TOKYO -- Hitachi has decided to reduce the number of its group companies by 40% by the fiscal year ending in March 2022, consolidating a sprawling empire of 800 companies to around 500. It has has over 300 companies in China and Southeast Asia alone.
The plan is part of a drastic program to eliminate indirect costs and increase its operating profit margin to over 10%, the level of overseas rivals, from an estimated 7.1% for the fiscal year ended in March.
Hitachi's indirect costs have grown as the number of its companies ballooned over the past decade, due partly to aggressive overseas expansion.
The company plans to flesh out its consolidation program by the end of the current fiscal year. The program will be led by a vice president in charge of cost structure reforms, a newly created position.
Hitachi has multitude of businesses, from power and energy to construction machinery, information communication, automotives and home electronics. Many of these operations made separate efforts to expand overseas, creating redundancies such as overlapping back office functions.