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Matsushita demands fee for management guidance
Panasonic had several candidates for a technical tie-up. Philips was eventually selected for further negotiations, one reason being that the two companies had done business together before the war and Philips had taken the initiative to contact Panasonic after the war to request a resumption of trade. Other reasons were Philips' advanced technology, and its excellent management performance. Philips had begun as a light bulb manufacturer in the Netherlands, a country even smaller than Japan, and had grown in just 60 years to become one of the world's major electric equipment manufacturers.
But negotiations were rocky. Philips had suggested that the companies set up a jointly financed subsidiary, and wanted a fee for technical guidance. MEI was capitalized at ¥500 million at the time, while the subsidiary was to be capitalized at ¥660 million. Although Philips agreed to provide 30% of the capital, the funds they would apply to this would actually be coming from the technical guidance fee.
The fee was to be 7% of the new company's sales, in contrast with 3% requested by American companies. Philips agreed that the figure was high, but refused to yield. It reflected, they said, the true value of their assistance, since they would be providing complete, unreserved technical support. Matsushita responded with a demand for a management guidance fee since, he reasoned, management expertise has a value as tangible as that of technical expertise.
Philips eventually capitulated, and the companies concluded their tie-up, which led to the establishment of Matsushita Electronics Corporation(MEC) in December 1952, and the construction of a factory in Takatsuki, an Osaka suburb.
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