Japanese SMEs hit by crisis

Kitajima Shibori Seisakusyo, a producer of metal-spinning parts that has been in business since just after World War II and employs about 30 skilled staff, is among them.

Minoru Kitajima, president of the Tokyo company, said he had avoided layoffs and wagecutting by all means possible, despite lower sales.

"This is the most difficult time ever for us. The recession has taken its toll, as the Japanese economy is deteriorating. My older brother, who is the founder of the company, says this is the first time he has ever seen such a sudden decline," he said.

The company - established two years after the end of World War II - survived the Japanese economic bubble as well as the "lost decade", but is now struggling to stay afloat with sales falling by up to 20 per cent year on year.

Its products include metalspinning parts for lamps and lighting equipment, space carriers and nuclear power facilities, architectural decoration, and parts for semiconductor manufacturing equipment.

Some of these products are subcontracted from other companies, whose sales are to both the local and overseas markets. Kitajima Shibori Seisakusyo does not have longterm contracts, as its orders come on a daily basis.

Overall yearly sales peaked at 700 million yen (Bt247 million) during the economic bubble 15 years ago, but are now about 400 million yen.

"There is no sign of improvement. If the company can record flat growth this year, we will be lucky," Kitajima said.

The company's president is also worrying about his customers, as some of them could become bankrupt because of the recession. The company has faced two or three defaults by customers per year over the past 12 years, but there has been a minimal impact so far during the current downturn.

Customer default is still a concern, even though the company has a condition of cash payment for firsttime customers, payment terms for secondtime customers and promissory notes for longerterm clients.

Asked whether the company was planning to reduce its worker numbers to cope with lower income, Kitajima said that despite the need to reduce costs, he would like to nurture skilled labour.

About 20 years ago, the company changed its strategy from producing mass products to valueadded items in order to meet demand for higher quality, as China had flooded the market with cheaper metalspinning products.

Another challenge is that it is hard amid the current tough economic situation to invest in the new equipment the company needs. But maintaining highly skilled labour is more important than new equipment, he said.

Moreover, for small and mediumsized enterprises, getting a loan is difficult in any economic circumstances, he added.

"There are several loans available, but the procedure and paperwork is too difficult for us," Kitajima said.

Besides the economic crisis, there is intense competition in the industry. However, Kitajima said his company's production was running at maximum capacity, while rivals are producing well below capacity as they have diversified their production lines so much.

Asked what in his view was the key to surviving the crisis, Kitajima said the company should remain "passive" by not making any products that have not been ordered by customers. In addition, despite a number of competitors, greater differentiation of quality products would help.