I.Aggressive measures utilizing Hitachi's consolidated
strengths
1.Provision of social infrastructures for the 21st century
based on information systems and electronics technologies
1)A principal focus of Hitachi's business will be the provision
of new social infrastructures for the 21st century,based on
information systems and electronics technology as well as the
expertise and trust it has acquired through its implementation of
social infrastructural systems.
2)Consolidated software and service operations presently amount
to some 1.5 trillion yen a year. Within five years this will be
increased to around 2.5 trillion yen by expanding and
strengthening personnel resources by redeploying personnel,
mergers and acquisitions, the utilization of outside human
resources and other such means.
2.Reorganization of Hitachi Group companies and aggressive
promotion of outside alliances
To speed up the realization of the Hitachi's business vision,
the parent company will be restructured. Together with this,
consolidation of operations will also be implemented with respect
to subsidiaries. At the same time, the building of alliances with
other companies will be aggressively promoted, including through
investments and acquisitions, as necessary.
II.Restructuring to turn results around
- The implementation of restructuring plans already under way
will be accelerated
1.Expansion of sales and orders by moving more personnel
into front-line operations such as sales and service
2.Reducing fixed costs of the parent company
1)By the end of fiscal 1999, fixed costs will be trimmed by
about 10 percent compared to the present level, entailing a
reduction of 140 billion yen per a year.
2)Main Measures
-Personnel costs will be trimmed by 60 billion yen by various
measures including reducing the number of employees,cutting back
on overtime and reviewing related costs. During fiscal 1998, the
number of employees will decrease by 4,000 to around 66,000, as a
result of natural attrition, including through retirement-age
severance, redeployments made in the course of restructuring,
utilization of human resources from outside as well as inside the
Hitachi Group, and other such steps and factors. The new systems
governing qualifications and pay implemented this spring will be
utilized, together with target management systems, in the rigorous
application of a system based on results and abilities.
-150 billion yen was originally allocated for investment in plant
and equipment. While 70 billion yen of this hasalready been used,
in principle further investments will be frozen pending a full
screening of items.
-Research and development projects will be further prioritized and
streamlined to reduce the original sum of 380 billion yen
allocated for research and development expenditure to 350 billion
yen.
3.Consolidation and disposition of idle assets
4.Restructuring of operating divisions
1)Comprehensive restructuring of semiconductor operations
-TwinStar Semiconductor Incorporated, a joint venture established
with Texas Instruments Incorporated, was dissolved in March
1998.
-Personnel redeployment and organizational changes required to
focus semiconductor operations on system LSIs instead of memories
were completed in July 1998.
-The consolidation of two design subsidiaries was completed in
April 1998.
-Back-end assembly operations of Hitachi Semiconductor (Europe)
GmbH was transferred to an assembling plant in Malaysia.
-Production line operations at Hitachi Semiconductor (America)
Inc. will be frozen and the sales and design divisions
consolidated to strengthen the company's ability to design
products that answer market needs.
-As part of the streamlining of operations, five domestic
subsidiaries will be reorganized and consolidated to form three
companies.
-This fall 1998, volume production of 64-megabit DRAMs based on
0.18-micron process technology will be started. During the first
half of the fiscal 1999, production will be centralized with
Hitachi Nippon Steel Semiconductor Singapore Pte. Ltd. forming the
main production base.
-The ramping-up of system LSI operations will be accelerated to
double sales to 200 billion yen by 2000. This will be achieved by
setting up a System LSI Development Center to make effective use
of the company's extensive fund of systems expertise, the
concentrated deployment of human resources and making optimum use
of the SuperH and H8 microprocessors and other such areas in which
the company has a technological edge.
-The aim of these measures is to move into the black in fiscal
1999.
2)Consumer products divisions of the parent company to be made
into separate entity
-Hitachi is already implementing streamlining and trimming the
fixed costs of the manufacturing and sales operations. The fixed
costs of the parent company's manufacturing divisions during the
first half of fiscal 1998 were 15 percent less than in the
corresponding period of the preceding fiscal year. By the end of
the first half of fiscal 1998 the sales divisions will have 3,000
employees, 500 fewer than the corresponding period of the
preceding fiscal year.
-In order to achieve further reductions in fixed costs, the
manufacturing divisions will be reorganized as separate entities
within a year.
-In response to infrastructural changes in the consumer products
industry, the focus will be on developing as a life solutions
based operation able to provide products meeting individual
customer requirements. In addition to the enhancement of
operations having a stable foundation, resources will be
concentrated in the areas of digital technology and ecology to
promote the changeover to high value added sectors. Concerning the
development of new products, the three S's of Segment, System and
Standard will be emphasized to create new demand and present
customers with life style for the new age.
-These measures will move consolidated operating income of
Consumer Products segment into the black during the second half of
fiscal 1998, and will also ensure stable earnings next fiscal year
and beyond.
3)Rigorous rationalization of power systems operation
-Business functions will be concentrated in Hitachi City in order
to effect restructuring commensurate with the scale of sales
involved.
-Streamlining will include the consolidation of eight subsidiaries
affiliated with the Hitachi Works into four units by the end of
the year.
-Cooperative arrangements with General Electric Company and
Toshiba Corporation will be expanded.
-As a result of these measures, sales will start to recover in the
second half of fiscal 1999, led by sales by the nuclear power
division. Taken together with the effects of the restructuring,
earnings will improve.
4)Consolidating of industrial systems and equipment
operation
-Manufacturing, sales and service operations of the motor division
and the air-conditioning system division of the parent company,
together with those of subsidiaries, will be consolidated.
5)The information systems divisions of the parent company to
focus on software and services
During the current fiscal year some 1,000 personnel will be
transferred to the information systems divisions to strengthen
their capabilities to meet the service requirements arising from
Japan's "Financial Big Bang," network services such as TWX-21,
outsourcing services and so forth.
5.Implementation of management reforms in the parent company
to ensure a speedy response to market changes (To be implemented
from April 1999)
-Each business division will be substantially an independent
company, with considerable decision-making powers and
responsibilities.
-The current Executive Committee, vice-president committee and
other such organs will be abolished. Important decisions that
affect the whole company will be made substantially by a
"corporate management council."
-The head office functions will be minimized to roughly halve the
present level.
-In October a "Hitachi Group committee" will be set up to discuss
management strategies important to the whole Hitachi Group. The
result will be more efficient consolidated management of the
Hitachi Group.
WRITTEN BY Secretary's Office
All Rights Reserved,
Copyright (C)
1998, Hitachi, Ltd.
