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”.
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.
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..
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“.
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. 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.
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. 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.
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:
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 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.
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.
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
