Japan Stocks Decline on U.S. Auto Concern; Bridgestone Slumps

By Masaki Kondo

Dec. 4 (Bloomberg) -- Japan stocks fell on speculation U.S. carmakers will enter bankruptcy, reducing demand in the world’s biggest economy, and as companies cut investment at the fastest pace in six years to cope with the global recession.

Bridgestone Corp., the world’s No. 1 tiremaker, sank to a five-year low on a report General Motors Corp. and Chrysler LLC are considering a pre-arranged bankruptcy. Komatsu Ltd., the No. 2 maker of earthmovers, sank 7.5 percent after Japan’s capital spending plunged last quarter. Nippon Mining Holdings Inc. surged 11 percent after agreeing to merge with Nippon Oil Corp.

“Regardless of whether the U.S. automakers go bankrupt or stay afloat, they’ll have to sack workers,” said Yoshinori Nagano, a senior strategist at Daiwa Asset Management Co., which manages about $96 billion in Tokyo. “Should the companies collapse, it may trigger a series of business failure and worsen an already weakened U.S. economy.”

The Nikkei 225 Stock Average declined 79.86, or 1 percent, to close at 7,924.24 in Tokyo, after rising as much as 1.3 percent. The broader Topix index retreated 10.31, or 1.3 percent, to 788.88, after swinging between losses and gains nine times. Three stocks retreated for each that rose on the Topix.

The Nikkei has tumbled 48 percent this year as the collapse of the U.S. housing market sparked a global recession. Capital spending dropped for a sixth quarter and by the sharpest margin in six years, Japan’s Ministry of Finance said today, while companies’ quarterly profits tumbled the most since 2001.

Arranged Bankruptcy

Staff for three members of Congress have asked restructuring experts if a pre-arranged bankruptcy could reorganize the U.S. auto industry without liquidation, a person familiar with the matter said. GM and Chrysler told Congress on Dec. 2 that they need $11 billion in government loans to survive the year.

Bridgestone dived 9.2 percent to 1,356 yen, the lowest close since May 2003. Sumitomo Rubber Industries Ltd., which makes Goodyear and Falken tires, sank 4.3 percent to 762 yen. Honda Motor Corp. slumped 6.2 percent to 1,685 yen, leading a decline in automakers.

Honda president Takeo Fukui today said additional production cuts for this business year are “highly possible,” and that the company is studying response plans should U.S. automakers fail.

Komatsu retreated 7.6 percent to 943, while closest domestic rival Hitachi Construction Machinery Co. declined 6.8 percent to 871 yen. Sumitomo Heavy Industries Ltd., Japan’s largest maker of plastic injection-molding gear, sank 7.2 percent to 296 yen.

Mitsui, Orix

Mitsui Fudosan Co., Japan’s biggest developer, lost 8.4 percent to 1,235 yen, sending a gauge of real-estate companies to the lowest level in two weeks. Closest rival Mitsubishi Estate Co. slid 3.5 percent to 1,214 yen, while Sumitomo Realty & Development Co., the No. 3, fell 4.3 percent to 1,201 yen.

Macquarie Securities Ltd. analyst Hiroshi Okubo cut his price estimates on Mitsui Fudosan and Mitsubishi Estate by as much as 48 percent, citing “a decline in corporate earnings and increasing uncertainties in the macro environment.” He cut his rating on Sumitomo Realty to “underperform” from “neutral.”

Orix Corp., a non-bank financial company that counts real estate as its biggest source of earnings, tumbled 14 percent to 4,480 yen, the lowest close since March 1997. The stock was the second-biggest loser on the MSCI World Index.

“There are many non-bank financial companies like Orix that invest in real estate,” said Hiroshi Chano, who helps manage the equivalent of $7.3 billion at Yasuda Asset Management Co. in Tokyo. “Investors are selling these shares because they are afraid more developers will go bust.”

Twenty-three of 30 bankruptcies among Japan’s publicly traded companies this year were in the real estate and construction sectors.

Sanyo Buyout

Sanyo Electric Co. plunged 12 percent to 148 yen, while Panasonic Corp., the world’s largest maker of consumer electronics, fell 5.2 percent to 1,034 yen. The Nikkei newspaper said Panasonic plans to increase its offer for a controlling stake in Sanyo to 130 yen a share, lower than the 250 yen Sanyo is seeking. Goldman Sachs Group Inc. today refused the offer as too low and said it may seek to increase its stake in Sanyo.

Nippon Mining, an oil refiner and Japan’s biggest copper smelter, leapt 11 percent to 285 yen, the sharpest jump since Oct. 29, while Nippon Oil added 3.4 percent to 331 yen. Nippon Mining and Nippon Oil today agreed to Japan’s biggest oil company merger since 1999. The companies expect to reduce costs by 60 billion yen a year.

Taiheiyo Cement Corp., Asia’s largest cement producer, soared 16 percent to 136 yen, making it the second-biggest winner on the MSCI World Index. Sumitomo Osaka Cement Co. jumped 10 percent to 193 yen. Shinya Yamada, a Tokyo-based analyst for Credit Suisse Group, initiated coverage of the companies at “outperform,” with 12-month price estimates of 160 yen for Taiheiyo and 255 yen for Sumitomo Osaka.

Nikkei futures expiring in December fell 2 percent to 7,880 in Osaka and slid 1.4 percent to 7,925 in Singapore.

To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.