UPDATE 2-Hitachi eyes M&A for growth, rejigs governance

* To accelerate alliances, acquisitions to bolster growth

* Implements internal ratings systems for business units

* Ratings system gives autonomy to strong performing units

* To continue streamlining group firms

By Nathan Layne

TOKYO, April 6 (BestGrowthStock) – Loss-making Hitachi Ltd (6501.T: )
will seek more alliances and acquisitions, as well as introduce a
new governance system to help accelerate decision-making across
the sprawling conglomerate, its new president said.

A high cost structure, bureaucratic management style and lack
of focus are thought to be root causes behind Hitachi
cumulatively losing 1.1 trillion yen ($11.7 billion) over the
past 10 years. During the same period rival General Electric
(GE.N: ) has generated a total profit of $165 billion.

“We have good technology but are not profitable. That is the
truth,” Hiroaki Nakanishi, who took the helm this month of
Japan’s largest conglomerate, told a news conference.

“We have not been able to escape from a high cost structure.”

Hitachi is aiming to focus more of its resources on railway,
power and other infrastructure-related businesses likely to
benefit from increased government spending on such projects and
where it feels it has a technological edge.

Nakanishi, who has served as head of Hitachi’s North American
and European operations, said he would accelerate the forming of
alliances and look to make acquisitions to help drive growth
overseas, where it gets just 40 percent of its sales, a
relatively low proportion for a major Japanese technology
exporter.

“Take a company with a strong base in a certain region and
with which we can share a common direction and it would be
natural for us to consider forming an alliance or buying that
company outright,” Nakanishi said.

Nakanishi, who graduated from Tokyo University and holds a
masters degree in computer engineering from Stanford University,
said a new internal ratings system will de-centralise
decision-making and help invigorate the company, which is made up
of about 900 firms.

Hitachi’s 40 major business units will be ranked “excellent”,
“average”, “needs monitoring” or “needs counter-measures” based
on their financial and operational strength. The higher the rank,
the more discretion they will have in making investments or other
important decisions.

Nakanishi acknowledged that the parent company would, if
rated, deserve the lowest rank.

Nakanishi said Hitachi would continue to rejig its business
portfolio to improve performance, calling its bid last year of
about $3 billion to make Hitachi Maxell and four other listed
units wholly owned companies a starting point.

Nakanishi said he would not pull the plug on the struggling
flat panel TV and home appliances operations. “I want to consider
various measures to ensure their survival,” he said.

Hitachi shares closed down 2.7 percent at 366 yen,
underperforming a 0.5 percent fall in the benchmark Nikkei
average (.N225: ). Hitachi’s stock is up 29 percent so far in 2010,
beating the Nikkei’s 7 percent gain.

Stock Market Money

(Additional reporting by Kentaro Hamada and Reiji Murai; Editing
by Edwina Gibbs)

UPDATE 2-Hitachi eyes M&A for growth, rejigs governance