Buying a German harness maker and all of Sumitomo Wiring Systems (2006)

Deciding whom you are a company that sells to

To read these two years only as overseas M&A that bought additional share is to miss the point. What the acquisition of Volkswagen Bordnetze brought was less production equipment than a customer — the European carmakers that following Japanese manufacturers abroad had never reached. After president Matsumoto Masayoshi said at the end of 2004 that “20% share is already in sight,” what remained was not a share figure but a choice about whom the company would be selling to.

The customers it bought did not turn into profit at once. In the year to March 2009 the automotive segment’s operating profit fell to ¥6.1 billion, as falling demand coincided with the cost of reorganising and relocating harness plants in Europe and North America. Because Sumitomo Wiring Systems had been made a wholly owned subsidiary the year before, that pain was absorbed inside the group alone, without minority shareholders in Yokkaichi. Whether buying in works out shows up not in the year of the purchase but in how well the following few years are endured.