It was an unlikely suitor, but he was in no position to be picky. Though his company made some of the world's most sophisticated printing machines, and it was said that he was a brilliant engineer, he was also a miserable businessman. His company was bankrupt. It was this deal or liquidation.
So Yasutaka Kojima, president of the Akiyama Machinery Manufacturing Corp., a fallen champion in once-mighty Japan, began negotiations to hand over his business to a state-owned company from the People's Republic of China. He would seek salvation -- cash, and expertise in the art of capitalism -- from Shanghai Electric Co., a conglomerate still controlled by the Communist government.
That such a transaction could even be considered, let alone consummated as it was last year, attests to a dramatic reordering of economic power in Asia. Flush with cash and intent on expanding into markets around the globe with powerful brands and cutting-edge technology, Chinese companies are beginning to buy distressed businesses in Japan, where a decade-long slump has left many in desperate straits.
This reversal of fortune is filled with historical irony. In the first half of the 20th century, as Japan conducted its imperialistic march across Asia, it ravaged China, occupying territory and seizing materials and machinery. Now, China is crossing the sea in the other direction, bringing home spoils from Japan. Only a decade ago, as Japan swallowed one foreign trophy after another -- Hollywood studios, Rockefeller Center -- pundits proclaimed the era of the Rising Sun, stoking sometimes jingoistic fears of Japanese world domination. Although China, too, was making investments in the United States and other countries, its image remained that of a land of bicycles and rice farmers, with values closer to Karl Marx than Warren Buffett.
But now, at least for the moment, China's brand of business is trumping Japan's. China is booming as it continues its transition from communism. In the past two years, at least seven Chinese companies have purchased majority stakes in such diverse Japanese ventures as metal processing and textile operations, according to Recof Corp., a leading Japanese mergers-and-acquisitions research firm. In most of the deals, the Chinese company has shifted manufacturing to China, where, despite the "Worker's Paradise" label, wages are as little as a tenth of their Japanese equivalents and pressure to retain workers is far lower.
"China is more capitalist than Japan in terms of labor issues," said Akira Kan, president of the home-appliance division of the Japanese giant Sanyo Electric Co., which sold its microwave-oven division to Guangdong Midea Holding Co. in October 2001.
More such deals are in the works. Beijing-based Joco Investment Management Co., a private investment firm, is sniffing out takeover candidates for Chinese businesses in Japan, said its president, Nick Gu. In October, nearly three dozen firms attended a Shanghai government conference on investing in Japan. Late last year, one of China's largest brokerage houses, Tiantong Securities, set up a consulting business, Tiantong Star Investment, to advise government-owned companies on how to buy Japanese firms. It is now brokering the purchase of a Japanese furniture maker by a Shanghai area company, said its general manager, Zhou Bin.
Foiled by the Numbers
Akiyama was founded by three brothers of that name in 1948. Kojima joined as a 15-year-old the following year, as Mao Zedong's forces took control of mainland China. He learned engineering on the factory floor, worked his way up and became president in 1973.
Kojima had a knack for fashioning new products. Under his direction, Akiyama developed machines that can print 13,000 sheets an hour at photographic quality. By the mid-1980s, Akiyama was selling more than $130 million worth of machinery a year worldwide, employing 140 people in its factory in Suikaido City, about an hour from Tokyo.
But Kojima neglected the numbers side of his business. Akiyama opened sales offices in Los Angeles, Dallas Chicago and New Jersey. Each operated as a separate fiefdom, importing machines from the factory. They ordered too many. "The unpaid balances started to pile up," Kojima said.
In 1993, Akiyama filed for bankruptcy. It emerged after some restructuring and business turned around for a bit, propelled by Kojima's latest technological advance -- a machine capable of simultaneously printing on both sides of paper. But that machine provoked a bitter, expensive and ultimately failed patent battle with Akiyama's largest competitor. At the same time, Japan's economy was in the doldrums. In March 2001, Akiyama landed in bankruptcy again.
This time, things looked grim. The only potential Japanese buyers were themselves in hard times. Then, in April 2001, came the intervention of one of Akiyama's customers, a family printing business that makes high-quality playing cards for casinos across Asia. Officials there worried that Akiyama's failure would threaten its own survival.
One of the executives at the playing-card company contacted a former colleague, Kazuhiko Toyama, president of Tokyo consulting company Corporate Directions Inc., which specializes in turning around troubled companies. Toyama wrote a report listing Akiyama's attributes: Its machines were still of the highest quality. Its brand still had value. Bankruptcy would strip away its debt. Toyama set his sights on potential buyers in the developing world.
Two years earlier, Toyama had been impressed when he visited China to explore an alliance with Shanghai Electric Co., which is something like China's version of General Electric and employs more than 100,000 people. Chinese state-owned companies have traditionally been more concerned with preserving jobs and benefits than in turning profits. But under China's reforms, state companies are now under pressure to make money. Shanghai Electric has been quicker to adapt than most. It was already engaged in three joint-venture printing-machine manufacturing businesses with the Morningside Group, a private investment firm controlled by Hong Kong real estate magnate Ronnie C. Chan.
Toyama sent his report on Akiyama to Bob Ching, a former colleague who is now a partner at Morningside. Ching was intrigued. China's printing industry was growing by 30 percent a year. Quality was improving as a burgeoning class of nouveau riche acquired a taste for magazines with shiny photos of modern buildings in Barcelona and models on catwalks in New York. But the high-end machinery was still imported. Shanghai Electric dominated the market for lower-end machines, but its quality was nowhere near Akiyama's.
"We have been looking to upgrade ourselves," said Ching, 61, who fancies himself as a bridge between China's past and its future. He was born in Shanghai and grew up in Hong Kong and Taiwan before settling in the United States. "For us, it was a very natural course of action."
But Shanghai Electric executives wondered whether they had the expertise to oversee Akiyama, which was bigger than any of their operations in China, and whether a Japanese bankruptcy court would sign off on putting Akiyama in the hands of a Chinese state-owned company.
Japan's written language includes traditional Chinese characters. The Japanese word for bankruptcy spells out "born again" in Chinese. Shanghai Electric's leaders wondered if they could really meet such a standard.
When the Chinese executives approached the Ministry of Finance, Trade and Economic Development, they found the government enthusiastic. They could do the deal. But did they want to?
No Longer '20 Years Behind'
Hu Xiongqing, a 55-year-old veteran of Shanghai Electric's printing operations who eventually would become head of the new company, led a reconnaissance effort to Tokyo in June 2001.
When Kojima met Hu for the first time in Toyama's conference room, he mostly listened. He was concerned that the Chinese just wanted to strip Akiyama's technology. He was pleased to hear Hu say -- through an interpreter -- that Shanghai Electric wanted to keep the factory in Japan and saw value in sending people over from China in a sort of apprenticeship mode.
On his trip to China in 1999, Kojima had found that industry there was "20 years behind." But he also saw that China aimed to catch up fast. Now, he was listening to an official from a state-owned company speaking of "returning profit to the shareholder."
"The way he talked was different from our impression of China," Kojima said. "He had a very capitalist point of view. I would be lying if I said the deal didn't strike me as strange. But I saw this as ahead of its time. Mostly, I saw it as a way to move my business."
In early July, Hu visited the factory for the first time and quizzed its managers. He began to understand why Japan is sometimes known as the world's most successful socialist country. Akiyama had failed to press suppliers for lower prices as its scale grew, Hu discovered.
"They were doing a really lousy job controlling costs," he said. "They never tried to bargain. They would pretend to have more money than they did to save face and just accept whatever price for goods they were offered."
Middle management seemed uncreative and ossified. "If they regarded a strategy as correct, they would just do it forever and not react to changing conditions," Hu said. "Their technology was very advanced, but their management concept was very backward. I could see we had the capability to change the company."
But Hu was uncertain whether Akiyama's employees would respond to Chinese management. "Most Japanese have never been to China and they are very arrogant," he said. "They regard that they are an advanced country and China is a developing country: 'How can a less-developed country manage us?' "
Kojima and Toyama assured him that the workers understood their options -- a new boss or no boss. They would adjust. Hu and the executives back in Shanghai decided to go ahead.
On Aug. 8, Shanghai Electric's senior executives gathered in Toyama's office with Kojima and his colleagues to sign a letter of intent to buy the company. Afterward, they shifted to the Metropolitan Hotel in Tokyo's Ikebukuro district for a Chinese banquet. Some toasted the deal with Japanese rice wine; some drank Chinese liquor.
They still had to settle the purchase price, something neither side will discuss, though Japanese news reports have pegged it at $17 million. Talks were slowed as Shanghai Electric executives encountered trouble gaining visas to visit Japan, which treats all Chinese as presumptive economic migrants. The deal closed last February.
According to Hu, Akiyama International Co., as the new venture is known, is already profitable. It has trimmed production costs by 15 percent through aggressive bargaining with suppliers. It has instituted a merit-based pay system, eliminating perks for senior employees while creating opportunities for younger ones.
"We have met resistance," Hu said. "At first, the Japanese managers were very defensive. They wanted us to do everything the same as before."
Hu has fired two people: one for refusing to bargain with suppliers, the other for "general incompetence." But Hu has also hired 16 new employees while swelling the ranks of the factory to 126, more than double the 59 he was required to employ under the purchase deal.
On a recent afternoon at the factory, workers loaded freshly built machines onto the bed of a tractor-trailer bound for the port of Yokohama, where they would be shipped to Cambridge University Press in the United Kingdom to print bibles. Other workers made adjustments to machines destined to make calendars in Spain, covers for compact discs in Japan, travel brochures bearing photos of white sand and emerald water.
Next month, six managers from Shanghai Electric's printing operations at home plan to begin a year-long stint at the factory in preparation for eventually making Akiyama machines in China. That would be "an expansion," a manager was quick to emphasize.
Special correspondent Wang Ting in Shanghai contributed to this report.