U.S.-Japan Investing

Summary transcript of program broadcast September 15, 1999

Subject: "Hitachi's Restructuring"

Host, Dr. Dennis Laurie and guest Tetsuo Saito, Senior Representative, Hitachi, Ltd.

Dennis Laurie: It is the twelfth largest company in the world and it has been a dominant power in Japan now for almost a century. The company is Hitachi, and I have with me today Senior Representative of Hitachi, Mr. Tetsuo Saito. A good place to begin is the 1998 Annual Year Report that recently came out. How did 1998 fare for Hitachi?

Tetsuo Saito: Unfortunately we didn't have a good result. We made a loss of some $300 million, due to the very bad market in the semi-conductor fields mostly.

Laurie: I think a very positive aspect, though, of Hitachi's performance is the major restructuring that the company has embarked upon that positions it for the coming year. Tell our viewers and potential investors the nature of that restructuring of Hitachi.

Saito: This restructuring took place from the first of April this year, and we divided into ten business units. Each unit specializes in one segment of production or industries.

Laurie: Those ten business units are very broad, encompassing many fields, so would you agree that the future of Hitachi is electronics and telecommunications?

Saito: Yes. We are making the core business electronics and information systems, together with systems support industries.

Laurie: Going back to the founding of this company, 1910 or so, you are about to enjoy your 90th anniversary. R&D has always been a critical part of Hitachi's overall structure. Is that still the case today?

Saito: Yes, exactly. Since our founding in 1910, Namihei Odaira has emphasized the importance of R&D to lead us into the future. At the time of foundation, he was trying to get his own Japanese technology into the business.

Laurie: Let's cross the Pacific. We are now in the U.S. Hitachi's operations in the U.S. are extensive. Would you give our viewers a sense of those operations?

Saito: Yes, as the Hitachi group companies on a consolidated basis, we have some 68 companies operating here in the U.S., and the total number of employees is somewhere around 20,000. And the products are diversified.

Laurie: Almost 30 percent of Hitachi shares are owned by foreign interests. I would think most of those are Americans.

Saito: Yes. Exactly speaking, 27 percent of the total share is owned by foreign investors. And those investors are mostly institutional investors and they mostly originate from America.

Laurie: Talking about Hitachi's presence here in the U.S., one of the major presences is Hitachi Data Systems (HDS), which recently bought out and took on EDS' Services. That's very significant.

Saito: From April 1 this year, we took over all the shares that EDS had, and now HDS (Hitachi Data Systems) is wholly owned by Hitachi.

Laurie: EDS, of course, is Mr. Ross Perot's old company, and many people are thinking, and probably correctly, that the great profit potential is in the service side of the business.

Saito: Yes. On top of our hardware sales of large-scale computers to Fortune 500 corporations, we will move forward to take such service industry into our business.

Laurie: Let me go now to your primary responsibility as Senior Representative for Hitachi. You head the office here in Los Angeles, which is a kind of public relations, community affairs, and financial affairs office. Give my viewers a sense of how you see the mission of your office.

Saito: As I said, some 30 percent is owned by foreign investors, who are mostly American. But institutional investors consist of individuals. We take it seriously to inform what's happening in Hitachi.

Laurie: I want to applaud your effort for that, because Hitachi is a huge company and not that easy to understand. So to the extent you can enlighten potential investors, that's got to be a good thing. Now, let me say it also is a very important and applauded community affairs activity role played by your office. The California Forum, for example.

Saito: We are taking up this California public affairs forum to offer the opportunity to discuss the most pressing issues in the state of California, and this is our offer to the community, for the benefit of all the residents in California.

Laurie: Mr. Saito, your company is about to experience its 90th anniversary. Good going. Suppose I invited you back here for the 100th anniversary, what will Hitachi look like ten years from now?

Saito: From this year April 1 we started the restructuring, and this restructuring will continue. And also R&D will continue to have its importance, and our business will be much more globalized than today.