Ukraine. Poland has been a supporter of Ukrainian sovereignty, and for its integration into Europe since the fall of the Soviet Union. Relations between the two countries deteriorated somewhat, however, when PiS came to power in 2015. At the beginning of the Russian invasion, Poland provided strong support to Ukraine but in recent months tensions have flared up again. The hope, both for the EU and Japan must be that these tensions are resolved now Tusk is in power, although no resolution to the Russian invasion is in sight.

*https://www.jetro.go.jp/world/reports/2023/01/9692d660c7fb3d25.html

Top 30 Japanese companies in Poland 2021 – Rudlin Consulting

This article was first published in Japanese in the Teikoku Databank News on 14th February 2024

Photo of Manggha Museum – (Nemuri), Public domain, via Wikimedia Commons

Sekisui House UK to go into liquidation

Sekisui House UK, which was established in 2018, is to go into liquidation. The company had invested in Urban Splash House Holdings and also made a loan to one of the companies in the group, Port Loop. Seven of the companies in the Urban Splash group went into liquidation in 2022 including Urban Splash House Holdings Ltd, the main development business Urban Splash House Ltd, the modular manufacturing business Urban Splash Modular Ltd, and a development vehicle for the Port Loop development, Port Loop (Subco 1) Ltd.

Urban Splash was hit by the under-use of its factory, which led to losses piling up with the problems compounded by design issues which resulted in defects in the homes it produced.

It seems Sekisui refused to bail the company out once a shortfall was identified.

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.

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 (download available 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 pdf (£3 + VAT) of the Top 30 Japanese employers in the EMEA region, showing ranking in 2022 and 2023, total global employees, % of employees overseas and number employed in EMEA:

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.

Category: Japanese business in Europe