management2013 hitachi construction machinery

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Copyright © Hitachi Construction Machinery Co., Ltd. 2011 All Rights Reserved.

New Mid-Term Management Plan

“Ｇｏ

Ｔｏｇｅｔｈｅｒ

2013 ”【Period: 2011～2013】

Hitachi Construction

Machinery Co., Ltd.Copyright ©

Hitachi Construction Machinery Co., Ltd. 2011 All Rights Reserved.

2


Ｉｎｄｅｘ

2. “Go Together 2013”2-1. <2020 VISION> and 6 Imperatives2-2. Hard (Product) Strategy2-3. Mining Strategy2-4. Solution (Sales& Service) Strategy2-5. Regional Strategy2-6. Enhancing Management base

1. Business and Market Environment

3. Target Performance

3


Ｉｎｄｅｘ




4


100

150

200

250

300

350

400

450

500

'00 '02 '04 '06 '08 '10 '12 '14 '16

-4

-2

0

2

4

6

8

10

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13

IMF World Economic

Outlook (Apr.2011)

‘11 ‘12 ‘13

World total 4.4% 4.5% 4.5%

Advanced 2.4% 2.6% 2.5%

Emerging 6.5% 6.5% 6.5%


Emerging

Advanced

Total

Real GDP Growth Rate

World economy is in steady Recovery Emerging countries are enlarging

Demand is correlated with GDP

-1%

'90 '93 '96 '99 '02 '05 '08

-40%

GDP Growth

Demand Construction Machinery

Dear GDP

（FY 2000=100)

India

Sub-SaharaM. East

China

Advanced

BrazilRussia

Scale of economy for China and India is expected to grow by more than 200%, and for Sub-Sahara, M. East, Russia, by 150%

approximately.

5


22 18 23 26 28 31 3320

10 14 18

28 2729

36 3742

52

26

1524

26

14 1519

2732

3024

17

10

1318

11 21

3216

2429

47

44

73

111

128

710

13 17

17

21

29

23 29

38

42

56

713

18

25

36

32 15

29

30

151162

221

179

155

133123

9787

229

0

25

50

75

100

125

150

175

200

225

250

275

300

325

350

375

'01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13

千台

6%11%

6%

49%

17%

11%

7%10%

7%

48%

16%

12%

5%8%

8%

53%

14%

12%

2011 F

2010R

Composition

2013 F

Emerging79%

JapanW. Europe

N. America

China

Asia/Oceania

Others

Demand Growth Rate

'10 '11

+39% +26%+61% +8%+35% +40%+53% +15%+32% +11%+95% +6%+52% +15%Total

Japan

W. Europe

N. America

ChinaAsia/Oceanina

Others

Japan

W. Europe

N. America

China

Asia/Oceania

Others

Total

263


Market will increase in double digits. Emerging Countries in main, covering 80%.

1000Units

R: ResultF: Forecast

*HCM Estimate

*Excluding Chinese Maker

Worldwide Demand Hyd Excavator

6


Ｉｎｄｅｘ




7


9,000

7,7387,442

6,058

9,405

1,085

488

197415

650

'07 '08 '09 '10 '11 '12 '13-200

300

800

1300

1800

New Mid-Term Management Plan Go Together 2013

2-1. <2020 VISION> & 6 Imperatives

1st step for

Sustainable Growth

【2011-2013】

Close and Reliable Partner anywhere on the Earth with Best Solutions through Kenkijin Spirit

2020VISION2020

VISION

2nd Step

3rd

Step

1st

Step for the

coming 10 years

Sales/ Operating Income (100 Mil Yen)

Sales (B

ar)O

perating Income (Line) ’20

Kenkijin SpiritGuiding Principles of HCM Group

8


Hard (Product)

SolutionCustomer satisfaction

Transform to Global Management towards Sustainable Growth

Global Production Global Management

Research & Development

Life Cycle Support

Mining Operation

JapanAmericaEurope/ RussiaChinaAsia/ OceaniaIndiaAfrica/M. East

Marketing & Sales

Regions

Global Management basis

2-1. <2020 VISION> & 6 Imperatives

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Basic Policy1. Development for each

market needs2. Unified Quality3. Standardize, Integrate

Basic Policy1. Development for each

market needs2. Unified Quality3. Standardize, Integrate

Establish Global R & D Made

by

HITACHIMade

by

HITACHI

2-2. Hard (Product) Strategy

1.

Development on local requirement in China.

2. Cost Reduction by further localization

HCMC (China)

Share function

Telcon (India)1.

Develop specification for Emerging Market with better cost performance

2. Outsource Computer analysis function

Japan1. Control all products cross sectional2. Develop advanced technology

(Saving energy technology)3. Utilize Human Resources

(China, India)4. Collaboration and alliance with

HITACHI Group and suppliers5. Standardize, Integrate

http://www.volvo.com/

http://www.jcb.com/

10


●Mini Excavator

• Larger Production, Lower fuel consumption

• Simplified function• Easy Maintenance• Easy obtainable parts

Quality

Delivery Warranty

Price

Develop a New Brand Service Parts with high price competitiveness

Undercarriage, Tooth etcUndercarriage, Tooth etc

＋

2-2. Hard (Product) Strategy

Develop Machine & Spare Parts for Emerging Market with overwhelming cost competitiveness

Well accepted3G Series

More Durable models for China Market

●Wheel Loader: Develop Emerging Spec Model Series together with KCM

• Environment-Friendly• Used Machine

Distribution

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車両障害物歩行者

＋

2-2. Hard (Product) Strategy Establish Technology for Electric and Robot

Utilize Strength of Total HITACHI Group

Hitachi IES

Inverter

Hitachi IES/Hitachi Ltd

Motor Energy Management

Hitachi Institute

Battery operated Excavator

HybridExcavator

ASTACO(Advanced System with Twin Arm for

Complex Operation)

Safety Improve Operation Efficiency

AHMAsset HealthManagement

Overview Monitor Cruise ControlTraffic ControlInformation Fault detection

Lower fuel consumption for Energy saving

Improve Safety and Operation efficiency

Improve Value for Customer

http://www.hitachi-ies.co.jp/products/inv/sj700/tokucho.htm

12


* Demand: HCM Estimate

UnitUnit

0

200

400

600

800

1,000

1,200

1,400

1,600

'10 '11 '12 '13 ' '180

200

400

600

800

1,000

1,200

1,400

1,600

'10 '11 '12 '13 ' '18

1.9

2.2

2.2

4.9需

要

販

売

: vs2010

1.5

1.6

: vs 2010

1.7

3.0

Strong in Mining. Establish Solid Business Model

2-3. Mining Strategy

Demand Excavator (>100ton) Demand RDT (>140ton)

• Apply Success Story of Excavator

(Reliability) to

RDT

• Sophisticate Most Advanced technology of

Hitachi Group (AC Drive, Trolley, AHM etc)

・Develop Excavator & RDT upon common

concept in Japan

・Deploy Own Service utilizing ＩＣＴ

・Fulfill Service Infrastructure (HR, Re-Man)

【ICT: Information Communication Technology

Open Mining School (Australia)

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＋

New Unit

Service

Re-man

Parts

Realize Lowest Cost/Tonnage

Enlarge revenue ofService and Parts

Integrated Control & Maintenance through ICT

Integrated Control & Maintenance through ICT

Full Maintenance Contract (FMC)Full Maintenance Contract (FMC)

Win-Win Customer

2-3. Mining StrategyPackage of 1 Excavator with 4 Dump Trucks

Package of 1 Excavator with 4 Dump Trucks

Overwhelming Product

【ICT: Information Communication technology 】

Dump Area

Loading Area

TroubleshootingTool

Fleet Management System

Central Control of Information for all Machines at site

Achieve High Performance and Low Life Cycle Cost

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LocationWarningCondition Parts Bulletin

Repair History

2-4. Solution (Sales & Service ) Strategy

Utilize Global e-Service

New UnitFinance

After Sales Service

PartsRental

Re-man

Used Resale

Life Cycle Support Operation

Parts Book

Parts Book

Location WarningCondition

Custom

er Satisfaction

Enlarge Revenue

Boost up Customer satisfaction and realize higher market share.(Acquire repeat orders)

Evolve support based on the ICT fully utilized data.

http://www.hitachi-kenki.co.jp/products/excavator/medium/index.html

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2-5. Regional Strategy

Enhance Sales & Service Operation for regional market requirement

【Demand Hyd. Excavator:’10→’13】

America

Europe/Russia China

Africa/ M. East

IndiaAsia/ Oceania

North

Middle & South

EuropeRussia/CIS

Africa M. East

Localize Operation, Faster decision, Enhance Strategic function

Japan

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●Role of Telcon●Develop Product for Emerging Market

Increase Production Capacity

for Africa, M. East

Production (3 factories)unit

【2.6】

2-5. Regional Strategy -

India -Strengthen Dealer Sales & Service Network of Telcon

Dealer36

(226

outlets)

’10 ’1336(400

outlets)

Own Service Workshop 5 factories 12 factories

【2.4】

【】：vs 10

【1.8】

Large Projects in India【Airport Maintenance】

Build facilities 1100 Bil Yen （up to ’13）

【Seaport Maintenance】

Major Seaports 1200 Bil Yen （up to 14）

【Commercial artery Delhi and Mumbai 】Freight Railway and Industrial Park, Inland Depot to Seaports

8300 Bil Yen （up to 16）

0

5,000

10,000

15,000

'10 '13

Hyd. Excavator

Backhoe Loader

17


ロシアロシア

現地生産工場現地生産工場完成イメージ完成イメージ

Moscow

St Petersburg ﾞＴｖｅｒ

2-5. Regional Strategy –

Europe/ Russia -Name : Hitachi Construction Machinery Eurasia

Manufacturing LLC

（HCRM）

Location：

Tver, Russia

Established : 1st

April 2011

Production：

Hyd excavator 2,000units/Yr

Start Operation: October 2013

Industry PolicyIn Russia Competition

Joint MarketingHCRS＋Dealer

（Established in Mar 2010）

Build Substantial Russian Operation

1. Competition (Cost, Delivery,Market oriented)

2. Enlarge local procurement(Develop suppliers, Supply items to Europe)

3. Enhance Mining BusinessLocal production of Bucket, Vessel for Dump)

4. Avoid Import Duty Risk

Image HCMR FactoryImage HCMR Factory

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HMEC enhance Dealer Support in M. East, E. AfricaHCAF enhance Sales & Service Network

•Expand Presence

•Promote Wheel LoadersHMEC

HCAF Head Office

Ghana Office

MoroccoMorocco

AlgeriaAlgeria

TunisiaTunisia

NigeriaNigeria

S. AfricaS. Africa

LibyaLibya EgyptEgypt

SudanSudan

Demining

Machine BM307-V33

AngolaFind/Develop Dealer

Maintain Support Organization

Promote in Full line

India

HCAF

Mining Order

Taking

Working at Mozambique/Angola

Emerging SpecModels

Mozambique

HCAF


Africa/ M. East -

Country Demand of Hyd Excavator >100 units/Yr

http://www.jcb.com/

19


HCMI factory

HMAP

HCMM

HCMT

HAP

HCA

CPL

1.

Enlarge Service Revenue

Enhance support for CustomerUtilizing Global e-Service

2.

Participate in Big Projects(Coal, Forestry, Infrastructure)

'10 '11 '12 '13

Used etc

Service

Parts

150%Parts/Service Sales Palm Oil Plantation

Highway Project Forestry Coal

OutletMining Project


Asia/ Oceania -

Strengthen Home Market (Retail Sales and Service)Secure Presence in Biggest Market

20


Shenyang Beijing

InnerMongolia

Nanning

Chengdu Hefei

Enhance Dealer Network ( by Market size, Growth Ratio)


China -

Basic StrategyBasic Strategy

Strategy byProvince

Strategy byProvince

Support ControlPerformance

Support ControlPerformance

Large and Rapid

Small but Rapid

Large but Slow

Analyze per productBring strategic modelPrice Management

Focus on Specific Province Prioritized machine supplyEnhance Dealer Support

Establish HCS Branch office

Support Dealers through Score CardExpand to other area

Introduce Dealer Training Support SystemTraining through e-Learning

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America -

Alliance to be Deepened, Enhanced and Developed

Sales started in North American Market for new Engine emission models

Increase production at Deere-Hitachi

Zaxis-5

Promote JD Products in Asia

DozerMotor Grader Forestry MachineBackhoe Loader

Sales range expansion and synergy expected for Excavator SalesIncrease sales volume per dealer

http://www.deere.com/en_US/cfd/construction/deere_const/docs1/jdcfc_homepage.html

22


Start HCM JapanStart HCM Japan1st

April 2012

Promote All-in-One Sales

Sales

Service Rental

20％

Total customers : 31,000


Japan -

Satisfy customer needs of

“Rent”, “Buy”

and “Repair”Rental ServiceSales

Start as an comprehensive company

who can respond to any requirement in any place in Japan.

Reform structure to further strengthen Japanese market that is significant.

Japan : Rapid change in volume

Decreasing Construction Investment

Tier 4 emission Decrease Sales to Rental Company

Decreased Sales to End User

Low hour, Long term

Sales to wrapped user is 5 times. Target is to increase ratio to 20%

23


Accelerate Growth by aggressive Production Capacity Expansion

HCMC (China) （17 30 K units at End FY2011)Increase Capacity for Components （42 60 K Units E/FY2011)Investment

USA

Indonesia

160%

170%180%

180%

170%

Production Capacity Medium Excavator

１70% (2010 to 13)

140%

Production Capacity Mining (2010 to 13)

Ultra Large Excavator（100tup）

【160%】

Rigid Dump （140tup）

【300%】

Increase Production for Ultra Large Excavator, Rigid Dump Truck

JapanRussia

Europe

China

India

2-6. Enhance Management Base –Production -

24


Procurement to Secure

Volume required

Procurement to Secure

Volume required

1. Enhance Purchase & Procurement

Aim No.1 Cost Competitiveness, Reduction of Total Cost thoroughly

2. Reduce SG&AProject activity of Promoting reduction of Indirect cost of Hitachi Group

Promote Cost Reduction activity

by Top Down

New Partnership Strategy

Introduce Score card of SupplierIntroduce Score card of Supplier

HCM Supplier

2-6. Enhance Management Base –Total Cost Reduction -

3. Enlarge Local ProcurementShorten lead time

Reduce cost Secure Volume

4. Reduce Logistic Cost & Loss CostStrengthen Supply Chain

Periodical ReviewStrategicPartner

Preferred Supplier

•Approved Supplier

25


HR Policy and Foster HR based on Global Operation

◆ HR Policy

Australia S. Africa Malaysia China

＜Training for Overseas TOP Management>

Promote Localization of staffs

◆ Foster HRFoster TOP Management through Global Core Human Resource Program

◆ Promote Diversity

Share Kenkijin

Spirit

-

Foster and Strengthen Kenkijin

- (Share Value)

Foster and Utilize diversified Resources

2-6. Enhance Management Base –Human Resource -

26


Amount of Investment (Accumulated from2011 to 13)

IT and others Production Facility Components for Excavator (Increase capacity)Sales & Service

(Outlets etc)

(Excluding Lease Property)

187Bil. Yen

Overseas Group for Production facility Production Facility

Mining Machines (Including Components)(Increase capacity)

2-6. Enhance Management Base –

Investment -

27


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28


'10 '11 '12 '13

0

10

20

30

40

50

2020VISION2020

VISION

Sales/ Operating Income Ratio

FY2010

Operating Income Net D/E Ratio Payout Ratio

Profitability Soundness

ＲＯＥ

Efficiency

0.9

Below0.8

3.6%

Over 15%

5.4%

Over10%

38.1%

Over 20%

Management Index

7,7389,000

Over 11,000

(100 Mil Yen, %)

Stable Dividend

5.4 7.2

Over 10%

3. Target PerformanceNew Mid-Term Management Plan Go Together 2013 1st

Step for the

coming 10 yearsClose and Reliable Partner anywhere on the Earth with Best Solutions through Kenkijin Spirit

Sales (B

ar)O

perating Income (Line)

FY2013

Exchange rate: 80¥/$, 115¥/Euro

29


The slogan “Go Together”

is aimed at encouraging efforts in combining the strengths of all employees of the HCM Group as we work to realize the 2020 Vision.

Let’s take on the challenge of global competition, with all HCM Group employees sharing Kenkijin Spirit

and

with the concept of “Global One”

under which everyone has a sense of solidarity.

Exert Ｋｅｎｋｉｊｉｎ

Spirit, and give first priority to customer satisfaction.

Challenge (Spirit of Challenge)Customer (Individual customer

orientation)Communication (Open atmosphere)

Ideas underpin Kenkijin Spirit

HCM Group Attitude of Kenkijin

(Value and Guiding Principle)

Go Together 2013 Poster

30


End

31


Certain statements found in this document may constitute “forward-looking statements” as defined in the U.S. Private Securities Litigation Reform Act of 1995. Such “forward-looking statements” reflect management’s current views with respect to certain future events and financial performance and include any statement that does not directly relate to any historical or current fact. Words such as “anticipate,” “believe,” “expect,” “estimate,” “forecast,” “intend,” “plan,” “project” and similar expressions which indicate future events and trends may identify “forward-looking statements.” Such statements are based on currently available information and are subject to various risks and uncertainties that could cause actual results to differ materially from those projected or implied in the “forward-looking statements” and from historical trends. Certain “forward-looking statements” are based upon current assumptions of future events which may not prove to be accurate. Undue reliance should not be placed on “forward-looking statements,” as such statements speak only as of the date of this document.

Factors that could cause actual results to differ materially from those projected or implied in any “forward-looking statement” and from historical trends include, but are not limited to:

■economic conditions, including consumer spending and plant and equipment investment in Hitachi’s major markets, particularly Japan, Asia, the United States and Europe, as well as levels of demand in the major industrial sectors Hitachi serves, including, without limitation, the information, electronics, automotive, construction and financial sectors;

■exchange rate fluctuations of the yen and other currencies in which Hitachi makes significant sales or in which Hitachi’s assets and liabilities are denominated, particularly against the U.S. dollar and the euro; ■uncertainty as to Hitachi’s ability to access, or access on favorable terms, liquidity or long-term financing; ■uncertainty as to general market price levels for equity securities in Japan, declines in which may require Hitachi to write down equity securities that it holds; ■the potential for significant losses on Hitachi’s investments in equity method affiliates; ■increased commoditization of products; ■uncertainty as to Hitachi’s ability to continue to develop and market products that incorporate new technologies on a timely and cost-effective basis and to achieve market acceptance for such products; ■rapid technological innovation; ■the possibility of cost fluctuations during the lifetime of, or cancellation of, long-term contracts for which Hitachi uses the percentage-of-completion method to recognize revenue from sales; ■fluctuations in the price of raw materials including, without limitation, petroleum and other materials, such as copper, steel, aluminum and synthetic resins or shortages of materials, parts and components; ■fluctuations in product demand and industry capacity; ■uncertainty as to Hitachi’s ability to implement measures to reduce the potential negative impact of fluctuations in product demand, exchange rates and/or price of raw materials or shortages of materials, parts

and components; ■uncertainty as to Hitachi’s ability to achieve the anticipated benefits of its strategy to strengthen its Social Innovation Business; ■uncertainty as to the success of restructuring efforts to improve management efficiency by divesting or otherwise exiting underperforming businesses and to strengthen competitiveness and other cost reduction

measures; ■general socioeconomic and political conditions and the regulatory and trade environment of countries where Hitachi conducts business, particularly Japan, Asia, the United States and Europe, including, without

limitation, direct or indirect restrictions by other nations on imports and differences in commercial and business customs including, without limitation, contract terms and conditions and labor relations; ■uncertainty as to the success of alliances upon which Hitachi depends, some of which Hitachi may not control, with other corporations in the design and development of certain key products; ■uncertainty as to Hitachi’s access to, or ability to protect, certain intellectual property rights, particularly those related to electronics and data processing technologies; ■uncertainty as to the outcome of litigation, regulatory investigations and other legal proceedings of which the Company, its subsidiaries or its equity method affiliates have become or may become parties; ■the possibility of incurring expenses resulting from any defects in products or services of Hitachi; ■the possibility of disruption of Hitachi’s operations in Japan by earthquakes, tsunamis or other natural disasters, including the possibility of continuing adverse effects on Hitachi’s operations as a result of the

earthquake and tsunami that struck northeastern Japan on March 11, 2011; ■uncertainty as to Hitachi’s ability to maintain the integrity of its information systems, as well as Hitachi’s ability to protect its confidential information or that of its customers; ■uncertainty as to the accuracy of key assumptions Hitachi uses to evaluate its significant employee benefit related costs; and ■uncertainty as to Hitachi’s ability to attract and retain skilled personnel.

The factors listed above are not all-inclusive and are in addition to other factors contained in Hitachi’s periodic filings with the U.S. Securities and Exchange Commission and in other materials published by Hitachi.

Cautionary Statement

management2013 hitachi construction machinery

Investor Relations

hitachi group

mining strategy

regional strategy

hitachi basic policy

management base3

market environment2

emerging countries

emerging total4 advanced2