Federal Express Buys Control of 3 Firms in Japan

Federal Express Corp. said Friday that it has bought a majority interest in three Japanese cargo distribution companies and a minority stake in their parent company in order to expand its presence in Japan and to improve its current system of picking up and delivering packages in that important Asian market.

The companies are Daisei Shokuhinrytsu Co. and Daisei Co. of Tokyo, and Nagoya Daisei Cargo of Nagoya, the Memphis, Tenn.-based air express package delivery concern said. The Japanese firms are part of the Daisei group of companies established in Nagoya in 1969 by Kouichi Tanaka. Tanaka, the Daisei group chairman and chief executive, will serve as Federal Express’ managing director for Japan, Federal Express said.

The Daisei group includes 14 subsidiaries that are involved in various aspects of transportation, including food and dry goods delivery, warehousing, contract distribution and cargo delivery throughout Japan.

“The addition of the Daisei companies brings us more than 80 well-trained employees, some 70 vehicles and seven station facilities to expand our operation in Tokyo, Nagoya and Osaka,” John M. Dauernheim, Federal Express vice president of operations for the Pacific Rim, said in a statement. “It also brings us a strong management team to enhance and expand our Tokyo Narita and Osaka management team.”

Slowed by Red Tape

Federal Express has been offering deliveries to Japan since 1984. But it was only granted the right to fly its own DC-10 aircraft into the country earlier this year after the U.S. Transportation Department selected it under a 1985 agreement with Japan that permits one small-package carrier to fly between the two nations.

Those flights began in June of this year, but the company says it has faced restrictions imposed by the Japanese government and a failure by the Japanese to provide expedited customs clearances for its packages, as it agreed to do. The customs delays cause its deliveries to Japan to take longer than deliveries to any of the other 100 foreign nations it services, Federal Express said.

Dauernheim said in an interview that the investment in the Japanese companies won’t help resolve the immediate problems. “We really acquired the companies for other reasons,” he said. However, he added, the investment will help bilateral trade issues in the future. The current issues are to be addressed in bilateral U. S.-Japan talks, he said.

Another Challenge

A. Doyle Cloud, Federal Express vice president for government and regulatory affairs, said no trade talks have been scheduled, but the company believes that they will begin in December. He said the U.S. government took a firm stand in support of Federal Express’ documentation for small packages and that that issue has been resolved. The Japanese government had objected to the company’s documentation because it did not conform to the longer, more detailed traditional airway bills used for air cargo.

Federal Express is also challenging a Japanese attempt to apply a 70-pound weight limit to packages that the company routes through Tokyo to other Asian nations. The company argues that the weight limit shouldn’t apply to packages not bound for Japan.

Cloud said the consensus in the air cargo industry is that upcoming trade talks will result in a lifting of all restrictions and a decision by the Japanese to allow other U.S. carriers, including United Parcel Service and Emery Air Freight, to begin deliveries to Japan.