January 30, 2009

Hitachi Plans To Restructure After Reporting Record Losses

Japan's Hitachi Ltd is now joining the ever-increasing list of technology companies slowed by the current recession as it warned of a record $7.8 billion annual loss due to weak sales, a firmer yen and costs to restructure its sprawling operations.

The Japanese manufacturing company is calling it the biggest loss it has ever suffered.

Hitachi stated on Thursday it would exit unprofitable businesses, close plants and take other restructuring steps in a bid to cut 200 billion yen in fixed costs by March 2010.

Chief Executive Kazuo Furukawa told a news conference that since last November, economic conditions surrounding the company have kept deteriorating at an unprecedented speed.

Hitachi now expects a net loss of 700 billion yen ($7.8 billion) for the year to March 31, rather than the previously projected 15 billion yen profit.

Both Sony Corp and Toshiba Corp have also announced heavy losses.

A poll of 12 analysts from Reuters estimates concluded that the latest forecast compares with the consensus of a 54.8 billion yen loss.

Dragging car sales worldwide battered Hitachi's automotive components business, while its flat-screen TV operations suffered from steep price falls amid fierce competition and weakening demand.

The companies operating profit forecast was cut by 90 percent to 40 billion yen, reflecting a downturn across most of its major business lines.

Hitachi was also forced to write down deferred tax assets following a dramatic fall in taxable income across the group"”estimating that adjustment would raise its taxes by about 140 billion yen.

The struggling microchip joint venture, Renesas Technology, has also had a hand in weighing down Hitachi's performance.

Hitachi owns 55 percent of Renesas, while Mitsubishi Electric has the remainder. Renesas expects a net loss of 206 billion yen for the year to March as demand for chip-intensive products such as automobiles and mobile phones are on the decline.

Furukawa said on Friday they are in talks with Mitsubishi Electric on possible aid for Renesas, including financial support.

Furukawa added that although Hitachi and Mitsubishi will lead Renesas' turnaround, its alliance with other Japanese semiconductor makers is also a future option, raising a possibility of far-reaching realignment in the nation's semiconductor sector.

As the global slowdown forces Japanese chipmakers to cut jobs and try to band together, Toshiba Corp is already in talks to merge part of its chip operations with NEC Corp's semiconductor unit.

Hitachi said it plans to cut workers as part of its restructuring measures, but did not specify the size of the job cut"”the company employees some 400,000 workers.

NEC expects at least 20,000 job cuts across the group, by far the biggest cuts announced by an Asian company in the global crisis.

Hitachi shares closed down 6.7 percent at 294 yen before the announcement, while the benchmark Nikkei average lost 3.1 percent.

Photo Courtesy UPI


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