VZCZCXRO2124
RR RUEHCHI RUEHFK RUEHHM RUEHKSO RUEHNAG RUEHPB
DE RUEHKO #1639/01 2020507
ZNR UUUUU ZZH
R 210507Z JUL 09
FM AMEMBASSY TOKYO
TO RUEHC/SECSTATE WASHDC 4685
INFO RUEHRL/AMEMBASSY BERLIN 1660
RUEHLO/AMEMBASSY LONDON 2456
RUEHFR/AMEMBASSY PARIS 6549
RUEHBS/USEU BRUSSELS
RUEHZU/ASIAN PACIFIC ECONOMIC COOPERATION
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RULSDMK/DEPT OF TRANSPORTATION WASHINGTON DC
RUEHFK/AMCONSUL FUKUOKA 5347
RUEHNH/AMCONSUL NAHA 7676
RUEHNAG/AMCONSUL NAGOYA 2841
RUEHOK/AMCONSUL OSAKA KOBE 9155

UNCLAS SECTION 01 OF 02 TOKYO 001639 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EAP/J, EEB, AND OES 
STATE PASS COMMERCE, DOT 
STATE PASS USTR FOR AUSTR WCUTLER AND MBEEMAN 
 
E.O. 12958: N/A 
TAGS: EIND KGHG SENV ETRD JA
SUBJECT: JAPANESE AUTO EXECUTIVES LOOK TO MARKET 
RECOVERY AND NEW TECHNOLOGIES 
 
TOKYO 00001639  001.2 OF 002 
 
 
SENSITIVE BUT UNCLASSIFIED. CONTAINS PROPRIETARY 
INFORMATION 
 
¶1. (SBU) Summary:  Honda and Nissan Executives see 
conditions improving in both auto and financial 
markets.  Honda stresses the importance of being able 
to benefit now from past investments, especially in 
alternatives to the classic internal combustion engine 
investment and taking a long-term view in weathering 
the market downturn.  Both companies seem more focused 
on the industry's transition to new technologies and 
the role government policies may play, rather than on 
market recovery only.  Nissan called the recently 
announced USG funding for electric vehicle (EV) 
batteries a positive sign.  Looking at the situation 
in Japan, Nissan is concerned over the possibility of 
a DPJ victory in upcoming elections because of what 
the car manufacturers feel are unrealistic emissions 
targets and deadlines.  End summary. 
 
¶2. (U) As part of a series of farewell calls,  EMIN 
met Honda General Manager for External Affairs Takao 
Aoki July 16, and Senior Vice President Hitoshi 
Kawaguchi, and General Manager for External and 
Government Affairs Takehiro Kasai July 15. 
 
---------------------------------------- 
Market Conditions and Business Prospects 
---------------------------------------- 
 
¶3. (U) Honda Motors sees improvement in market 
conditions and company sales figures, although broader 
economic recovery is still further down the road. 
Aoki told EMIN domestic sales figures for June are up 
5.7 percent year-on-year and would appear even more 
striking compared to December figures.  Production has 
increased and inventory levels are nearly back to 
normal.  Access to business financing has improved in 
both the U.S. and Japan.  He said the company's 
weakened balance sheet also reflects factors such as 
writing down the asset value of its fleet of leased 
vehicles, even while sales and production improve. 
 
¶4. (SBU) Describing recent government support, Aoki 
said the only direct assistance Honda received from 
the Japanese government was credit insurance to help 
secure short-term financing.  He acknowledged other 
government measures such as support in the commercial 
paper market and special bond facilities to provide 
short-term capital for firms in distress, but said 
Honda had not needed such assistance.  He added, while 
incentives to encourage consumption may cause 
consumers to accelerate their purchases, they have not 
really changed underlying consumption patterns.  In 
other words, the incentives may be causing consumers 
to buy a car rather than putting it off, but they are 
not causing a rise in overall demand for cars in 
Japan. 
 
¶5. (U) Aoki noted Honda was able to obtain credit more 
easily in Japan during the hardest parts of the 
financial crisis than in the U.S.  That difficulty in 
obtaining credit caused problems with operating and 
consumer financing.  Honda is pleased, therefore, that 
the credit market in the U.S. is recovering. 
 
---------------------------------------- 
Future Prospects and Government Policies 
---------------------------------------- 
 
¶6. (SBU) Optimistic about Honda's business prospects 
since the company still has new models that appeal to 
consumers, Aoki noted these new models are a result of 
investment decisions made five to seven years ago.  He 
asserted some other firms, such as Nissan, had focused 
more on cutting operating costs rather than taking a 
 
TOKYO 00001639  002.2 OF 002 
 
 
long-term view.  As a result they will find the coming 
market very difficult.  Honda's experience in recent 
markets reinforced a sense of the importance of 
investment in R&D and new technologies, particularly 
should the auto industry shift permanently from 
internal combustion to electric or other engines. 
 
¶7. (U) Nissan Senior Vice President Kawaguchi said his 
company is pleased with the recent USG announcement to 
provide additional funding for electric vehicle (EV) 
batteries.  Nissan views this as a "positive sign" of 
U.S. support for hybrid vehicle development and 
Kawaguchi added it should also help create new jobs. 
 
¶8. (SBU) While the EU and Japan are also exploring 
ways to spur EV production, Kawaguchi said Japan lags 
in this area.  He argued there is not much downside 
risk in governments "choosing" certain new 
technologies such as EV batteries over other options, 
adding industry will be forced to innovate in order to 
survive, with or without government support.  He 
acknowledged, though, Toyota and Honda have moved more 
aggressively to a mix of hybrids than has Nissan. 
 
¶9. (SBU) Kawaguchi expressed concern an opposition 
Democratic Party of Japan (DPJ) victory in upcoming 
Lower House elections slated for August 30 may not 
bode well for auto manufacturers since the party is 
advocating what industry feels are unrealistic CO2 
emissions targets and deadlines. 
 
POST