FDI Japanese investments in EU R&D

Hitachi Rail Europe Ltd opens £82 million train factory in Newton Aycliffe, County Durham, UK

Hitachi received orders for 866 Intercity Express Program (IEP) carriages and for 234 carriages for Abellio’s ScotRail program, following 174 “Javelin” carriages

Hitachi Rail putting competitive pressure on Europe’s rail established rail manufacturers: Hitachi Rail has “on time delivery” at the top of the list of commitments to customers

by Gerhard Fasol

Winning a series of train contracts, Hitachi Rail invested £82 million (= approx US$ 130 million) in a train manufacturing plant in Newton Wycliffe, Country Durham, UK.

Hitachi Rail Europe announced contracts for the following train carriages to be built in the Newton Aycliffe facility:

The £ 5.8 billion ($ 10 billion) Intercity Express Programme (IEP) was initiated in 2005 by the UK Department of Transport.

Earlier in 2004, Hitachi received an order for 29 6-car high-speed Class 395 “Javelin” trains (a total of 174 carriages), which went into regular service on 30 December 2009 on the Integrated Kent Franchise, between London St. Pancras Station and Ashford International Station, traveling this approx. 100km distance in 37 minutes, an average speed of 162 km/h.

For a background of the international business aspects of Hitachi, read an essay by the emeritus Chairman of Hitachi Europe, and emeritus Board Member of Hitachi Ltd. Sir Stephen Gomersall.

Hitachi Rail to challenge European rail manufacturers Siemens and Alstom

Europe is one of the world’s biggest rail markets, and has a number of established rail manufacturers including:

There has been a series of recent problems in Europe’s established rail industries, which may have contributed to Hitachi’s considerable business success in Europe:

Rail in Europe and in Japan are very very different stories

European rail services are predominantly owned, operated and controlled by Government agencies, and to some extent operations are contracted out for limited periods to private service operators, almost none of Europe’s rail services are fully privately owned and operated – a rare and very successful exception is the Jungfraubahn mountain railway.

Rail services in Japan on the other hand are largely owned and operated by a large number of private railways companies, most of which are very successful and profitable and growing and listed on the stock exchange.

Thus Hitachi Rail is used to satisfying the tough needs of very competitive and privately owned commercial rail operators, while Europe’s rail manufacturers to a large extent sell to Government controlled agencies, or directly to Governments, or under Government programs, such as UK’s Intercity Express Programme (IEP).

The Hitachi investment in context: maybe we see a shift in investment value from traditional manufacturing to intellectual business such as insurance and pharmaceutical research

Compare Hitachi’s £82 million (= approx US$ 130 million) with the recent acquisition of UK insurance company Amlin by Mitsui Sumitomo Insurance Company for £2.5 billion (approx. US$ 3.85 billion or ¥642 billion), or the acquisition of Cambridge/UK Heptares Therapeutics Ltd by the Japanese Sosei Group for US$ 400 million (US$ 180 million in cash plus up to US$ 220 million in incentives).

Of course we are comparing apples and oranges here, and the overall Intercity Express Programme (IEP) is on the order of £ 5.8 billion ($ 10 billion), but we may witness here a shift of investment value from traditional manufacturing to intellectual business such as insurance and pharmaceutical research here.

More about Japan’s electronics and electrical machinery industries

Report on Japan’s electronics industry sector (approx. 237 pages, pdf file)

Copyright (c) 2009-2015 Eurotechnology Japan KK All Rights Reserved

Corporate Governance EU-Japan business Leadership

Sir Stephen Gomersall on UK-Japan relations & globalization

Sir Stephen Gomersall on corporate governance: Board Meetings should be like sparkling water – not like tea

Globalization and the art of tea

Hitachi – Japan’s most iconic corporation – under the leadership of Chairman & CEO, Hiroaki Nakanishi embarked on the “Smart Transformation Project” to globalize, to face a world where value creation has moved from manufacturing to innovation and solving customer’s problems, and to overcome long years of stagnation and low profits or losses, despite strong technology capabilities.

One of the most important brains behind Hitachi’s reinvention and globalization is Sir Stephen Gomersall. After a long and successful career as diplomat in the British Foreign Service, culminating in the years as British Ambassador to Japan 1999-2004, Sir Stephen joined Hitachi in 2004 as the first foreigner responsible for proposing and implementing Hitachi’s overseas regional strategy. Later Sir Stephen became responsible for all of Hitachi’s business in Europe as Chairman and Chief Executive of Hitachi Europe, and in addition Sir Stephen also served as Director on the Board of all Hitachi 2011-2014 overseeing all of Hitachi Group’s business as Board Director. With Sir Stephen’s leadership Hitachi achieved major business breakthroughs in Europe.

On March 5, 2015, Sir Stephen gave the “Princess Chichibu Memorial Lecture to the Japan British Society at Ueno Gakuen University in Tokyo with deep insights on Japan-British relations, on comparison of Britain’s and Japan’s position in the world, and on the challenges of globalization facing Japan and Japanese corporations – in particular Hitachi.

Sir Stephen is very clear that there is no alternative to globalization: “Globalisation poses tough challenges for Japanese companies, but is the only way forward”.

Read Sir Stephen’s lecture here:

Sir Stephen Gomersall: “Globalisation and the art of tea” (click the link above to read the full text of Sir Stephen’s Princess Chichibu Memorial Lecture)

Sir Stephen Gomersall

Stephen Gomersall was British Ambassador to Japan from 1999-2004, and Hitachi’s Chief Executive for Europe and subsequently Board Director from 2004-2014. He is now Adviser to the CEO, Hitachi Ltd.

Copyright·©2015 ·Eurotechnology Japan KK·All Rights Reserved·

FDI Japanese investments in EU M&A

Hitachi agrees with Finmeccanica S.p.A. to acquire rail business of AnsaldoBreda S.p.A. and 40% of rail signaling company Ansaldo STS S.p.A.

AnsaldoBreda rail business to help Hitachi to compete globally with Siemens, Bombardier and Alstom

by Gerhard Fasol

Finmeccanica accelerates restructuring, reduces debt and focuses on aerospace, defense and security

Hitachi Ltd (株式会社 日立製作所) and Finmeccanica S.p.A. announced on February 24, 2015, that their Boards of Directors have agreed for Hitachi to:

  • acquire the rail business of AnsaldoBreda S.p.A. (with some exceptions) for € 36 million (US$ 41 million), and
  • to acquire Finmeccanica’s 40% holding in the rail signaling and rail systems company Ansaldo STS S.p.A. for € 773 million (approx. US$ 880 million)

Hitachi is expected to be required to launch a tender offer for all remaining shares of Ansaldo STS S.p.A. and if successful, will acquire all of Ansaldo STS S.p.A..

Estimating the overall acquisition size:

Hitachi and Hitachi Rail

Hitachi is generally considered as one of Japan’s most important and most representative companies. Hitachi was founded in 1910 bei Namihei Odaira, and produced Japan’s first electrical motors. (For a detailed analysis of Hitachi and Japan’s electronics industry, read our report “Japan electronics industries: mono zukuri“.

Hitachi’s “Smart Transformation”

While Hitachi grew into a conglomerate with a large number of different business areas, during the 15 years 1997-2012, Hitachi grew with an annual compound growth rate of only 0.48%, and during the period 1997-2012 suffered average annual net losses of YEN 45 billion (US$ 0.45 billion) per year. This difficult business situation is characteristic of Japan’s electronics industry overall, as discussed in our report “Japan electronics industries: mono zukuri“. One reason for this difficult situation is the so-called “Galapagos Effect“.

Indeed, Hitachi’s “Chief Transformation Officer” (CTrO) explained recently, that it is only in 2011/2012 that Hitachi started to benchmark important business performance data (eg. operating margin, R&D expenditure, administrative expenses, cost of sales etc) internationally. Until 2011/2012 Hitachi had only compared performance data with other Japanese companies such as Toshiba.

In April 2010, Hiroaki Nakanishi was appointed President of Hitachi, and he started the “Hitachi Smart Transformation Project” with the aim to rebuild a strong Hitachi into a truly global company. (You can find an overview of Hitachi’s Smart Transformation Project in our report: “Japan electronics industries: mono zukuri“).

Hitachi has great strengths in rail engineering, and the acquisitions of AnsaldoBreda and Ansaldo STS are an implementation of Hitachi’s Smart Transformation Project.

Other recent acquisitions and investments by Hitachi in the railway engineering field include:

AnsaldoBreda S.p.A.

AnsaldoBreda S.p.A. was formed in 2001 by the merger of the companies Ansaldo Trasporti and Breda Costruzioni Ferroviarie, and employs about 2400 employees.

Gio. Ansaldo & C. was founded in 1853 in Genoa to manufacture steam engines, steam locomotives, rail rolling stock.

Ing. Ernesto Breda and C. was founded in 1886, and became Societa Italiana Ernesto Breda (SIEB) in 1899.

AnsaldoBreda in cooperation with Bombardier produces the Italian high-speed train Frecciarossa, and other trains for many mainly European and US rail operators. Recently there have been a number of delivery problems, e.g. the IC4 for Denmark, and the Dutch/Belgian high speed train Fyra, a project which was abandoned on 31 May 2013 after its operating license was suspended by the authorities.

AnsaldoBreda businesses:

  • High speed trains
  • Trams
  • Driverless metro (e.g. in Taipei, Copenhagen, Salonicci, Riyadh, Milano, Honolulu, Brescia)
  • Metro (e.g. Circumvesuviana, Madrid, Fortaleza, Meneghino, Los Angeles, Miami Dade Country, Milano)
  • Commuter trains
  • Locomotives
  • Services

Ansaldo STS S.p.A.

Ansaldo STS S.p.A. is a manufacturer of rail signaling and transportation systems, and was founded in 2006 by the merger of a number of railway engineering companies, including:

  • US Union Switch & Signal (US&S), founded by George Westinghouse in 1881 in Pittsburgh, USA.
  • Compagnie des Signaux pour Chemins de fer (CSE), founded by Fernand Cumont in 1902, which built the first lines of the Paris Metro. Later renamed Company and Business Electrical Signals (CSEE)

40% of Ansaldo STS S.p.A.‘s shares are owned by Finmeccanica S.p.A. and Finmeccanica has now agreed to sell these 40% of shares to Hitachi. The remaining 60% are traded on the Borsa Italiana, and it is reported that Hitachi will be required to launch an offer to purchase all remaining 60% of shares following the acquisition of 40% from Finmeccanica.

Finmeccanica S.p.A.

Finmeccanica S.p.A. is an Italian industrial group, founded in 1948. As of 23 December 2014, 32.45% of Finmeccanica shares are owned by the Italian Ministry of Economy and Finance.

With the sale of the railway businesses, Finmeccanica will focus on aerospace, defense and security core business.

Japan electronics industries – mono zukuri.

Copyright (c) 2016 Eurotechnology Japan KK All Rights Reserved

Energy Japanese investments in EU M&A

Hitachi Engineering Europe formed by acquisition of Valcom S.r.l.

Hitachi acquires Valcom, electrical and instrumentation engineering for oil and gas plant systems

by Gerhard Fasol

Hitachi Engineering Europe: the new name for Valcom

Hitachi acquired all outstanding shares of Valcom S.r.l. and will rename the company “Hitachi Engineering Europe S.r.l.”

Valcom S.r.l. is an Engineering, Procurement, Construction (EPC) company, headquartered in Milano (Italy), in the following fields:

  • Oil and gas field development, electrical and instrumentation engineering business for oil and gas plant systems
  • Fossil fuel and nuclear power plants
  • Pipelines
  • Refineries and petrochemical facilities
  • Chemical and service industries
  • Airport and communications networks
  • Power transmission lines
  • Renewable energy power plants
  • Non-residential buildings (hospitals, universities, offices, etc.)
  • Floating Production, Storage and Offloading (“FPSO”) systems
  • Engineering business related to electrical equipment (transformer substation, power distribution, drive systems, and lighting equipment, etc.) needed to operate machinery, and measurement equipment (sensors, etc.) and to control plant systems

Japan electronics industries – mono zukuri.

Copyright (c) 2014 Eurotechnology Japan KK All Rights Reserved

Japanese investments in EU M&A

Hitachi Europe acquires The Railway Engineering Company (TRE)

TRE supplies simulators and automatic routing systems

by Gerhard Fasol

Hitachi Europe expands European Traffic Managment Railways (TMS) sector

Hitachi Europe, on December 20, 2012 announced the acquisition of The Railway Engineering Company (TRE) from James Fisher and Sons plc for UKL 25.5 million.

The Railway Engineering Company (TRE) products include:

  • Automatic Routing Systems
  • Signalling and Interlocking Simulation
  • Data Preparation tools
  • Signalling System support
  • TREsim, a high fidelity simulator and TREsa
  • Signallers Automatic Route Setting (SARS)
  • Signallers Assistant Control System (SACS)

Japan electronics industries – mono zukuri.

Copyright (c) 2014 Eurotechnology Japan KK All Rights Reserved

Energy FDI Japanese investments in EU M&A

Horizon Nuclear Power acquired by Hitachi for £696 million

Hitachi to build 6 GigaWatt of nuclear power in UK

by Gerhard Fasol

E.ON and RWE to withdraw, Chinese consortium lost bid

In tune with Germany’s “Energiewende”, E.ON and RWE npower decided to sell Horizon Nuclear Power.

On October 29, 2012 Hitachi Ltd (株式会社日立製作所) announced the agreement to acquire Horizon Nuclear Power for £696 million (approx. US$ 1 billion), and the purchase was completed on November 26, 2012.

One of the bidders was a joint venture between China Guangdong Nuclear Power Group and China National Nuclear Corporation, however dropped out of the competition.

Engineering, Procurement and Construction (EPC) will reportedly be undertaken by a joint venture of Hitachi Ltd (株式会社日立製作所), Babcock, Rolls-Royce, and SNC-Lavalin Group.

UK is planning to invest £110 billion to replace existing nuclear power stations with modern designs.

Horizon Nuclear Power

Horizon Nuclear Power was founded in 2009 as a joint venture between E.ON and RWE npower with the plan to build a nuclear power station with 6 GigaWatt capacity on a site close to the Oldbury and Wylfa nuclear power stations.

Wylfa nuclear power station is located near Wylfa Newydd (Isle of Anglesey) and can be found here on Google-Maps.

Oldbury nuclear power station is located about 23 miles from Bristol (UK), Oldbury (South Gloucestershire, on the banks of the Severn Estuary), and can be found here on Google-Maps.

Horizon Nuclear Power plans:

  • Wylfa Newydd (Isle of Anglesey): two Advanced Boiling Water Reactors (WBWRs) planned delivering 2.7 GigaWatt
  • Oldbury (South Gloucestershire): 2.7 GigaWatt planned

Hitachi Ltd (株式会社日立製作所)

Hitachi Ltd (株式会社日立製作所) aims to grow its nuclear business to YEN 360 billion/year (approx US$ 3 billion) by 2021.

Japan electronics industries – mono zukuri.

Copyright (c) 2012-2015 Eurotechnology Japan KK All Rights Reserved

Japanese investments in EU R&D Science & Technology

Hitachi “inspire the next” Europe opens Rail Research Centre (ERRC)

European Rail Research Centre (ERRC) to focus on rolling stock design, manufacturing, maintenance and traffic management systems

by Gerhard Fasol

ERCC will be part of Hitachi Europe’s Transportation Energy & Environment Research Laboratory

Hitachi “inspire the next” announced on October 10, 2012 the opening of the new European Rail Research Centre (ERRC) in London, to support Hitachi’s many rail projects in Europe and globally.

Hitachi’s new European Rail Research Centre (ERRC) will conduct research into:

  • rolling stock design
  • manufacturing
  • maintenance
  • traffic management systems

Hitachi Rail Europe recent orders

  • UK Department for Transport’s Intercity Express Programme (IEP): 225 km/h Super Express Trains (SETs) to be financed, supplied and maintained by Agility Trains. Total number of trains: 122 trains
  • UK Network Rail Infrastructure Limited (“Network Rail”): prototype Traffic Management System

Japan electronics industries – mono zukuri.

Copyright (c) 2012 Eurotechnology Japan KK All Rights Reserved