THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Saturday, June 15, 1996 TAG: 9606150311
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: JAMES SCHULTZ, STAFF WRITER
LENGTH: 93 lines
Sumitomo Corp.'s loss of $1.8 billion won't affect Chesapeake-based Sumitomo Machinery Corp. of America, according to company president William M. Lechler.
``We're all independent companies,'' Lechler said Friday. ``It has nothing whatsoever to do with us. There's no impact here.''
In all, 24 major companies comprise the Sumitomo group, Lechler said. Sumitomo Corp. owns a ``minor fraction'' of publicly traded Sumitomo Machinery stock, he said. The Chesapeake firm is a division of Sumitomo Heavy Industries Inc.
Lechler said the $100 million company is on track to add 150,000 square feet of manufacturing space to its 250,000 square-foot plant on 100 acres in Cavalier Industrial Park. Announcement of the $15 million expansion came last month, during Gov. George F. Allen's 14-day trade mission to Japan, Hong Kong and Korea.
Lechler said his 275-person work force will add another 130 workers over the next 18 months.
Lechler oversees nine assembly plants in the United States, Canada, Mexico and Brazil, plus operations offices in Australia, Chile, India, New Zealand and South Africa.
In Chesapeake, Sumitomo Machinery operates its lone manufacturing facility, which produces industrial power transmission equipment, including components for gearboxes and motors.
While his annual sales pale to the loss suffered by Sumitomo Corp., Lechler says the financial pain should be put into perspective.
``You look at the figure of $1.8 billion dollars and say, `God almighty,' '' he said. ``But it's about 1 percent of their sales for one year. It's not anything to jump off the cliff about.''
Sumitomo Corp. is a leading member of the Sumitomo group, a Japanese network of businesses connected by cross-ownership with annual revenues exceeding $150 billion.
Sumitomo was known as a top player on copper commodity exchanges in New York and London, where title to own copper - either immediately or at some future date - is traded. Recently the price of copper has plunged because of oversupply.
Sumitomo announced Thursday that a copper trader had lost $1.8 billion in off-the-books trades over 10 years.
Word came not long after Japan's Daiwa Bank Ltd. disclosed that a lone trader had lost $1.1 billion on unauthorized bond transactions, and followed the revelation that another rogue trader, Nicholas Leeson, cost Britain's Barings PLC almost $1.4 billion in trading losses.
The Sumitomo loss would represent quite a nest egg for ordinary folks. It's enough to buy 13,000 new U.S. homes, 33,000 fully loaded Cadillac Seville STS's - with a nice amount left over for gas - or could employ a city the size of Tuscaloosa, Ala., for an entire year.
It wouldn't, however, put much of a dent in the federal budget deficit. The loss comes to 1.4 percent of this year's projected shortfall of at least $130 billion.
``It's not the kind of money people relate to in so many words,'' says Muriel Siebert, founder of a brokerage firm. ``It's not like a new car, or a new house, or the kind of things people look at.
``That's probably why the public has not gotten afraid of this.'' MEMO: The Associated Press contributed to this report.
Losses may push Sumitomo out of Japan's elite/D3
[See related story on page D1.] ILLUSTRATION: GRAPHIC
Sumitomo's Roots
The roots of Sumitomo Corp., now embroiled in scandal over huge
losses by a rogue copper trader, go back to the 17th century -
ironically, as a copper producer and refiner.
The House of Sumitomo was founded by Masatomo Sumitomo, a
warrior-turned-monk who gave up the monastic life to begin a
medicine and bookstore business. Once established, he learned a
European-perfected copper-refining technique.
In 1690
Sumitomo acquired a large copper mine on the island of Shikoku
and became the government's official purveyor of copper, as well as
a major exporter. It branched out beginning in the late 19th century
into general trading, mining and finance.
After World War II
the Sumitomo conglomerate was broken up, and its companies were
made officially independent. But the Sumitomo companies - including
Sumitomo Bank, Sumitomo Mutual Life Insurance and many others -
continue to hold shares in each other and favor each other in
business deals.
Today
Sumitomo is one of the world's biggest distributors of metals,
grains and other basic commodities, as well as a broad array of
industrial goods and consumer products.
ASSOCIATED PRESS by CNB