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DCR Assigns 'D-2' Commercial Paper Rating to Yazaki International

12 November 1997

DCR Assigns 'D-2' Commercial Paper Rating to Yazaki International

    CHICAGO, Nov. 12 -- Duff & Phelps Credit Rating Company (DCR)
assigned a 'D-2' (D-Two) short-term rating to Yazaki International
Corporation, whose board has initially authorized a $100 million commercial
paper program.  Yazaki International is a wholly owned U.S. subsidiary of
Japan-based Yazaki Corporation, the world's largest manufacturer of automotive
electrical wiring harnesses.
    The proceeds from commercial paper issuance will be used to partially
replace bank debt in funding working capital and other corporate requirements.
At fiscal 1997 yearend, Yazaki International had approximately $225 million of
short-term bank debt, along with $140 million of long-term debt outstanding.
    The rating reflects the general creditworthiness of both Yazaki
International and parent Yazaki, since they are strategically and financially
intertwined and Yazaki International's technical capability and cost
competitiveness significantly depend on parent Yazaki.  Yazaki International,
which serves as a holding company for Yazaki marketing, engineering and
distribution operations supplying automakers in North and South America,
comprises about 30 percent of Yazaki's more than $6 billion in consolidated
sales.
    Yazaki coordinates and transfers research, development and engineering
expertise among its technical centers in Japan, Michigan and Europe to service
central design staffs as well as local plants of global automakers.  While
Yazaki International directly owns six manufacturing plants that formerly were
Chrysler's Acustar Electric Wiring Division, more than 70 percent of Yazaki
International's sales are manufactured in plants owned and controlled by
parent Yazaki and its affiliates.  The assembling of harnesses is very labor
intensive, so most of these plants are located in Mexico, Thailand, the
Philippines, Taiwan and China.
    With relatively high, steady volume of overall light vehicle production
expected to continue in North America, along with Yazaki's growing penetration
in South America, Yazaki International's operating cash flow should remain
good at $100 million or above near term.  Although capital expenditures for
new models is expected to decrease, Yazaki International is investing more
than $50 million in fiscal years 1998 and 1999 to build a new North American
headquarters.  Therefore, only modest free cash flow will likely be available
to reduce debt until fiscal 2000, and the ratio of debt-to-EBITDA is expected
to remain slightly under 2.0 times near term.  Also, upside potential for the
rating is somewhat constrained by the significant debt level of parent Yazaki.
    Yazaki's share of the worldwide market for light vehicle wiring harnesses
is more than 25 percent, anchored by a dominant 52 percent share of auto
production in Japan and even greater strength in the growing balance of the
Asia/Pacific region.  Yazaki International has about a 32 percent share in
North America, which is almost equal to the share of General Motors' captive
Delphi Packard operations, Yazaki's largest competitor.  Yazaki's share in
Europe is about 10 percent.  Yazaki Corporation is privately held, mainly by
employees through a stock ownership plan, along with the founder's family and
its major banks.

SOURCE  Duff & Phelps Credit Rating