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Companies

Fukushima operator embraces Toyota-style efficiency

Under ex-Hitachi chairman, Tepco seeks to regain status as blue chip

Tepco Chairman Takashi Kawamura is trying to change the company culture.

TOKYO -- Facing a huge bill for cleaning up its crippled Fukushima Daiichi nuclear power plant, Tokyo Electric Power Co. Holdings is embracing productivity improvements pioneered by Japanese manufacturers under Chairman Takashi Kawamura, the former Hitachi chief credited with turning that electronics group around. 

When Kawamura took the helm at Tepco last June, he stepped into the biggest of Japan's regional utilities, whose long years of operating local monopolies had left them with a casual disregard for high costs. Tepco and its peers could simply roll operating and administrative expenses into the price of electricity.

Then came the Fukushima disaster, which brought uncomfortable attention on an industry so inward-looking it was called the "nuclear power village." And now that the retail power market has become fully open to competition, regional utilities have seen their pricing power eroded.

"Our mission is to earn a profit and return it to society," Kawamura said on Wednesday at a forum hosted by Tepco where executives got lessons in efficiency from Toyota Motor, known for its kaizen system of continuous improvement. Also present was Sumitomo Construction Machinery, a unit of Sumitomo Heavy Industries.

Speakers explained their kaizen initiatives at the three-hour meeting, which drew 340 participants. They were showered with questions from Tepco executives, who asked, for instance, to what extent efficiency improvements can be left to the workforce.

Tepco's efforts to change its misspending ways come as it wrestles with the estimated 16 trillion yen ($145 billion) cost of decommissioning the Fukushima reactors and compensating residents whose lives were upended by the March 2011 nuclear disaster. To this end, it hired former Toyota executive Susumu Uchikawa as a special adviser in 2015, and has produce some 1,500 steps for improvements so far, some of them already taken. 

At the coal- and oil-fired Hirono power station in Fukushima Prefecture, the utility cut the time it took to inspect the No. 5 generating unit to 75 days from an initial plan for 141 days, boosting earnings by several billion yen in 2016. 

The key to the success was preparation, which is routine in the manufacturing sector but was a new concept for Tepco inspections. Pipes for the plant were welded being brought there to reduce on-site work. The next inspection, slated to start this June, is expected to take 79 days, down from 123 days in the past. 

Kawamura touted Tepco's progress, pointing to a steady rise in pretax profit. With its focus on improving efficiency, Tepco wants to get back on track to resuming dividend payouts, which it last made for the year ended March 2011.

One reason Tepco is focusing so much on kaizen is that other approaches for boosting earnings depend on factors beyond its control. Under a plan released last May, the company wants to explore consolidation with other utilities in transmission and distribution as well as nuclear power.

On its own, it seeks to restart its flagship seven-reactor Kashiwazaki-Kariwa nuclear plant, which was not damaged in the 2011 tsunami but faces local opposition to resuming operation. Neither of these goals can be achieved without the support of industry peers or regional governments. Little if any progress has been made over the past year. 

Tepco's kaizen program, launched in 2015, initially focused on fossil fuel power plants. Steps to improve efficiency in its nuclear operations have lagged but the company has started with areas that do not compromise safety. At Fukushima Daiichi, for instance, Tepco has switched to a more cost-effective method for constructing tanks to store the seemingly endless buildup of wastewater. 

"We want to accelerate our kaizen efforts and boost Tepco's productivity tenfold," said Shunji Uchida, chief kaizen officer.

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