Mr. Sueshige, (right) checks product quality prior to delivery to AAT. The number of rounds he makes in the plant has increased since the delivery date approaches. (Chachoengsao Province)

There is a Mazda subsidiary in Chachoengsao Province immediately east of Bangkok, called Sukosol and Mazda Engineering Co., Ltd. (SMEC). The company produces transmissions and gears. Auto Alliance Thailand (AAT) ordered transmissions for their small trucks from this company. Yoshitaka Sueshige, 55, the President of the supplier who was dispatched from Mazda says, "It has nothing to do with keiretsu or a business group system. We compete solely on the basis of quality and cost."

The production of parts for prototypes at SMEC is proceeding rapidly. Recently, Mr. Sueshige has been making the rounds checking for quality in the plant much more frequently. There are only three Japanese employees working for them, all dispatched from Mazda. These includes Mr. Sueshige, who has served as the President since January, 1992, when operations began. One-hundred-and-twenty-eight other Thai employees are responsible for production.

Three companies competed for the transmission contract at AAT, including SMEC and other parts manufacturers in Japan and Australia. They all submitted price quotes. "No preferential treatment was given as a result of the fact that we are partially owned by Mazda," Mr. Sueshige recalls.

In the midst of the economic turmoil triggered by the currency crash in Thailand, how to keep cash flowing is another major headache for Mr. Sueshige, "Now, the going rate for lending is 22% per annum, and banks are reluctant to extend loans." Since they landed the contract for parts at AAT, they have had to increase investment for new equipment. Last October, the company's capital almost doubled to 744 million baht (approximately 200 million yen) after Mazda raised its stake from 40% to 64%. Part of the increased capital was used to finance this investment.

In exchange for injecting more money into the company, Mazda asked Mr. Sueshige to cut his workforce. "It's probably because once Mazda owns more than half of SMEC, it will be included as a part of their consolidated accounts," Mr. Sueshige says. Thus the company's performance can then affect the balance sheet at Mazda's Head Office. On the other hand, it takes at least seven months to train a new employee. It is too late to employ new workers after intensive production has started at AAT. "Cutting costs does not make sense if quality goes down along with it," he insists.

Mazda now enforces very tight cost control under Ford management. In the end, 23 employees were removed from their payroll by such measures as sending three of the six Japanese employees back to Japan and by forgoing new employment planned for January this year. As a member of the purchasing department at Mazda, Mr. Sueshige says his requests were usually accommodated after some insistence. Now, in Thailand, he feels how much the Head Office has changed.

Eleven years ago, when the Mazda Manufacturing (USA) Corporation (MMUC) was about to start operations, Mazda recruited suppliers to advance into the United States with them. This time, it did not invite any suppliers. Katsuaki Yamamoto, 58, Managing Director, who selects parts suppliers for AAT explains: "In order to accept orders based on a competitive bidding system, not the influence of keiretsu."

In April, Kurashiki Siam Rubber (KSR) started operations in Platinpli Province. It is a joint venture partly owned by Kurashiki Chemicals Industry (Kurashiki City), one of Mazda's subsidiaries. The company received no favorable treatment from AAT. However, it beat out eight other suppliers for contracts including one for rubber parts to suppress engine vibration. Akira Sakae, 56, President of KSR reveals, "Far from being invited, we were told that we could never expect the kind of complete sponsorship customary in Japan."

Other Japanese carmakers operating in Thailand also take quotes from several suppliers when sourcing parts, without any regard to keiretsu. As Mr. Sueshige of SMEC, which depends on 80% of its total sales of 480 million yen on orders from companies other than AAT, explains, "We cannot expect returns on our investment unless we do business by transcending the barriers of keiretsu." The collapse of the keiretsu structure, progressing in Mazda's hometown of Hiroshima, is already an unquestionable reality in Thailand.