The biggest annual loss on record by a Japanese manufacturer jolted executives into action at the Hitachi Corporation, the century-old electronics and engineering behemoth that takes its name from this wind-swept industrial city on the Pacific Coast.
Since its 787 billion yen, or $9.2 billion, loss in 2009, Hitachi has staged an impressive turnaround, booking a record 347 billion yen ($4 billion) in net profit in the year through March 2012, while rivals like Sony, Sharp and Panasonic continue to struggle.
But in Hitachi, a city of 190,00 and the company’s longtime production hub, there is little celebrating. Instead, the deserted streets and shuttered workshops speak of the heavy toll levied by the aggressive streamlining, cost-cutting and offshoring that has underpinned Hitachi’s recovery.
The divergent fortunes of Hitachi and its home city highlight an uncomfortable reality: The bold steps that could revive Japan’s ailing electronics giants are unlikely to bring back the jobs, opportunities and growth that the country desperately needs to revive its economy.
The way forward for Japan’s embattled electronics sector, for now, is a globalisation strategy that shifts production and procurement from high-cost Japan to more competitive locations overseas. “Closing plants in Japan is a big deal, and we don’t take cutbacks lightly,” Hiroaki Nakanishi, Hitachi’s president and chief executive, said in a year-end interview in Tokyo.
Japan is still grappling with the fallout from a decade-long, seemingly unstoppable decline of its electronics sector, once a driver of growth and a bedrock of its economy. Japan’s two biggest electronics companies, Hitachi and Panasonic, each have more in sales than the country’s entire agricultural sector, and other big electronics firms come close.
But for more than a decade, these technology companies have experienced little growth. Annual sales growth over the last 15 years at Japan’s top eight tech companies averages around zero, according to Eurotechnology Japan, a research and consulting company in Tokyo.
To blame are plunging prices across the board for their products, brought about by intense competition from rivals in South Korea and Taiwan as electronics increasingly become widely interchangeable. Overstretched and unfocused, Japan’s tech giants also ceded much of their cutting edge to more innovative companies like Apple. Japan’s failure to keep up with a shift in the industry to software and services has compounded those woes.
Still, even among its peers, Hitachi stood out for the depth of its losses. After a decade of little or negative growth, Hitachi fell first and hardest, booking its big loss at the height of the global financial crisis because of large write-downs and losses in its electronics businesses.
Local media went into a frenzy over what it called “Hitachi shock,” while the company’s shares slumped to a third of pre-crisis levels.
Hitachi once had almost 400,000 employees at a thousand often overlapping and competing groups, making products as diverse as televisions, hard disk drives, chips, heated toilet seats, elevators and nuclear reactors. Under the leadership of Nakanishi, who took the helm in 2010, the company has substantially shrunk or sold money-losing businesses.
Hitachi’s shift from consumer electronics has been the most striking, epitomised by its exit this year from a half-century of manufacturing TVs. Consumer electronics made up just 9 percent of its revenue for the year through March 2012, down by almost half from a decade ago, and it is expected to fall further this year.
Instead, Hitachi is focusing on infrastructure projects, including information technology services and networking systems, power generation, railways and industrial machinery.
© 2012 The New York Times News Service