Etsuhiko Shoyama
1936–

President and chief executive officer, Hitachi

Nationality: Japanese.

Born: March 9, 1936, in Japan.

Education: Tokyo Institute of Technology, BS, 1959.

Career: Hitachi, 1959–1982, power plant engineer at Hitachi Works; 1982–1985, deputy general manager of Hitachi Works; 1985–1987, general manager of Kokubu Works; 1987–1990, general manager of Tochigi Works; 1990–1991, general manager of Household Appliances Division; 1991–1993, general manager of Consumer Electronics Division; 1993–1994, executive managing director of Hitachi and group executive for Consumer Products Group; 1994–1995, executive managing director of Hitachi and group executive for Consumer Products & Information Media Systems Group; 1995–1997, senior executive managing director of Hitachi and group executive for Consumer Products & Information Media Systems Group; 1997–1999, executive vice president and representative director; 1999–2003, president and representative director; 2003–, president, chief executive officer, and representative director.

Address: Hitachi, 4-6, Kanda-Surugadai, Chiyoda-ku Tokyo, 101-8010, Japan; http://www.hitachi.com.

■ Etsuhiko Shoyama started working for Hitachi in 1959, became its president in 1999, and in June 2003 took over as chief executive officer of the giant Japanese electronics conglomerate. For Hitachi, and Shoyama, the closing years of the 20th century and the early 2000s brought new challenges as the grim realities of doing business in an increasingly competitive international market became apparent. The wake-up call came in the form of a shocking $3 billion loss for fiscal year 1998, which was announced at almost the same time that Shoyama became the company's president in April 1999. The loss, the first posted by Hitachi since it adopted consolidated-accounting practices in 1963, made clear that business as usual would no longer be enough to keep the company in the black. Hitachi's crushing loss for fiscal year 1999 was made all the more painful by a decline of 8 percent in its worldwide sales.

Although Shoyama struggled feverishly to return Hitachi to the days of steady profitability, numerous obstacles made it difficult for him to achieve his goals. The worldwide economic downturn in the wake of the September 11, 2001, terrorist attacks in the United States, coupled with a decline in the demand for information-technology products, dealt Hitachi another body blow in fiscal year 2001. For that 12-month period Hitachi posted a net loss of more than $3.8 billion on sales of $60.1 billion, down sharply from $67.9 billion the previous year. Under Shoyama's direction, Hitachi battled back in fiscal year 2002, posting net income of $372 million on revenue of $69.3 billion. Fiscal year 2003, however, proved disappointing, as Hitachi struggled to eke out a profit of $150 million on sharply higher sales of $81.4 billion.

GOALS OUTLINED FOR HITACHI

Shoyama's goals for Hitachi, as outlined on the company's Web site (www.hitachi.com), focus on helping to "make people's lives more convenient and comfortable" through its offerings of "New Era Lifeline Support Solutions," designed to enhance and fuse information systems and social infrastructure systems, and "Global Products Incorporating Advanced Technology." In the latter category are included competitive hardware and software solutions that incorporate Hitachi's advanced knowledge and technologies.

Born on March 9, 1936, Shoyama studied electrical engineering at the prestigious Tokyo Institute of Technology, earning his degree in March 1959. A month after graduation he went to work for Hitachi as a power-plant engineer in the company's Hitachi Works. After working more than two decades as an engineer at the Hitachi Works, in August 1982 Shoyama was named deputy general manager at the plant. In June 1985 he was transferred to Kokubu Works, where he took over as general manager. In February 1987 he became general manager at Hitachi's Tochigi Works.

In August 1990 Shoyama was named general manager of Hitachi's Household Appliances Division, a position he held until June 1991 when he was appointed general manager of the company's Consumer Electronics Division and named to Hitachi's board of directors. Two years later he took over as group executive for the company's Consumer Products Group and was named executive managing director of Hitachi. In August 1994 Shoyama, who remained executive managing director of Hitachi, was named group executive for the company's Consumer Products & Information Media Systems Group.

CONTINUED CLIMB TO TOP

In June 1995 Shoyama, while continuing as group executive for the Consumer Products & Information Media System Group, was promoted to senior executive managing director of Hitachi. In June 1997 he moved into the upper ranks of management as Hitachi's executive vice president and representative director. He assumed the presidency of Hitachi in April 1999, while remaining a representative director.

Not long after his appointment as president, Shoyama and Koji Nishigaki, the newly appointed president of NEC Electronics, took their competitors in the semiconductor industry by surprise when they announced a strategic alliance. Under the terms of the Hitachi-NEC agreement, announced in June 1999, the core DRAM (dynamic random-access memory, the most common kind of RAM in personal computers) operations of the two companies were merged. At the time of the merger NEC claimed about 11 percent of the worldwide DRAM market, while Hitachi had a share of roughly 6 percent. The partners said that working together they hoped to be able to claim one-fifth of the international market in DRAM chips. Both companies had posted sharp losses in their semiconductor business for fiscal year 1998. While NEC's DRAM revenue dropped from $2.5 billion to $1.6 billion, Hitachi was hit even harder, seeing its DRAM sales fall to $903 million from $1.7 billon in fiscal 1997.

Under Shoyama's leadership, Hitachi posted a profit in fiscal year 1999 of $160 million, up sharply from net income of $29 million the previous year. Things improved further in fiscal year 2000 when the company posted net income of nearly $1.3 billion. All of Shoyama's efforts to improve Hitachi's financial performance were swept away, however, in fiscal year 2001 when Hitachi suffered a staggering loss of nearly $3.9 billion, much of it attributable to the worldwide business decline that followed the 9/11 terrorist attacks in the United States.

PRESSURE INCREASED AFTER BIG LOSS

In the wake of Hitachi's heavy losses in fiscal year 2001, the pressure increased on Shoyama to move decisively to return the company to profitability. Unlike his counterparts in most Western countries, however, Shoyama was constrained by Japanese business traditions from cutting payrolls within his country. Payrolls at Hitachi facilities outside Japan, however, could be—and were—trimmed. As early as 1999 Hitachi had closed a semiconductor plant in Irving, Texas, resulting in the layoff of 650 employees.

Interviewed by Benjamin Fulford of Forbes, Shoyama was asked what options were open to him in dealing with Japanese employees who could no longer be productively occupied in business sectors that were stagnating. The Hitachi president explained that in such cases the only solution was to redeploy the workers. "We took 4,000 people, retrained them for six months, and moved them from [analog] businesses into the information sector. … It is amazing to see how energized people become when they are taken out of a stagnant division" (June 14, 1999).

In June 2002, only months after Hitachi had posted its big loss for fiscal year 2001, Shoyama negotiated a 12-month wage cutback averaging 5 percent with its labor union. Six months later the Hitachi president told Kyodo World News Service that he would probably have to seek another wage cut. "It may be a matter of course to conduct a wage cutback since the company is going through deflation," he said (December 17, 2002).

MANAGEMENT STRUCTURE REORGANIZED

In January 2003 Hitachi announced a major reorganization of its corporate-governance structure, a move made possible by changes in Japan's commercial code. Under the reorganization, which was implemented in June 2003, the company adopted the committee system, which it hoped would create a more agile management system better able to implement its core strategies. The reorganization affected Hitachi and its 18 publicly held group companies. In announcing the restructuring, Shoyama indicated that the move was undertaken to dramatically speed management decisions, render management practices more transparent, improve oversight of group companies by bringing them under the umbrella of a unified management system, and adopt a corporate-governance system more widely understood by investors outside Japan.

In a further refinement of its management restructuring, Hitachi in March 2004 announced the establishment, effective April 1, 2004, of Hitachi Group Headquarters. Designed to develop and execute management strategy for Hitachi's group companies, the new headquarters was divided into three divisions: Global Business, headed by Hiroaki Nakanishi, vice president and executive officer; Legal and Corporate Communications, headed by Takashi Hatchoji, vice president and executive officer; and Corporate Strategy, headed by Makoto Ebata, executive officer. Despite its disappointing financial performance in fiscal year 2003, weighed down in part by heavy tax payments, Hitachi looked for a dramatic improvement in fiscal year 2004 based on sharply increased demand for high-tech products.

See also entry on Hitachi, Ltd. in International Directory of Company Histories.

sources for further information

"Financial Results for the Year Ended March 30, 2002," http://www.hitachi.com/New/cnews/E/2002/0426/index.html.

Fulford, Benjamin, "Jack Welch Lite (Etsuhiko Shoyama to Restructure Ailing Hitachi)," Forbes, June 14, 1999.

Hara, Yoshiko, "Pact Signals New Game in DRAM," Electronic Engineering Times (Japan), June 28, 1999.

"Hitachi Announces Changes to Top Management," http://www.hitachi.com/New/cnews/E/1998/981224B.html.

"Hitachi Changes Top Brass in Bid to Stem Losses," Computergram International, December 31, 1998.

"Hitachi Establishes 'Hitachi Group Headquarters;'" Aims to Improve Group Management System and Expand Group Synergy," http://www.hitachi.com/New/cnews/040311.html.

"Hitachi Head Suggests More Wage Cuts at Annual Wage Talks," Kyodo World News Service, December 17, 2002.

"Hitachi, Ltd. President Etsuhiko Shoyama Reviews Company Performance and Outlook," http://www.hitachi.com/New/cnews/E/2001/0710d/index.html.

"Hitachi Net Profit Down 43 Percent," Agence France Presse, April 28, 2004.

"Hitachi Returns to Black on Robust Sales of Consumer Digital Electronics," Agence France Presse, February 4, 2004.

"Japanese Company Chiefs More Bullish on Economic Outlook: Survey," Agence France Presse, February 26, 2004.

Kageyama, Yuri, "Japan's Hitachi Dropping Money-Losing Businesses to Clinch Profits," Associated Press, January 30, 2003.

"Message from the President," http://www.hitachi.com/about/corporate/intro/index.html.

"Philosophy & Strategy," http://www.hitachi.com/about/vision/index.html.

"Reinforcing Corporate Governance, Hitachi, Ltd. and Major Group Companies Adopt Committee System," http://www.hitachi.com/New/cnews/E/2003/0130a/0130a.pdf.

—Don Amerman