hitachi

The path Japan should take to zero carbon – former Hitachi president Kawamura Takashi

Kawamura Takashi is famous in Japan for being instrumental in turning Hitachi round after its largest ever loss in 2009. He has just finished 3 years as chairman of TEPCO (Tokyo Electric Power). Nikkei Business asked for his view on the Japanese government goal of achieving zero carbon by 2050. While more diplomatic than Mr Kobayashi of Mitsubishi Chemical, he points out that country level goals need to be translated into industry based goals, and this cannot be left up to individual companies. Government, electric power companies, manufacturers and citizens will have to unite to do this, he says.

This could apply to Japanese companies in Europe as well in our opinion. There is more scope for Europeans working in Japanese companies to network with each other to collaborate to achieve sustainable development goals, and not just leave it up to the Japanese exaptriates.

Kawamura points out that it’s tough for each company to go it alone. Equipment around the world for companies such as steel manufacturers will become obsolete if they were to switch away from current product methods. Chemical companies could no longer make plastic from petroleum but artificial photosynthesis has been worked on for decades and is still unsuccessful.

“But if it cannot be done, the earth will be destroyed first”. It may seem that the solution is for Japan to “choose the path of returning to the lifestyle of the Edo period (1603-1868) living quietly with a small population” but Kawamura thinks this is not a responsible thing to do when Japan has the third largest GDP in the world.

Hydrogen can be one solution but the problem is making it. It can be made from water with nuclear power but of course this is controversial. There are few regions in Japan where the efficiency of generation of renewable power is high enough to make hydrogen however. So it might be necessary to find methods of producing hydrogen from overseas renewable energy power generation and transporting it to Japan for distribution as energy.

Kawamura says Japanese business leaders are too emotional. They cannot cut business lines which have been developed in their companies over the years, so end up having to bring in foreign executives to do it. “It’s a lie that Japanese can’t do it. Japanese companies don’t want to make calm decisions based on economic rationality, but Japanese really should do this for themselves.”

Asked if he will stay on another 3 years at TEPCO to help with zero carbon he says that at 81 he is too old and he is wanting to do things that give him ikigai (a reason for living outside of work – see our Japan Intercultural Consulting video on this) such as taking his time to read books, which he said he could not do when he was an executive.

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Hitachi in the UK – from TVs to trains (part 1)

Hitachi’s first foray into manufacturing the UK in the 1970s was extremely fraught. Undeterred, 10 years later, it established its European headquarters in the UK, where it has been located since. It has kept faith with the UK through turbulent times, establishing the global headquarters for its rail business in the UK in 2014.

Hitachi had a sales arm in the UK since 1970, marketing “portable monochrome television receivers, radios and record-players”. This was heralded in The Times as “another challenge on the home market from a Japanese rival” (1) noting that this was the third Japanese group to enter the UK home market in recent months (the other two being Sony and Matsushita).

The enemy within the walls

As with much of Japanese manufacturing investment overseas at the time, setting up production within the European Community (EC) was done to avoid accusations of dumping, and to ensure there was enough local content to satisfy the European Commission. Hitachi initially considered a greenfield site in Washington in the North East of England for manufacturing TVs in 1975, shortly after Sony and Matsushita had established manufacturing in the UK. This attracted such hostility from UK domestic competitors worried about overcapacity that Hitachi shelved the idea.

Hitachi was hoping to source cathode ray tubes from British firm Mullard, the only UK manufacturer of colour TV tubes, who were initially very reluctant. They maintained in 1977 that they were not ready to accept a Hitachi offer to buy 25,000 of its tubes a year from 1980. Jack Akerman, Mullard’s managing director, sounded positively sniffy about Hitachi’s technology. “We must be absolutely satisfied that our merchandise is going to be used in a technical environment where it will perform well and live well. If all the technical points are answered and we are satisfied, then it would be acceptable for Mullard and Hitachi to trade together in the event that Hitachi’s new factory were welcomed to this country by the Government.”(2)

The Times ran an opinion piece by the commercial editor Derek Harris asking if Hitachi was going to become “the enemy within the walls”. (3) It detailed a rumour that Finnish made TV tubes (from a partly Hitachi owned company) might supply Hitachi in the UK instead, in return for British fighter aircraft exports to Finland, in an offset deal between governments. It described how Mullard’s real concern was not technological compatibility so much that the British TV industry had substantial overcapacity, so Mullard supplying Hitachi would simply result in damage to existing UK customers of Mullard such as Rank, Thorn and Mullard’s sister company Pye (both were owned by the Dutch company Philips).

Harris quotes Akerman as saying “those first few years will be as smooth as silk. But then – watch out. In Japan they are planning for the year 2000, They want to dominate the electronic equipment business and, as we have said consistently, we don’t blame them.”

“Critically endangered” by tube imports from Japan

Derek Harris wrote a further piece in The Times in October 1978 (4) noting the warning from the European Electronic Component Manufacturers’ Association that the European electronics industry was being critically endangered by cheap imports from Japanese TV component makers. The tubes represented a third of the value of a TV set, and out of every 100 colour sets sold in the EEC, 33 contained tubes made in Japan. This was to intensify in the early 1980s when licensing agreements expired, opening the EEC to the larger colour TV sets made in Japan. UK TV manufacturers had an informal agreement with the Japanese industry on import restraint, but nonetheless, it was estimated that Britain’s TV and audio industry was operating at only 50% capacity.

The UK government then introduced Hitachi to the General Electric Company (the UK company that eventually became Marconi, not the US company General Electric) and the two companies formed a joint venture, GEC-Hitachi Television Ltd, in December 1978 and adopted an existing GEC television factory in Aberdare, Wales, along with a workforce of over 2,000.

Hitachi takes over GEC factory

The British continued to manage the plant, and Hitachi invested nearly £3m in new plant and equipment, and provided technical support. At first sales were good, building up a 10% UK market share. By the early 1980s, overmanning and industrial strife led to losses. GEC sold its half of the company to Hitachi in March 1984 and it became Hitachi Consumer Products Ltd. Hitachi instituted a one union policy and reduced the workforce to 800. The plant also began to manufacture hi-fi equipment. Mullard was a supplier to Hitachi, along with Tabuchi Electric who had set up production in the UK in 1985. Philips changed the Mullard name to Philips Components in 1988.

Hitachi also started a video cassette recorder plant in Germany and eventually the German plant also manufactured TVs and the Wales plant also manufacturered VCRs, with German made cylinder heads and chassis being shipped to the UK and British made PCBs being exported to Germany. This meant the local content for both TVs and VCRs were around 80-90%.(5)

The bubble bursts

In the 1990s competition from cheaper TVs and VCRs made in developing countries made it difficult for Hitachi and other UK based Japanese manufacturers to compete. The Aberdare plant was closed in 2001, with the loss of 700 jobs. Hitachi said it would focus on higher value added products in Europe such as plasma screens, projectors for home cinema, DVD camcorders and in-car navigation systems. After several years of losses, Hitachi Consumer Products UK Ltd was wound up in 1995-1997 and the business transferred to Hitachi Home Electronics, until it too was liquidated in 2003, with remaining assets and business transferred to Hitachi Europe.

(1) The Times, 21 August 1970, p 20

(2) The Times, 10 November 1977, p 20

(3) The Times, 18 November 1977, p 21

(4) The Times, 4 October 1978, p 22

(5) Much of this post is based on pages 304-9 of Japanese Manufacturing Investment in Europe, Its impact on the UK Economy, Roger Strange, Routledge 1993

Japan’s new “job type” system explained

Many Japanese companies such as Hitachi and Fujitsu are introducing a “job-type” (job-gata in Japanese) system. The term “job-type” will not be familiar to Europeans, so we will draw on a series in the Nikkei Business to explain the background to this change.

It’s common practice in Japan to hire full time, permanent staff, usually straight out of university, known as “seishain” with a ‘blank contract’ and no clear definition of the content of the work or the location of employment. Many Japanese commentators call this the “membership type” system, because the new recruit has in effect become a member of a corporate community. I like to use Trompenaars Hampden-Turner’s description of Japanese companies being a “family” company too, even if the founding family are no longer in control.

In contrast to this, the “job type” system is commonly used in Europe and the US, where the company and the individual have a carefully worded employment contract, and the content of the job and remuneration are clearly set out in advance.

	Job type	Membership type
Duties	In principle, duties outside the job description are not undertaken	Boundaries of the role are not clearly defined. Job rotations are common.
Salary	Salary is based on job evaluation/duties	Salary is based on ability and position in a career track, which in turn is based on years of service
Job location	Job location is defined and limited. In principle there is no relocation	Job location and assignment is not defined. Relocation is the norm
Training	for immediate applicability – up to the individual to acquire	long term employment is the precondition, so the company trains the individual.

3 decades of HR reforms

There is plenty of criticism that this is just a repackaging of the much criticised seikashugi or performance based system. Many Japanese companies introduced this after the economic bubble burst in the 1990s but it was seen as simply a cost cutting exercise. Managers started looking for ways to reduce employees’ bonuses, which up until then had mainly been based on company or divisional performance. Nikkei Business notes that the “3 lost decades” in Japan have seen a series of crises followed by changes to HR systems, but somehow the change is watered down and the company reverts to seniority based HR management.

Companies that have introduced the job type system include Mitsubishi Chemical. When they first introduced it in 2017, it was still the manager who made the decision on promoting employees, and as a consequence the seniority element remained. So from October this year they are introducing an open application system, to increase fairness and transparency. Mitsubishi Chemical’s HR Director Nakata Ruriko notes that their workforce is no longer the homogenous group of lifetime employees recruited as graduates. There are more mid career hires and dual income couples, trying to balance child and elderly care. Nakata is introducing choice and the ability to build your own career, to respond to this diversity.

The telecoms company KDDI has skipped trying to negotiate with the labour union to introduce the job type system to current union members and is only introducing it to managers and new graduates from April 2021. There will no longer be the same salary for all new graduate recruits – compensation will depend on skills and internships undertaken before entering the company.

Fujitsu has ended “side by side” cohort based training and a mandatory retirement age. The position of manager will be open to all, but if you do not ask to be a manager, you will not be promoted.

Working from home and relocations

Having a job type system also helps with working from home, as people have more autonomy and clarity on the boundaries to their work. Several Japanese companies are also ending the “tanshin funin” job relocation where the employee (usually male) would be assigned to another location and move there without their family.

From the management side the intentions behind bringing in a job type system depend on the sector, but at least one of three main reasons are usually cited:

the need to bring in people from outside the company who have the skills to support the company with technological innovations such as AI
to counter the constant increase in labour cost brought about by the seniority based system
a unified, globally applicable HR system which will improve internal job mobility across multinational operations

Over half of Japanese employees prefer the job type system

Nikkei Business surveyed over 1100 employees and found that nearly half preferred the job type system, compared to 24% who preferred the membership type system. When asked “do you think you can survive a switch to the job type system?”, 62.4% felt they could. More than 75% of the respondents said they would like to continue to work from home even after the pandemic was over.

But better state support and retraining are needed

The chairman of Rengo, Japan’s Trade Union Confederation, points out that Japanese employees are still very dependent and tied to their companies. If the aim of a job type system is to increase labour mobility, there needs to be more of a state safety net provided than there currently is. Some companies will simply be looking to reduce costs and those employees whose skills are no longer needed will find it very hard to switch to another company if they are no longer satisfied with the pay they receive for the work they do.

Takeda Yoko, a Director at the Mitsubishi Research Institute recommends FLAP as a way to succeed in a job type system – Find the work you want to do, Learn how to do it, Act upon this learning and then Perform – be evaluated and treated correctly.

Chipping away at the three treasures of Japanese HR

Several Japanese blue chip companies have announced some quite radical changes to their HR systems, just in time for the new Reiwa era. The so called three treasures of lifetime employment, seniority based pay and a company union have been looking a little tarnished for some years now. They seem a legacy not even of the Heisei era but of the post war Showa era of a booming economy and a need to retain a young workforce.

Hitachi had shown the way four years ago (as described in our blog post at the time), abolishing seniority based pay for its managers and replacing it with pay based on job roles. They have made further waves recently with the announcement of the first ever Hitachi subsidiary President to be in their forties. The newly formed Hitachi Global Life Solutions will be led by Jun Taniguchi, born in 1972.

Hitachi claim that this new system is needed for the company to be truly global and able to appoint and transfer managers around the world, regardless of where they were recruited. Beer and soft drink manufacturer Asahi Group Holdings has also been shifting to global standards. Around half their employees are non-Japanese, as a result of their acquisitions of European brands such as Peroni, Grolsch and Fullers. They have said their Presidents and CEOs will be evaluated on return on equity from now on, and given the boot if it is not maintained above 13%.

Japanese megabank MUFG says it will reduce new hires in Japan by 45% to 530 next spring, and will cut the 6000 employees in its Tokyo headquarters by half. Not all Japanese HR traditions are being thrown out of the window, however, as the surplus 3000 will not be made redundant, but rather redeployed to sales functions or sent overseas to areas where MUFG is expanding like the USA and Asia (but not it seems, Europe). MUFG is automating the functions that these staff performed, as well as cutting many of its retail branches in Japan. It will instead be beefing up its overseas compliance and digital payment systems divisions.

Some Japanese politicians and commentators have said that the “rei” of Reiwa sounds rather cold, as it can sometimes mean “order” or “command”. It also, when combined with the radical for water, becomes a character meaning chilly or freezing. It certainly feels like some icy winds will be blasting through Japanese cosy HR traditions in the new era.

Hitachi acquisition of ABB power grid business is a “Black Ship” to push globalization

It’s been 10 years since Hitachi made its record breaking loss and Takashi Kawamura became Chairman and President. Kawamura was chairman when Hitachi decided to buy Horizon Nuclear Power in the UK in 2012, and he now says he was one of the more cautious faction. “Costs pile up long before you’ve even produced one kilowatt of energy so I made it clear that we needed to set various points at which we will decide whether to proceed or not with the project”. Takashi Kawamura is now chairman of Tokyo Electric Power, so has not managed to escape the nuclear power industry despite his cautiousness.

Hiroaki Nakanishi lasted 4 years as President from 2010 to 2014, when Toshiaki Higashihara, also interviewed in the same Nikkei article, became President. Higashihara has not only frozen the Horizon project but acquired Swiss company ABB’s power grid business in 2018. “Globalization has not been achieved yet” for Hitachi he believes. He tells employees that the ABB acquisition is a Black Ship he has invited in, just like the foreign pressure to open up Japan in the Meiji Revolution, to change Hitachi and push globalization further.

Hitachi is shifting more into services and believes it has the right product and solution mix to for the “Internet of Things”. Sales may not grow much – for services business the point is to improve profitability, rather than sales volume, Higashihara points out.

Kawamura also says the old ways, of life time employment and being a generalist have to come to an end. Hitachi offered retraining for people employed in the businesses he shut down or spun out, like the semi conductor business, but many of them had expected to stay at Hitachi all their life, and not to have to find work elsewhere.

Higashihara goes on to say the next leader needs to be able to manage globally, in particular, to be able to communicate, across generations, nationalities, sexuality and gender. “If they seem to have the right balance of qualities, it would not be a surprise if it was a foreigner” who succeeds him. That is likely to be soon, as Higashihara has been president for 5 years now, and 6 years is usually considered to be the maximum for Presidents in companies such as Hitachi. Maybe the Black Ship has brought some potential candidates with it, or Hitachi Rail’s former CEO Alistair Dormer, now Representative Executive Officer, Executive Vice President and Executive Officer of Hitachi Ltd is being lined up for the job.

Lessons from the decline of Japanese electronics manufacturing in the UK for the automotive industry

Although around 10,000 manufacturing jobs in Japanese electronics companies in the UK were lost in the 1990s-2000s, about the same number have been added, either created by Hitachi Rail or in the automotive or air conditioning sectors. Japanese electronics companies such as Sony, Fujitsu, Panasonic, NEC, Mitsubishi Electric and Hitachi still all employ thousands of people in the UK.

It is a story of how industrial policy cannot ultimately stop product obsolescence, shifts of manufacturing to cheaper locations or the transformation from mass manufacturing of products to supply chain ecosystems providing solutions and services. Recent investment from Japan in the UK is in services and infrastructure, for the domestic UK market, and at least for now, the EU. But this has meant fewer jobs in the areas that voted Brexit.

Bunging £10s of millions at Nissan to compensate for tariffs was not going to stop these shifts. Over 10% of the 7,000 Nissan employ in the UK are working in design centres, not on the factory floor. Being a gateway to the EU now, even in manufacturing, needs regulatory alignment and free movement of people so suppliers can visit and base themselves at client sites and provide services and ship prototypes around the region.

The shift to electric vehicles means the car companies have to cooperate more than ever with ICT and electronics companies. Many of these ICT and electronics companies have joint European HQs spread across the UK, Netherlands or Germany, with senior management and teams scattered across the region, working virtually or at customer and partner sites. They have also integrated back office and technical support into cheaper locations such as Portugal or Poland.

Some examples of the history of Japanese electronics companies in the UK over the past 30 years:

Fujitsu

Fujitsu is the biggest Japanese employer in the UK with over 8,000 employees, 2,000 down on a few years ago, as it grows delivery and support centres in Portugal, South Africa and India and downsizes in the UK. It acquired 80% of UK’s ICL in 1990 (increasing to 100% 1998). ICL had 2,000 UK employees, 26,000 worldwide, with mainframe and PC factories in Letchworth, Manchester and the Midlands. ICL was born out of 1960s industrial policy – the British government had a 10% stake in it for a while. To this day, Fujitsu provides a lot of government IT infrastructure and services. Its last computer factory in Europe, in Augsburg in Germany, will shut down in 2019, retaining manufacturing in Japan only.

Hitachi

Hitachi used to employ around 1,000 people in its factory in Aberdare, Wales, making cathode ray TVs, video recorders and microwave ovens. It was shut in 2001, blaming low price competition from Asia. Hitachi has since shifted away from consumer products to infrastructure. In the UK it acquired the now stalled Horizon Nuclear Power projects in Wylfa and Oldbury and set up Hitachi Rail in the UK as the global headquarters with a new factory in Newton Aycliffe, employing nearly 2,000 people.

Hitachi employs another 4,000 people in the UK services sector – for example credit and loans company Hitachi Capital, IT consultants Hitachi Vantara and Hitachi Consulting and Vantec, providing logistics for Nissan.

Sony

Sony came to the UK in 1973, and had 2 plants in Pencoed making cathode ray TVs, employing 1,800 by the 1990s. As these started to shut down, Pencoed transformed itself into an innovation centre, developing and producing broadcast and professional equipment, employing 500-600 people.

Sony has been restructuring across Europe recently, consolidating back office functions into cheaper regions. It was still manufacturing DVDs in Enfield in the UK but this was shifted to Austria in 2017/8, reducing capital in UK by over £250m. It still employs nearly 2,000 in its music, home entertainment and interactive businesses in the UK.

Ricoh

Ricoh still has a factory in Telford (and two other plants in UK), employing the same number of people in 2018 as in 1991 – around 700 – but the product range has shifted from faxes to printers and consumables.

Mitsubishi Electric

Mitsubishi Electric acquired Apricot Computers in 1990, with a plant in Glenrothes and R&D in Birmingham, employing 442 in 1991. Glenrothes was shut in 1999, blaming cheap competition in Asia. It still has manufacturing in the UK, employing nearly 1,000 people (many of whom are non-UK EU citizens) in Livingston, at its airconditioning plant.

Panasonic

Panasonic, formerly known as Matsushita, had many plants in UK from 1970s to 1990s, employing 1,621 in Cardiff (TVs, microwaves), 469 in Gwent (electric typewriters, carphones), 160 in Port Talbot (components for TVs, video recorders, microwaves) and 63 in Reading (fax machines). Most Matsushita/Panasonic plants in UK shut down in early 2000s, with production shifting to Eastern Europe. 1 plant remains in Wales, employing 400 people, manufacturing microwave ovens but also conducting R&D into fuel cell technology. Panasonic has acquired Belgian IT company Zetes and Spanish automotive supplier Ficosa recently.

NEC

NEC is also shifting into IT services via European acquisitions. It used to have a semiconductor plant in Livingston (Silicon Glen, remember that?) which employed 1200 by 2001, when it shut down. NEC UK employees now number over 1000 again thanks to the acquisition of Northgate Public Services, in 2018.

Others

Oki Electric were relatively late in shutting down their Cumbernauld printer plant in 2018 – and now all production is in Asia. JVCKenwood shut down their East Kilbride TV/CD player factory in 2008 and shifted production to Poland. Pioneer closed its CD player/TV factory in Wakefield in 2009. Toshiba had a factory in Plymouth, which used to make TVs, video recorders, but is now owned by a US company and makes air conditioners. Sharp (now owned by a Taiwanese company) still has a factory in Wrexham as does Brother.

How will Hitachi weather the storms of Brexit and industry turmoil, not just in nuclear energy but also rail?

The Japanese business media is asking the question I’ve been wondering about too – what might the impact be on Hitachi Rail’s global HQ in the UK, now that Hitachi have shown they can take the tough decision to suspend their Wylfa nuclear power project, amid the continuing uncertainty of how Brexit will play out?

Toyo Keizai’s Naoki Osaka details the history of how Hitachi’s first step into the UK rail market was as a preferred bidder for the UK HS1 in 2004, supplying 174 carriages, which were built in Japan. Hitachi then won the IEP bid in 2012, for 866 carriages and a contract for First Great Western. They then invested £82m in the Newton Aycliffe factory i 2015, which is now making around 40 carriages a month for IEP and Abellio Scotrail. Not all parts are made in the UK. The 700 employees mostly do not have any rail manufacturing experience but are learning fast, according to Osaka. The 25 expatriate Japanese have been reduced to 6. Including the maintenance operations, there are now 7 sites in the UK, expecting to expand to 13 by 2020, employing around 2000 people.

Osaka was told when he visited the factory last December that there were plenty of future projects to bid for, so no worries for the future. However Diamond magazine says their Hitachi contact told them that since Hitachi lost the London deep tube bid last year and also lost their attempt to overturn the decision, they only have an order book through to the end of 2019, and no orders beyond that, as yet. Diamond describes the formerly warm relationship between Hitachi and the UK government as “frosty” as a result of both this and the failure of the government and Hitachi to agree on how to move forward on the finances for the Wylfa nuclear power project.

If there is a no deal Brexit, customs inspections will be significant for carriage manufacturing, says Osaka. 70% of the parts are made within 40 miles of the factory. So although there are fewer logistical concerns, there will be plenty of issues around rules of origin that are likely to cause supply chain problems for suppliers to Hitachi.

Furthermore, the Italian factory which Hitachi acquired in 2015 is improving productivity beyond expectations and will no doubt play an important role in developing Hitachi’s rail business in Continental Europe.

Hitachi is also keeping an eye on the Siemens/Alstom rail business merger. It may well be blocked by the EU, and as Alistair Dormer, CEO of Hitachi Rail predicted, Alstom is offering to sell of some of its businesses to avoid this, for which Hitachi could be a buyer. Hitachi was hoping to become one of the Big Three of the global rail business, with a target of Y1trn turnover – Siemens and Alstom’s merger will produce a Y2trn business. Now it has turned its back on nuclear business, can Hitachi become a global player in the rail business, in the face of storms caused by Brexit and industry restructuring?

Hitachi Rail’s CEO Alistair Dormer on Brexit, speeding up and the need to speak simple English

Hitachi’s rail business is only 5% of the whole group’s turnover, but is growing rapidly and moving from being “double domestic” to a truly global business. Overseas sales are now 83% of turnover, having been 28% of the business in 2012.

Nikkei Business interviewed Alistair Dormer (subscription only, in Japanese), the CEO of Hitachi Rail who is also a Senior Vice President and Executive Officer of the Hitachi Group about his four years as CEO – at a time when the railway business is undergoing major change, with Siemens and Alstom joining forces in Europe for their rail business.

Dormer talks about the importance of being able to scale multilaterally through M&A, with the acquisition of Ansaldo Breda and other companies, which resulted in acquiring customers across 27 countries – 26% of business is now in the UK, 17% in Japan, 10% in Asia Pacific. Hitachi Rail is also moving, like every technology business, into “solutions” adding a services side, including communication technology, software development, signalling systems and operations.

Speed up every aspect

Dormer says the most important thing for Hitachi Rail as a Japanese company was to speed up every aspect. “It is a strength of Hitachi as with other Japanese companies that business advances on a consensus basis, carefully harmonizing in-house planning and business negotiations with partners. This leads to stable quality standards and organizational cohesion, but it is also a weakness in that it takes too much time when you face global competition. The leader needs to be able to make quick decisions and communicate rapidly.”

Of course this is even more difficult when communication and decisions have to be made across long distances such as between the UK and Japan. So Dormer decided the best way was to move people around, to raise the frequency and density of communication. So there has been substantial exchange of people between the factory in Japan and manufacturing bases in UK and Italy.

If there is a substantial geographical and time distance, then people prefer not to have meetings about trivial things, but these details can later become obstacles. So having more regular interaction is necessary. Hitachi Rail thererefore also has regular video confererence and Dormer himself visits sites, holding meetings with 50-80 people to exchange opinions.

Only use simple English

With English as the common language, Dormer (as a native Brit) instituted a rule that only simple English should be used. “When native English speakers are talking, they speed up. It should be easy to say, “I don’t understand, I can’t follow what you’re saying”, but it’s difficult to do this in a teleconference or an important meeting. So then the meeting ends inconclusively and you find out later that people did not understand. So not only should you use simple English, but also I put in a process to confirm understanding after the meeting. The productivity of our meetings has greatly improved as a result”

Hitachi Rail has also introduced common standards across all countries for HR reviews, cost, engineering performance etc. “Each country, the UK and Italy and Japan, have different cultures and ways of doing things, so we did not force conformity, but respected each others’ cultures while working to Hitachi’s values as the common standard.”

Brexit – nobody knows what the future will hold

With regard to Brexit, Dormer says he is repeatedly asked about it, but at the moment there has been no change. “Hitachi has good relations with the UK government. All we can do is continue to ask that companies like us who have their regional base in the UK can continue to access the EU market as seamlessly as possible. There is no choice but to believe this. A transition period is being discussed, so it’s possible the environment will not change for the foreseeable future. However it is still a shock to me on a personal level that the UK made such a decision – even when we knew there was nothing to gain from leaving the EU. There are many people in our offices who were born in the European Union outside the UK, and they are worried. My priority is to reassure them, but the only thing I can say is that nobody knows what the future will hold.”

Size matters when choosing a Japanese company

Whether you’re looking to work for or supply to a Japanese company, size matters. The most obvious reason being, as bank robber Willie Sutton apparently never said, “that’s where the money is”. That’s why we started our Top 30 Japanese Employers rankings – we’ve found them useful in understanding our customer base and the likely concerns of participants in our seminars.

We use the number of employees as a proxy for size rather than turnover or profit, and although there is a degree of correlation between employee numbers globally and in Europe and overall profit, there are some exceptions.

Toyo Keizai have recently listed up the companies* who made the biggest cumulative profit in the past 10 years and it’s absolutely no surprise that Toyota, one of the biggest companies in Japan and #9 amongst Japanese companies in Europe, made a whopping Y11 trillion ($99bn) cumulative profit from 2007 to 2017, far outstripping NTT and NTT Docomo at #2 and #3 who made less than half that amount. NTT and NTT Docomo are not in our Top 30 Japanese companies in Europe, although another group company, NTT Data, is.

However NTT and NTT Docomo never made a loss, whereas Toyota did go into the red – with a loss of $.8.6bn in 2008/9. Honda, who has had a tough time in Europe (and is #23 in our rankings), has also never made a loss, and accumulated a $36bn profit over the decade. Nissan, who made a loss but was famously turned round by Carlos Ghosn, is 10th largest in Europe in our rankings and has the 6th largest cumulative profit.

I was surprised to see my old employer Mitsubishi Corporation at #5, as they too had some rough patches particularly with losses in the commodity side, but clearly overall the Japanese trading companies have been very profitable, despite their death being heralded every decade – Mitsui is at #9, Itochu at #11, Sumitomo Corp at #14 and Marubeni at #21.

Unsurprisingly, almost none of the Japanese electronics companies feature in the top 30, apart from Canon at #10 and Mitsubishi Electric at #25. Other industries in the top 50 most profitable are automotive (Denso, Bridgestone) and pharmaceutical (Takeda, Astellas) related, and also heavily domestic businesses such as telecommunications (KDDI, SoftBank as well as NTT mentioned above), rail and retail (7&I, Fast Retailing).

Two of the largest Japanese companies in Europe – Fujitsu and Hitachi – are at #69 and #70 – Hitachi’s cumulative profit was heavily dented by the historic loss of $8bn in 2008/9. The largest company in the Europe and Africa region – Sumitomo Electric Industries (due to its labour intensive automotive manufacturing operations) is at #38, with a $6bn cumulative profit.

*Excludes banks, insurance and other financial services companies

The story of Japanese companies in the UK continues to be the story of the UK economy overall in 2016

The number of people employed in the UK by the biggest Japanese companies in the UK rose by around 1% to 76,103 in 2016 – representing over half of the 140,000 or so the Japanese Embassy to the UK estimates are employed overall in the UK by Japanese companies.

Just as 80% of the UK economy is services, so too with Japanese companies in the UK. Although Nissan, Toyota and Honda attract most of the headlines thanks to Brexit – understandably as they represent around 15,000 of the 76,000 jobs – the vast majority of the rest are in the services sector.

Even Sony has only one small factory left in the UK, making high end audio visual equipment and employing less than 100 people. The rest of 3000 or so jobs are in Sony Interactive Entertainment, music and film & TV or in marketing.

Fujitsu is still the biggest Japanese employer in the UK but the gap with Nissan at #2 is narrowing, as Fujitsu have reduced their headcount by over 15% in the past year or so. Although Fujitsu is still seen as an IT & telecomms manufacturer in Japan, in the UK it is largely an IT services company.

Trading company Itochu may be a surprise at #3, but this is largely due to its ownership of tyre fitting chain KwikFit.

The Hitachi group of companies (#7) has grown by 17% over the year – thanks in part to expansion at Hitachi Rail and Horizon Nuclear Power – but the bulk of its employees continue to be at consumer loans company Hitachi Capital.

Dentsu Aegis Network, part of the Dentsu advertising agency, has continued to acquire across the UK and Europe, resulting in a 21% increase in headcount. Other notable increases thanks to acquisitions include Mitsui Sumitomo & Aioi Nissay Dowa acquiring Lloyds underwriters Amlin and of course Softbank, a new entrant to the top 30, with its acquisition of ARM.

The story of Japanese companies in the UK continues to be the story of the UK economy overall – a trend which will no doubt continue in 2017, with Japanese banks already strengthening and relocating to their other European Union based operations, or threatening to do so.

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Last updated by Pernille Rudlin at 2022-01-26.

Tag: hitachi