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Hitachi names new CEO, what now?

Posted: 25 Mar 2009     Print Version  Bookmark and Share

Keywords:reorganisation  industrial equipment  cross-ownership  microcontroller business 

Looking for a new growth strategy in a depressed economy and in the aftermath of previous failed attempts to reorganise its operations, Hitachi Ltd has turned to one of its oldest executives for a new direction.

The move raises numerous questions, not the least of which is the wisdom of appointing an old-guard executive on the verge of retirement to lead a distressed enterprise in serious need of radical change.

Depending on how the future shapes out in the next few years, the appointment of 69-year-old Takashi Kawamura as chairman, president and CEO of Hitachi effective April 1 will either be recorded as a stroke of genius on the part of the board or a bad April Fool's joke.

Hitachi's current situation calls neither for mirth nor carelessness. The company is losing money and has been unable so far to successfully transform its operations to meet the challenges of a complex and troubled economy. While some businesses appear to be stable, Hitachi's automotive, consumer and electronic units are distressed and are sucking the life out of the other divisions, according to credit analysts.

"The company's extensive business profile and strong competitiveness in each of its business segments have provided a certain level of resistance against downward pressure on its earnings," said Hiroki Shibata, an analyst at Standard & Poor's. "There are potential risks associated with the declining number of businesses that are capable of supporting Hitachi's overall performance amid the global economic crisis."

Fighting for survival
Like many of its Japanese rivals, including Toshiba Corp., which is also replacing its CEO, Hitachi is in a fight for its life and needs to fundamentally restructure its operations to become a better competitor in each one of its market sectors. Will Kawamura, a long-term Hitachi fixture, who arguably helped push the company into the tight corner it's in today be the saviour the company so urgently needs?

Hitachi's directors obviously believe they have to first go backward in order to craft a better future for the company, hence the appointment of Kawamura who replaces Kazuo Furukawa, a sprightly 61 compared with his successor.

For 47 years, Kawamura was a faithful soldier at Hitachi, rising through the ranks to major executive positions and helping to transform the Japanese behemoth into one of the world's biggest electronic and industrial equipment manufacturers.

An electronic engineer, Kawamura joined Hitachi straight out of Tokyo University in 1962 and was getting ready to fade away into retirement before the new appointment.

Four core objectives
In addition to the plans laid out by Hitachi's board, Kawamura must successfully conclude four core objectives to validate his appointment and meritoriously conclude his long career at Hitachi:

Intensify and complete the reorganisation and overhaul of Hitachi's business units
Hitachi's multi-year reorganisation of operations has been conducted in typical Japan Inc. fashion with numerous announcements of change but hardly any visible results.

It's not clear how much leeway Kawamura would have in refashioning Hitachi since, simultaneous with the announcement of his appointment March 16, the company proposed a wide range of restructuring actions that the new CEO would have to implement.

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