Collaborative Creation and Profits- Progress with Corporate Strategy
Establish a Stable, High Profit Structure

May 26, 2008

Kazuo Furukawa
Hitachi, Ltd.

Collaborative Creation and Profits- Progress with Corporate Strategy
May 26, 2008

Contents
1. Basic Policy and Key Initiatives
2. Increased Profitability Through Rigorous FIV-based
Management
3. Building a Stable, High Profit Structure- Growth Strategy for Social Innovation Business
4. Evolution of Group Management to Respond to Changes in theManagement Environment and Innovation ThroughCollaborative Creation
5. Summary
Copyright © 2008, Hitachi, Ltd., All rights reserved.

2Collaborative Creation and Profits- Progress with Corporate Strategy
May 26, 2008

Contents
1. Basic Policy and Key Initiatives
2. Increased Profitability Through Rigorous FIV-based
Management
3. Building a Stable, High Profit Structure- Growth Strategy for Social Innovation Business
4. Evolution of Group Management to Respond to Changes in theManagement Environment and Innovation ThroughCollaborative Creation
5. Summary
Copyright © 2008, Hitachi, Ltd., All rights reserved.

3

1-1. Basic Policy
Basic Management Policy “Collaborative Creation and Profits”
Rigorous focus on market-oriented approach and profit creation

Goal
Establish a stable, high profit structure

Key Initiatives
1. Increased profitability through rigorously FIV-based management
2. Building a stable, high profit structure
3. Evolution to group management for high profitability
4. Innovation through collaborative creation- Leveraging the Group’s collective strengths to create
environmental value, etc. Copyright © 2008, Hitachi, Ltd., All rights reserved.

4

1-2. Business Results and Main Initiatives[Operating income(billions of yen), Operating margin(%)]
400.0
200.0

3.1%

2.7%
1.8%
256.0

345.5

182.5

0

FY2005[Net income(loss) (billions of yen)]

FY2006

FY2007(32.7)(58.1)

4%
2
0

37.3
0

Main initiatives executed to improve operating results
Completed- Managed unprofitable overseas power systems projects and increased reliability- Started collaborative creation with Matsushita Electric Industrial and Canon in the
LCD panel business

Ongoing- Accelerating structural reforms in HDD business- Developing products offering increased value and advancing structural reforms
in the flat-panel TV business
Copyright © 2008, Hitachi, Ltd., All rights reserved.

51-3. Key Initiatives
Accelerate Global Growth in the Social Innovation Business
Actively address global infrastructure demand with highly reliable
technologies and collective strengths
Accelerate local based operations and ensure rigorous risk management

Strengthen Robust Operating Base for Achieving Profitable Growth- “Strengthening The Base ‘08-’09” - Group Workforce Activity
Reduce procurement and other costs to decrease risks associated witheconomic slowdowns, escalating material prices and foreign exchange
fluctuations to achieve targets
Capitalize on MONOZUKURI, IT infrastructure and human resources
capabilities, shared philosophy for supporting society

Leverage the Group’s Collective Strengths to Create
Environmental Value
Create and expand environmental businesses through collaborative
creation within and outside the Hitachi Group
Implement strategies to address global warming through technologies
and actions
Copyright © 2008, Hitachi, Ltd., All rights reserved.

6Collaborative Creation and Profits- Progress with Corporate Strategy
May 26, 2008

Contents
1. Basic Policy and Key Initiatives
2. Increased Profitability Through Rigorous FIV-based
Management
3. Building a Stable, High Profit Structure- Growth Strategy for Social Innovation Business
4. Evolution of Group Management to Respond to Changes in theManagement Environment and Innovation ThroughCollaborative Creation
5. Summary
Copyright © 2008, Hitachi, Ltd., All rights reserved.

72-1. Improving Businesses with Negative FIV
Hard Disk Drive Business (1)Achieve product cost of sales rivaling
any competitor- Time to market high-value-added, low-cost
products- Improve yield to reduce scrap cost
- Achieve reductions in materials costs above
prices down
- Reduce number of components bystandardizing designs, improve productivity,
decrease losses

Ongoing cost structure reforms- Realize benefits of site integration- Improve SCM* to reduce total costs- Promote project to reduce fixed costs

Results: Profitable for 2 consecutive quarters
100
100
Operating income(loss)(U.S.$ millions)

Ongoing cost reduction- Positive FIV in fiscal 2008

50
50

営
0
0
業
-50
損
-50
益
-100
Ｍ＄ -100
-150
-150

-200
-200

4Q06
1Q08
4Q 1Q07
1Q 2Q072Q 3Q07
3Q 4Q07
4Q 1Q

2006

2007

2008

FY2008 Profit Structure Reforms
FY2007

FY2008Operatingincome0Operatingloss

・Fixed cost reductions(structural reform benefits)

Lower
prices・Cost reductions
・Volume increase* SCM: Supply Chain Management
Copyright © 2008, Hitachi, Ltd., All rights reserved.

8

2-1. Improving Businesses with Negative FIV
Hard Disk Drive Business (2)Business structural reforms proceeding as planned- Positive FIV in fiscal 2008
- Restructuring head and media operations
Media- Completed consolidation and integration of headand media operations

Product strategy- Focus development resources on mainstay
segments (high-speed enterprise products, large
capacity products for mobile devices and desktop
PCs)- Support customers’ efforts to offer “green products”
with our lower-power-consumption and higher
density products

Strengthening management team toaccelerate reforms
Industry No. 1 in annual U.S. patentregistrations

BeforeAfter

Slider

DEV.*

MFG.*

DEV.*

MFG.*

U.S.
Japan

U.S.
Japan
China

U.S.
Japan

Philippines

U.S.

U.S.
China

Japan

Philippines

Mexico

HGA.*
MFG.*

China
ThailandPhilippines

China

タイ

*HGA.: Head Gimbal Assembly*MFG.: Manufacturing*DEV.: Development

Strengthen product lineup for enterprise

Ultrastar 15K450
15,000 RPM
450GB capacity
Perpendicular magnetic
recording technology
Started shipping in April 2008
Copyright © 2008, Hitachi, Ltd., All rights reserved.

92-2. Improving Businesses with Negative FIV
Flat-panel TV Business (1)- Positive FIV in fiscal 2009

TV business for Hitachi- Expansion of flat-panel TV market (particularly in China, etc.)- Opening up of emerging markets in conjunction with social infrastructure business- A focal point of the era of broadcasting and communications convergence- Demonstrate the Group’s collective strengths

Implement cost structure reforms
in fiscal 2008

FY2008 Profit Structure Reforms ( Audio/ Visual )business- Reduce cost
- TVs: design improvement, etc.
- Panels: process improvements, etc.

- Establish SCM framework for further
reducing logistics costs and inventories- Reduce fixed costs by 30%,
consolidate and improve efficiency of
manufacturing and sales, optimize
personnel deployment, etc.

FY2007

FY20080Operatingloss
Operating
loss

Lower
prices・ Improvement in FY2007
structural reform-related
expenses・ Reduction in fixed costs(structural reform benefits)
・ Reduction in cost of sales /Improved capacity utilization

Copyright © 2008, Hitachi, Ltd., All rights reserved.

102-2. Improving Businesses with Negative FIV
Flat-panel TV Business (2)- Positive FIV in fiscal 2009

Sales strategy: Establish highly efficientsales structure
10 thousand units

Plasma TVs
LCD TVs[TV business]

45%

24%

- Rebuild global regional strategy
Japan: Focus on ultra-thin models and sales channels
China: Maintain and expand top share in large plasma TVs
North America and Europe: Transform into low-risk operation- Expand B2B channel, centered on ultra-thin models

Ultra-thin
model
share

[Plasma panel business]- Strengthen external panel sales: Establishment of China
PDP Technology Center, integrating design, sales andprocurement

2%

210

161
85

90

76

120

FY2007

FY2008280
120
160
FY2009Product strategy: Highlight competitive advantage
LCD, development of ultra-thin (35mm) plasma TVs, propose

Expand Ultra Thin TV lineup wall-mountable TVs

Introduce TVs that consume less power and take a total approach to

Reduce power consumption eco-conscious business (in packaging, transport, etc.)
Wireless

World’s first HDMI* wireless unit

Network-compatible

Launch original portal site service (June 2008, in Japan)* HDMI: High-Definition Multimedia Interface

Copyright © 2008, Hitachi, Ltd., All rights reserved.

11Collaborative Creation and Profits- Progress with Corporate Strategy
May 26, 2008

Contents
1. Basic Policy and Key Initiatives
2. Increased Profitability Through Rigorous FIV-based
Management
3. Building a Stable, High Profit Structure- Growth Strategy for Social Innovation Business
4. Evolution of Group Management to Respond to Changes in theManagement Environment and Innovation ThroughCollaborative Creation
5. Summary
Copyright © 2008, Hitachi, Ltd., All rights reserved.

123-1. Establish a Stable, High Profit Structure

Social Innovation BusinessSocial Infrastructure
Business

Industrial Infrastructure
Business

Life Infrastructure
Business

Power Systems
Railway Systems
Government Systems

Automotive Equipment
Systems
Industrial Systems
Financial Systems

Urban Systems
Home ICT Systems
Medical Systems

Information Infrastructure Business
IT Platforms

System Solutions

Infrastructure Technology/Products
Semiconductors
Materials
Motors / Inverters

PanelsHard Disk Drives

Copyright © 2008, Hitachi, Ltd., All rights reserved.

13

3-2. Growth of the Social Innovation Business

Shifting management resources• Ratio of investing cash flows in Social Innovation Business field
Social Innovation Business

53%

64%

66%

70%

Infrastructure
Technology/Products

47%

36%

34%

30%

FY2006

FY2007

FY2008FY2009Social Innovation
Business

Infrastructure
Technology/
Products

36%

23%

7%
34%

20%
FY2007

11%10%

26%
FY2008SocialInfrastructure

22%

Industrial
Infrastructure

11%

Life
Infrastructure
Information
Infrastructure
Copyright © 2008, Hitachi, Ltd., All rights reserved.

14

of a Stable, High Profit Structure
3-3. Pursuit
Social Infrastructure Business (1)Operating margin

FY2005

FY2007

FY2009(Target)

(5%)

(1%)

3%

MarketContinued robust demand for social infrastructure, resulting particularly fromemerging economies
Expanding demand in industrialized nations to upgrade social infrastructure to
make it more environmentally compatible

Key Policies
Expand businesses offering twin benefits of preserving the environmentand being economically advantageous: Nuclear, highly efficient coal-fired thermal
and wind power generation plants, and railway systems business
Steadily expand maintenance and services businesses
Reduce risk through locally based operations(Thermal power: Subsidiaries in Europe and the U.S.; nuclear power: collaborative
creation with GE; railway systems maintenance, etc: U.K. subsidiary)
Copyright © 2008, Hitachi, Ltd., All rights reserved.

15

of a Stable, High Profit Structure
3-3. Pursuit
Social Infrastructure Business (2)Reduce risk by promoting locally based operations
in response to growing global demandPower Systems Business
Nuclear and Thermal Power Business Size

Nuclear Power Business

Overseas nuclear power
Japan nuclear power

Overseas
Japan

Overseas thermal power* Includes Hitachi-GE Nuclear Energy, Ltd.
(equity method affiliate)

Japan thermal power
Reinforcement
initiatives

FY2005

FY2008FY2015*FY2010

Nuclear power business alliance with GE
Hitachi Power Europe GmbH established
Hitachi Power Systems America, Ltd. established

Balanced managementin power systems
business overally Implement project management that responds to expanding overseas thermal powerbusinessy Secure stable orders for nuclear power systems in Japany Win more orders for nuclear power systems overseas through collaborative creation
with GE
Copyright © 2008, Hitachi, Ltd., All rights reserved.

16

of a Stable, High Profit Structure
3-3. Pursuit
Social Infrastructure Business (3)Reduce risk by promoting locally based operations
in response to growing global demandPower Systems Business[Nuclear Power Business]

Install main equipment in new domestic BWR*1 plants and improve services forexisting plants
Tokyo Electric Power
Chubu Electric
Power
Kashiwazaki-Kariwa
Hamaoka No.5 unit
unit # 6/7

Start
Operation(1996, 1997)

Hokuriku ElectricPower
Shika unit 2(2005)(2006)The Chugoku ElectricPower
Shimane No.3 unit

(2011)

Hitachi’s involvement

Electric Power
Development
Ohma

Other companies’ involvement[Japan Nuclear Power Plant
Construction Plan (13 Plants)]<Hitachi’s Target>
・Participation in All BWR Plants(2012)

Strengthen collaborative creation with GE in overseas
nuclear power business- Major U.S. power companies (Dominion, Entergy and Exelon) haveapplied or are planning to apply for COL approval for construction andconditional operation of ESBWR*3- Plan to participate in 1/3 of new construction projects planned in U.S.

Develop next-generation uranium enrichment technology[Thermal Power Business]
Develop overseas coal-fired thermal power business- Promote business led by local subsidiaries in the U.S. andEurope and control risk management- Acquisition of U.S. service company

ＰＷＲ*2 3
ＢＷＲ10
Source: Agency for Natural Resources andEnergy, Ministry of Economy, Tradeand Industry, Summary of Electricity
Supply Plan, FY2008*1 Boiling Water Reactor*2 Pressurized Water Reactor*3 Economic Simplified Boiling Water Reactor

Expand service business by increasing sales of Hitachi-developed gas turbines
Copyright © 2008, Hitachi, Ltd., All rights reserved.

17

of a Stable, High Profit Structure
3-3. Pursuit
Social Infrastructure Business (4)Overseas utilization of domestically honed“Japanese quality”and greater localization

Railway Systems Business

Develop products and services businesses worldwide as Japan’s only
comprehensive provider of railway systems
Systems Supply

Supply of Key Components
ChassisN700系新幹線
N700 Shinkansen

Electricalequipment

Signals and systems

Electrical equipment (inverters)(for 5th line, Beijing Subway)

Operational
Signal systems management

Electronic interlocking
system for signals(for Chinese mediumspeed trains)

Maintenance
CTRL*Railcars

China, Asia, etc.
Markets

Japan, U.K., etc.
Markets

Railcars* CTRL:Channel Tunnel Rail Link

- Shipped first railcars for CTRL to U.K.(August 2007)- U.K.-based Hitachi Rail Maintenance began operations (October 2007)

Completed production ramp-up at railcar production base
- Increased railcar and electrical equipment output by 50% (March 2008)

Developed hybrid propulsion system for railways jointly with
East Japan Railway Company (JR East) (The world's firsthybrid railcars “Series E200” with this system commenced
commercial operations on the Koumi Line, in Japan)

JR East, Koumi Line
(Series E200)

Copyright © 2008, Hitachi, Ltd., All rights reserved.

18

of a Stable, High Profit Structure
3-4. Pursuit
Industrial Infrastructure Business (1)Operating margin

FY2005

FY2007

FY2009(Target)

4%

5%

5%

MarketSignificant shift in automobile-related needs - reducing environmentalload, enhancing safety, compatibility with ubiquitous networking, etc.
Rapid increase in demand for constructing infrastructure, centeredon emerging economies

Key Policies
Through collaborative creation with customers and by leveraging the Group’s
collective strengths, develop and provide new automotive equipment andsystems that precisely match all the needs of customers in terms of theenvironment, safety and comfort
Globalize the Hitachi Group’s operations through pioneering businessdevelopment in emerging economies (construction machinery and plant
construction businesses)
Copyright © 2008, Hitachi, Ltd., All rights reserved.

19

of a Stable, High Profit Structure
3-4. Pursuit
Industrial Infrastructure Business (2)Automotive Equipment Systems Business

Through collaborative creation with customers and by leveraging
the Group’s collective strengths, meet all the needs of customers
in terms of the environment, safety and information

Bring the latest environmental technologies
to the global marketplace- Delivered inverters for GM hybrid cars (Sept. 2007),
won large order for lithium-ion batteries(deliver batteries for 100,000 cars/year beginningin 2010)- Launch “Continuous Variable Valve Event and Lift
Control System” for Nissan Motor and begin mass
production

GM Chevrolet Tahoe 2-Mode Hybrid Car

Collaborative creation for safer vehicles- using Hitachi’s graphic rendering LSI technologies- Joint development and market launch of stereo camera for
automobiles with Fuji Heavy Industries

Lithium-ion battery

Create Group synergies- Car information systems: Clarion, Hitachi Global Storage Technologies- Lithium-ion batteries: Hitachi Vehicle Energy, Hitachi Maxell, Hitachi Chemical, Hitachi Cable- Motors/inverters: Hitachi Industrial Equipment Systems, Hitachi Metals, Hitachi Cable,
Hitachi Chemical
Copyright © 2008, Hitachi, Ltd., All rights reserved.

20

of a Stable, High Profit Structure
3-4. Pursuit
Industrial Infrastructure Business (3)Industrial Systems Business

Offer dominant technologically advanced
products and services globally[Construction Machinery](Hitachi Construction Machinery)
Expand production facilitiesy New plant 1: Supply key components globallyy New plant 2: Manufacture super-jumbo pneumatic excavators/
loading shovels and dump trucks
y Respond to emerging economies: Strengthen production capacity
in China, India, Indonesia, etc.

“Global e-Service” - worldwide service information
systemNew Hitachi Construction
Machinery plant[Plant Construction] (Hitachi Plant Technologies)
Participate in major construction projects in BRIC nations,
the Middle East, etc.
[Industrial Equipment] (Hitachi High-Technologies)
CD-SEMs*1 compatible with 45nm and finer design rules:
World share of 77%*2*1 Critical-dimension scanning electron microscopes, which measure the fine pattern dimensions on semiconductor wafers*2 FY2006, Gartner survey
Copyright © 2008, Hitachi, Ltd., All rights reserved.

21

of a Stable, High Profit Structure
3-5. Pursuit
Life Infrastructure Business (1)FY2005
Operating margin (1%)

FY2007

FY2009(Target)

(5%)

5%

MarketChanges in society, living environments and lifestyles are creating newneeds regarding safety, security, comfort and health

Key Policies
Globalize the Urban Planning & Development Systems Business (building
facilities and systems business, energy conservation business, etc.) andexpand maintenance and services businesses
Rebuild the flat-panel TV business and expand equipment and services in
response to broadcasting and communications convergence
Leverage the Group’s leading-edge technologies in medical systems-related
businesses
Copyright © 2008, Hitachi, Ltd., All rights reserved.

22

of a Stable, High Profit Structure
3-5. Pursuit
Life Infrastructure Business (2)Urban Systems Business

Utilize collective strengths of the Hitachi Groupto provide solutions to enhance security andcomfort to cities around the world

Elevator and escalator business- Increase share in three regions of Asia (Japan, China and Southeast Asia)→Stepping stone to future service business expansion- Build optimal global business framework (for development and production)- Strengthen Chinese production bases(establish framework of three production bases: Guangzhou, Shanghai and Tianjin)- Established elevator and escalator sales and services company in India; started operations(January 2008)

Services business- Strengthen and expand energy conservation business (ESCO*, etc.)- Upgrade energy-conservation proposals that leverage Hitachi’s engineering prowess,including clean room expertise and optimal air conditioning based on airflow analysis- Expand security business utilizing Group’s collective strengths- Expand sales of room entry systems to companies(application of μ-Chip, finger vein authentication technology, etc.)* ESCO: Energy Service Company
Copyright © 2008, Hitachi, Ltd., All rights reserved.

23

of a Stable, High Profit Structure
3-6. Pursuit
Information Infrastructure Business (1)Operating margin

FY2005

FY2007

FY2009(Target)

5%

7%

7%

MarketRapidly increasing demand in response to convergence of equipment,
information and knowledge as well as to escalating information volumes
IT equipment and systems must meet environmental and energy-saving
demands

Key Policies
Add higher value for a knowledge-based society
Global development centered on strong products and services
Strengthen MONOZUKURI capabilities to create a high earnings
structure
Copyright © 2008, Hitachi, Ltd., All rights reserved.

24

of a Stable, High Profit Structure
3-6. Pursuit
Information Infrastructure Business (2)Add higher value for a knowledge-based society- Strengthen outsourcing business- Expand integrated IT platform- Build world-class eco-conscious data center
Blade Server

Global development centered on strong products and services- Become worldwide leader as an integrated storage vendor- Expand system integration business centered on consulting

Strengthen MONOZUKURI to createa high earnings structure- Build highly reliable systems via rigorous
phase gate management- Continue improving worldwide TSCM*(design, procurement, manufacturing and transport)

Consultants
Fiscal 2009: 3,500
Fiscal 2007: 2,170* TSCM: Total Supply Chain Management
Copyright © 2008, Hitachi, Ltd., All rights reserved.

25

of a Stable, High Profit Structure
3-7. Pursuit
Materials Business
Operating margin

FY2005

FY2007

FY2009(Target)

7%

7%

8%

Market
Healthy new demand in environment-related and other areas(automobile-related field, etc.)
Expanding needs for high functional materials and components in HitachiGroup product and systems development

Key Policies
Expand top share products and further strengthen development ofstrategic materials for meeting environmental and other needs
Pursue creation of Group synergies with Social Innovation Business withno threshold; contribute significantly to enhancing productcompetitiveness
Copyright © 2008, Hitachi, Ltd., All rights reserved.

26Collaborative Creation and Profits- Progress with Corporate Strategy
May 26, 2008

Contents
1. Basic Policy and Key Initiatives
2. Increased Profitability Through Rigorous FIV-based
Management
3. Building a Stable, High Profit Structure- Growth Strategy for Social Innovation Business
4. Evolution of Group Management to Respond to Changes in theManagement Environment and Innovation ThroughCollaborative Creation
5. Summary
Copyright © 2008, Hitachi, Ltd., All rights reserved.

27

of Management Base to Respond
4-1. Strengthening
to Changes in the Management Environment
Rapid change in the management environment■ Rapid economic slowdown in the U.S. and elsewhere, risk of economic slowdown in emerging economies■ Improving technological and skill levels in emerging economies■ Foreign exchange fluctuation■ Soaring raw material prices, greater difficulty procuring natural resources■ Tougher environmental regulations ■ Natural disasters

Increasing management risks“Strengthening The Base ’08-’09”(From April, 2008)
Appointed executive vice presidents to focus on important crossorganizational issues to manage risk
Establish activity themes for all employees on a worldwide basis

Strengthen management base,risk-response capabilities

Shared philosophy by all employees
for managing difficulties and supporting society
Advanced MONOZUKURI
capabilities and reliability
Ability to help preserve
natural environment

Development and purchasing power
capabilities for optimizing costs
Human resources andteam capabilities

Leading-edge
IT infrastructure

Health care

Other

Copyright © 2008, Hitachi, Ltd., All rights reserved.

28

Advanced MONOZUKURI

4-2. Capabilities and Reliability

Strengthening
The Base ‘08-’09

Enhance MONOZUKURI capabilities and ensure reliability to prevail
against global competition and be the most trusted by customers
Raise quality and reliability, shorten development times through analysis-led design
Effective use of supercomputer-based simulations
Highly efficient coal-fired thermal power station boiler
technology that lowers environmental load
Verify high generating efficiency and combustion with minimal
emissions such as of nitrogen compounds through simulations

Air port
Air

Hitachi Supercomputer
SR11000

Combustion
testing equipment

BurnerUpflow
Upflow
Combustion simulation

Ensure quality of embedded software: standardize platforms
Globalize e-Meister activities: pass on techniques of highly skilled veteransusing latest digital media technologies
Copyright © 2008, Hitachi, Ltd., All rights reserved.

29

4-3. Strengthening Global Management Base Strengthening
The Base ‘08-’09
Strengthen management base worldwide to overcome forex and regional risks

Strengthen overseas development of Hitachi Group
common IT infrastructure and reduce common IT costs- Improve worldwide TSCM for optimizing global production- Reduce common Group IT costs

Strengthen management base in BRICs andother emerging economies
Promote global collaborative creation-type projects- Europe: Joint research with European universities in coal-fired thermal power generationthat reduces CO2 emissions- North America: Joint development project with GE on next-generation light water reactor- Economic and Simplified Boiling Water Reactor (ESBWR)- China: Model project for energy conservation and emissions reduction at small andmedium-sized companies- Asia: Joint research of water recycling technologies with National University of Singapore

Overseas revenues ratio Fiscal 2007 42% → Fiscal 2009 45%
Copyright © 2008, Hitachi, Ltd., All rights reserved.

30

Human Resources and4-4. Team Capabilities, CSR

Strengthening
The Base ‘08-’09

Recruit and develop human resources globally and maximize team strengths

Accelerate programs to develop business leaders- Select and develop overseas personnel as executives:
International Executive Course- Develop business leaders in partnership with The Wharton School of the
University of Pennsylvania, launch program led by Harvard Business School
professors

Recruit and develop people who can lead globally;
deploy and utilize the right people in the right places- Use Hitachi Group joint recruitment overseas(China, Singapore, Thailand, Malaysia)- Globally develop manager-training program

Promote work-life balance and maintain and promote health- Chosen as a Work-Life Balance Model Company by the Ministry of Health,
Labor and Welfare, Japan (April 2008)

Reinforce CSR on a global basis- Launch of e-learning program in 12 languages
Copyright © 2008, Hitachi, Ltd., All rights reserved.

31

Improving Efficiency of Management Base

4-5.and Creating Synergies

Strengthening
The Base ‘08-’09

Promoting “One Hitachi” concept to overcome a rapidly changing management environment

Improve efficiency of consolidated company management
Reduce material expenses in response to soaring raw materials costs, etc.
Reductions in costof materials

300 billion yen/year

Reduction of indirect costs

15 billion yen/year (average up to fiscal 2008)

Pooling of group funds

Annual saving of 5 billion yen/year in interest

Effective use of assets

Cash flow improvement of 5 billion yen/year(fiscal 2010)

Accelerate creation of business synergies- Motors/Inverters- Batteries- Environmental
business: Integrate R&D and promote activities of Motor Power Systems Division: Promote development throughout Group in automotive, railcar and power tool fields: Focus on water treatment and energy conservation-related areas;
currently developing overseas, including China- Urban Planning and : Provide one stop solutions from elevators and escalators to information
Development Project systems, and security and building management services
Copyright © 2008, Hitachi, Ltd., All rights reserved.

32

Leverage the Group’s Collective

4-6. Strengths to Create Environmental Value Strengthening
The Base ‘08-’09
Promote Hitachi Group “Environmental Vision 2025”(Announced December 2007)
Reinforce global warming
countermeasures

Global warming
prevention

Reduce CO2 emissions from HitachiGroup products by 100 million
tons/year worldwide by 2025

Implement measures using
Group’s collective strengths

Resource recycling

Ecosystem
conservation

Three pillars of the Hitachi Group’s Environmental Vision
CO2 emissions(100 million tons
/year)

Reductions Associated with
Hitachi Group Products(100 million tons/year)

207

1990

Global target;
Halve by 2050
compared to 1990

266

2005

2025

2050 (year)

Strengthen environmental
businesses
Create Environmentally Innovative
Products in pursuit of products andservices reflecting higher levels ofenvironmental efficiency byleveraging the Hitachi Group’s
technological capabilities
Develop technologies forpreventing global warming, invest
in strengthening businesses,
promote collaborative creation-type
projects

Enhance CSR activities, conducting
them in a unified manner along withsocial contribution activities
Copyright © 2008, Hitachi, Ltd., All rights reserved.

33

Leverage the Group’s Collective

4-7. Strengths to Create Environmental Value Strengthening
The Base ‘08-’09
Increase in Eco-Products
Sales of Eco-Products

Increase in Eco-Products(No. of types)

7,000

7,000

6,216

6,000

8

6.6
Nearlydouble

5,491

5,000
4,000

(Trillion yen)

4

4,506

3.5

3,294
2004 2005 2006 2007

2010
(FY)

0

2005

2010

(FY)

Environmentally Innovative Products- Data center power-conserving project CoolCenter50- Ultra-super critical pressure, high-efficiency thermal
power generation- Hybrid propulsion system for railways- Amorphous transformers- Energy-saving air conditioners

Eco-friendly
IT devices

Amorphous transformer

Copyright © 2008, Hitachi, Ltd., All rights reserved.

34

4-8. Collaborative Creation- and Profitability-focused Innovations
Initiatives in social innovation technology research- New electronics technologies: Next-generation storage devices
Spin transfer torque RAM: SPRAM(collaborative creation in Europe, the U.S. and Japan)- Human-oriented technologies: Develop an interactive robot that cangather large volumes of information through sensors as humans do,analyze it neuroscientifically and function in the real world

Initiatives in environmental technology research

Human symbiotic
service robot [EMIEW 2]- Reducing CO2 emissions, highly efficient thermal power generation system(Launched joint research with 4 European universities)- Hybrid/electric drive technologies with environmental advantages (Automobiles, railways)

Internationally competitive intellectual property activities~Double value of intellectual property~- Patent [Pipeline Power] ranked World No. 1, Electronics (IEEE Spectrum Magazine 2007)- Hitachi Group U.S. patent registrations: 2,302 (FY2007), 3rdOverseas Patent
Income(Breakdown)Overseas

35%

2000
Japan

Europe:15%

2007

Asia, etc.50%

65%
U.S.:6%

Japan:29%
Copyright © 2008, Hitachi, Ltd., All rights reserved.

35Collaborative Creation and Profits- Progress with Corporate Strategy
May 26, 2008

Contents
1. Basic Policy and Key Initiatives
2. Increased Profitability Through Rigorous FIV-based
Management
3. Building a Stable, High Profit Structure- Growth Strategy for Social Innovation Business
4. Evolution of Group Management to Respond to Changes in theManagement Environment and Innovation ThroughCollaborative Creation
5. Summary
Copyright © 2008, Hitachi, Ltd., All rights reserved.

36

5. Earnings structure in FY2006, FY2007 and FY2009

Establish a Stable, High Profit Structure
Operating income- Fiscal 2009: Consolidated Operating Margin of 5%- D/E Ratio 0.8 or below* (* including minority interests)
FY2006

Operating Margin:1.8%

D/E Ratio: 0.76

FY2007

Operating Margin: 3.1%

D/E Ratio: 0.76

FY2009Social Infrastructure
Business

Life Infrastructure
Business
Life Infrastructure
Business

Information
Infrastructure
Business

Life Infrastructure
Business

Industrial
Infrastructure
Business
Infrastructure
Technology/
Products
Business

182.5
billionInformation
Infrastructure
Business
Social Infrastructure
Business

Information
Infrastructure
Business

SocialInfrastructure
Business

Industrial
Infrastructure
Business

345.5 billion
Infrastructure
Technology/
Products
Business

Industrial Infrastructure
Business

Infrastructure Technology/
Products Business

Revenues
Copyright © 2008, Hitachi, Ltd., All rights reserved.

37

Cautionary Statement
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 andare 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:- fluctuations in product demand and industry capacity, particularly in the Information & Telecommunication Systems segment, Electronic Devices segment andDigital Media & Consumer Products segment;- uncertainty as to Hitachi’s ability to continue to develop and market products that incorporate new technology on a timely and cost-effective basis and to achievemarket acceptance for such products;- rapid technological change, particularly in the Information & Telecommunication Systems segment, Electronic Devices segment and Digital Media & Consumer
Products segment;- increasing commoditization of information technology products, and intensifying price competition in the market for such products, particularly in the Information& Telecommunication Systems segment, Electronic Devices segment and Digital Media & Consumer Products segment;- fluctuations in rates of exchange for the yen and other currencies in which Hitachi makes significant sales or in which Hitachi’s assets and liabilities aredenominated, particularly between the yen and the U.S. dollar;- uncertainty as to Hitachi’s ability to implement measures to reduce the potential negative impact of fluctuations in product demand and/or exchange rates;- general socio-economic and political conditions and the regulatory and trade environment of Hitachi’s major markets, particularly, the United States, Japan andelsewhere in Asia, including, without limitation, a return to stagnation or deterioration of the Japanese economy, or direct or indirect restriction by other nations
on imports;- 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 results of litigation and legal proceedings of which the Company, its subsidiaries or its equity method affiliates have become or may become
parties;- possibility of incurring expenses resulting from any defects in products or services of Hitachi;- uncertainty as to the success of restructuring efforts to improve management efficiency and to strengthen competitiveness;- uncertainty as to the success of alliances upon which Hitachi depends, some of which Hitachi may not control, with other corporations in the design anddevelopment of certain key products;- uncertainty as to Hitachi’s ability to access, or access on favorable terms, liquidity or long-term financing; and- uncertainty as to general market price levels for equity securities in Japan, declines in which may require Hitachi to write down equity securities it holds.
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.

Copyright © 2008, Hitachi, Ltd., All rights reserved.

38

Copyright © 2008, Hitachi, Ltd., All rights reserved.

39