Hitachi Eyes Shifting Railway Planning to U.K.

Hitachi Eyes Shifting Railway Planning to U.K. :TOKYO— Hitachi Ltd. 6501.TO +0.53% said it is considering relocating the business-planning operations for its overseas rail business to the U.K. from Tokyo, giving greater authority to a subsidiary overseas in a significant departure from its Japan-centric decision-making process.

In putting together plans for each of its business segments in Japan, Hitachi has been considering empowering its U.K. rail business to compile its own core management plan, including sales strategies and capital outlays, a spokeswoman for the company said. The details, including how many workers would be transferred to the U.K., haven’t been worked out yet.

Hitachi has businesses as diverse as consumer electronics and nuclear plants. Over the past two years it has secured orders to supply 866 high-speed railway cars in the U.K., as well as provide maintenance for 271/2 years. The value of the project is estimated at ¥880 billion, or roughly $8.5 billion.

Hitachi’s U.K. initiative underscores how the company is locked in a struggle with fierce competitors in the railway business, such as Germany’s Siemens AG, France’s Alstom SA and Canada’s Bombardier Inc. Environmental concerns have created brisk demand for more-efficient railways in industrialized countries, while demand for infrastructure remains strong in emerging economies.

Despite the large number of Japanese companies going abroad in search of new markets, the independence of overseas units has mostly been limited to those acquired through mergers and acquisitions. For instance, Japan Tobacco Inc., 2914.TO -0.42% which has expanded its overseas sales to about 120 countries, gives significant management freedom to its Switzerland-based subsidiary, acquired in 1999.

Analysts said Hitachi’s rail business is a good case study in the need to delegate management oversight to overseas units because of the different railway specifications between Japan and Europe, as well as the competition in the industry. “This is something that needs to be done by business conglomerates like Hitachi that have a number of business segments, but which don’t enjoy synergy effects,” said Daisuke Nakano, a partner at the consulting firm Roland Berger in Tokyo.

He added that the move isn’t really surprising, and might even be a little late.

“Because of the different standards and strong rivals there, it is too late to do business [in Europe] by issuing orders each time from Tokyo.”

Hitachi said it is also considering relocating part of the strategic-planning capabilities of its information-technology-services division to the U.S. from Tokyo.

Under its midterm business plan, Hitachi aims to increase its revenue from overseas sales to more than 50% of the total in the business year ending March 2016, compared with 41% in the year ended this past March. At the same time it aims to increase its workforce outside Japan to 150,000 people, or 43% of the total, from 118,000 people, or 36%, in the most recent year.

Hitachi Eyes Shifting Railway Planning to U.K.

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