Hitachi’s Revival Isn’t So Good for the City of Hitachi

The following is an excerpt from an article in:


The New York Times
Saturday, December 29, 2012

Hitachi’s Revival Isn’t So Good for the City of Hitachi

By HIROKO TABUCHI

HITACHI, Japan — 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 globalization strategy that shifts production and procurement from high-cost Japan to more competitive locations overseas. As Japan’s manufacturing giants become truly global, a country that has so depended on its manufacturers for growth must look to other sources of jobs and opportunity, like its nascent entrepreneurs — a transformation far more easily said than done.

“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. “But to return to growth, we have to cut loose what doesn’t bring profit. We have to be decisive.”

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.

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