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Hitachi group swings axe to light electric appliance division. Pulling down signboard of "integrated electric company"

5, 01. 2009

   The Hitachi group, in quagmire of unprecedented management difficulty, is facing the danger of "disintegration." The group consists of 880 companies operating in Japan and abroad beside the main company, Hitachi, Ltd. Their lines of products range from locomotives, computers and nuclear power plants to white goods, personal computers and audio-visual equipment. But the group is now swinging a "big axe" to its light electric appliance division under the motto of "return to the starting point," and pulling down the signboard of "integrated electric company." Under these circumstances, the managers of the group are now considering introducing public funds into the member firms of the group.

"Public fund" is one of options

   With the passage by the parliament of the bill for Industrial Revitalization, which allows the capital injection using public fund into major firms faced by bad business performance, the companies in the electric industry began studying the possibility of utilizing the law. The law is now accepted as a "lifeline" as indicated by the fact that the semiconductor company Elpida Memory, Inc. and the AV equipment company Pioneer Corp. have already expressed their wish for investments amounting to 50 billion yen and 30 billion yen, respectively.

   Takashi Kawamura, who became President of Hitachi just on April 1, 2009, said of the capital investment from public fund at a press conference on April 20 that the matter was being considered "for a number of fields" of his company.

   A person in charge of the public relations at the company said that the "utilization of the public fund is one of options, but nothing has been decided about fields of business activities or any other matters." The Hitachi, Ltd., the main company of the group, however, will not seek capital injection from the public fund, and the matter is left for "consideration by individual company in the group," the person said.

   The consolidated account settlement of Hitachi for the term ended in March 2009 is expected to have registered a loss of 700 billion yen by the American accounting standard, dipping deeper than the previous term's loss of 58.1 billion yen. The red figure widened amid the decline in sales for products ranging from large-scale electric machineries of the "heavy electric division" to television sets, air conditioners, refrigerators and other goods of the "light electric division."

Leaning toward information communications, electric power and environment business which are the "starting point"

   Hitachi, Ltd., founded originally for the production of transformers, will celebrate the 100th anniversary of founding in 2010. Faced by the unprecedented bad business condition, Kawamura is proposing that the company return to the "starting point." He stated the focus will be shifted from being an integrated electric maker and the company will aim at establishing a stabilized earning structure. This statement is taken as meaning that the company is pulling down its signboard as an "integrated electric company.

   Termed as "starting point" industries are those making up the "social innovation projects," including the information communications and electric power system, environment and related manufacturing, transportation system, and social-urban system. The company aims at strengthening more stabilized profit-earning projects by leaning further to the "social innovation projects."

   As another effort, it is likely to swing "an axe" to its light electric division. In the middle of April, business integration between Renesas Technology, the semiconductor company owned jointly with Mitsubishi Electric, and NEC Electronics, loomed. Hitachi commented that it has not made public the possibility of such integration. But a rumor also had it that there would be restructuring by injecting public fund into Renesas.

   The company has decided on the spinning off into a new company of the consumer goods group, including the production of thin screen TV's, in July 2009. It is considering further restructuring aimed at improving business efficiency covering the entire consumer goods business, including the white goods.

   To make clear the responsibility and authority of the business division, it says it will establish the "company system" of thoroughly self-supporting accounting system. But this seems the company's excuse to make it easier to sell its parts.

   The group is so big that it is made up of 880 companies in Japan and abroad. Moreover, each of them is a firm of large scale with tremendously influential power. It would take a long time to "break up" the group, and it is likely to be a huge restructuring move affecting the industry as a whole.

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