November 29, 2007,08:44 +0900(JST) The 40th Tokyo Motor Show

Sumitomo Electric Group boothSome time ago, I went to the Tokyo Motor Show. As many of you must know, the automotive business accounts for nearly half, or 1,100 billion yen, of the Sumitomo Electric Group’s total sales of 2,400 billion yen. The automotive component business has many giant manufacturers, such as Denso and Aisin Seiki in Japan and Bosch abroad, so we are on the side of the small-fry. Still, our business in this area is considerable and has been growing each year.

At each Tokyo Motor Show, we open an independent exhibition booth in the component section as the Sumitomo Electric Group.

At Sumitomo Electric Group boothIt was on Monday, October 29 that I went to the Tokyo Motor Show. As the show had opened just a few days earlier, there were many visitors. Though the number of visitors ultimately totaled 1.42 million, slightly less than the previous event, the figure was impressively high; I could feel the passion of the people involved and the strong drive of the automotive trade.

At the show, I talked with several people. In combination with other factors, this made me reflect deeply on the future of the automotive industry. I’d like to write about it some time in this blog.

In closing, a little episode from Tokyo Motor Show: the Sumitomo Electric Group booth’s receptionist became very popular with visitors for her beauty and pleasant personality; I was told that there were even visitors who came to our booth to see her, and not our products. Our “serious” exhibition booth could have had difficulty attracting visitors otherwise, but she contributed greatly to increasing the number of our visitors. So I’d like to thank her here on behalf of the Sumitomo Electric Group.

November 26, 2007,10:45 +0900(JST) TOB announced on November 5

On November 5, Sumitomo Electric announced our offer to take over Nissin Electric Co., Ltd. and Toyokuni Electric Cable Co., Ltd. This is currently the period of acceptance, and we’re asking the shareholders of the two companies to accept our offer. I’d like to give some information on the TOB that was given in the financial results presentation held on that day.

First, about the TOB for Nissin Electric, we have set the upper limit of acquisition at 20 million shares, so as to obtain the majority and transform this company into a consolidated subsidiary from an affiliate accounted for by the equity method.

Nissin Electric, known as “Nissin of capacitors,” has a firmly established status in the area of electric power apparatuses. Sumitomo Electric has been enjoying its cooperation for many years, and we have come to the conclusion that Nissin Electric’s becoming a consolidated Sumitomo Electric subsidiary, thereby further strengthening the two companies’ ties and enabling efficient mutual exploration of technical resources and sales channels, would be beneficial to both parties and highly effective in view of Sumitomo Electric’s management strategies, as defined in our new mid-term business plan “VISION 2012.”

In May 2007, Sumitomo Electric announced “VISION 2012.” To carry this through, we must reinforce our existing five business segments and develop new segments for future growth through concerted Group-wide effort.

In the existing segment of “Electric Wire & Cable, Energy,” we must accelerate our investment in such growth markets as the Middle and Near East, Asia and the United States by developing unique technologies and products suited to electricity network development in those markets. To do so, we must further reinforce our global sales and marketing network.

As for the development of new segments, to achieve our target sales ratio of new products, set at 30% for FY 2012, and to work on our new R&D theme of environment and resource conservation, we must greatly expand our business sphere beyond the boundaries of our existing activities.

In view of the above, we have decided to make an offer to acquire a majority share of Nissin, to make it Sumitomo Electric’s consolidated subsidiary.

Secondly, the purpose of the TOB for Toyokuni Electric Cable is to transform that consolidated company into a fully owned subsidiary. We therefore did not fix an upper limit to our acquisition. Instead, we intend to use a scheme involving the type of share that can be acquired in its entirety through a special resolution adopted at the shareholders’ general assembly.

Toyokuni Electric Cable, already a member of the Sumitomo Electric Group, mainly supplies optical communication cables and unit cables that contribute to work reduction in housing and building construction. The company is expected to face an increasingly challenging business environment, given the steadily lowering product prices, higher levels of technological requirements, shorter product life and higher raw material prices. At the same time, the information-communication market, characterized by a short innovation cycle, is advancing at an accelerated rate due to various changes in the market, including the commencement of FTTx service in the US and China, and next-generation network (NGN) construction in Japan.

We have decided that the best way to move forward under such circumstances is to further capitalize on the Sumitomo Electric Group’s managerial resources in this segment, and solidify the two companies’ collaboration, mainly in development, manufacturing and sales.

As a fully owned Sumitomo Electric subsidiary, Toyokuni will be placed under Sumitomo Electric’s unified governance and management, to build up its mobility and competitiveness. This is why we have announced the TOB.

November 21, 2007,16:08 +0900(JST) After Osaka City’s mayoral election

Osaka City’s mayoral election was held on Sunday, November 18. Mr. Kunio Hiramatsu was elected, defeating the incumbent mayor. This is the first time in a long while that someone from the private sector, who is not the incumbent deputy mayor, has been elected to head the Osaka City administration. On this occasion, I would like to extend to Mr. Hiramatsu my heartfelt congratulations on his victory, and express my sincere hope that he will steadfastly do his best to continue the city’s political reform, a task that is expected to be extremely difficult.

I’m not an Osaka City resident, but I couldn’t remain neutral in the election because Sumitomo Electric is headquartered in Osaka City and our major factories are located there. Osaka is, so to speak, the cradle of Sumitomo.

In the election the Kansai business community, headed by the Kansai Economic Federation, supported the candidacy of former mayor Mr. Junichi Seki, as it has positively evaluated his role in the municipal political reform. During Mr. Seki’s term, however, some scandals erupted on Osaka City’s political scene, in which Mr. Seki wasn’t involved, but which in fact suggest how seriously and deeply he tackled some vital issues. I believe that Mr. Seki should be duly commended for having dared to clear up the “debts” accumulated by past political leaders. The election results indicate, however, that the public’s desire was directed toward further information disclosure and clarification.

The turnout was 44%, which wasn’t high in that more than half the electorate didn’t vote. At the same time, it was an unusually high turnout for recent elections in Japan, indicating the high expectations that uncommitted voters have of Mr. Hiramatsu.

People expect the young and energetic Mr. Hiramatsu to come up with effective solutions to break through Osaka City Council’s present blockade. Yet, he doesn’t have much time to prepare. I hope that he and his team of reliable advisers will start immediately working out a clear vision for Osaka’s future, and draw up and carry out concrete plans one by one, defining destinations, approaches and a timetable to follow. Needless to say, he’ll also need cooperation from City Council members and municipal employees, so he’ll also have to work on communication to ensure that his vision is widely shared.

I believe that there is a tacit understanding among the general public that Mr. Hiramatsu, who used to be a well-known newscaster, is capable of doing all this in an effective manner, while promoting information disclosure in a way that is acceptable to the public. In this regard, I’m sure that the bar is set very high for his expected performance.

I’m not saying that mayorship is impossible for someone with no experience in local government. Rather, I’m looking forward to seeing this person breathe new life into City Hall. As a businessman based in Osaka, I truly look forward to seeing the Hiramatsu Administration one day winning such public praises as: “Osaka really has changed, and for the better.”

November 20, 2007,09:05 +0900(JST) For a brighter tomorrow

The following is an article I contributed to a magazine some time ago. I’d like to share it with you here, for it may be of some use to you:

With the Plaza Accord signed by the G5 nations in 1985, Japanese companies took the first step in truly self-reliant management. At the time, they shocked the world’s industry with Japanese-style management techniques and enjoyed the ultimate praise “Japan as No. 1,” while the United States sank into stagnation. Some Japanese business leaders proudly proclaimed that there was nothing left that Japan could learn from the West. Some Japanese companies won international recognition. It seemed as if the Japanese management system was to become the world standard.

In the 1990s, with the bursting of Japan’s economic bubble, Japan handed world leadership over to the Anglo-American economy in terms of both quality and quantity, deeply entering a dark tunnel of economic crisis, where it would stay for over ten years. Today, aided by the vigorous advances of Southeast and Eastern Asian countries, Japan finally seems to find a ray of light ahead.

During this period, Japanese-style management has been thoroughly criticized, and many Japanese companies have switched to Anglo-American-style management, as epitomized in the international accounting standards. Nevertheless, looking back on the developments since 1985, one should ask where is the source of the Japanese people’s driving force, which transformed a war-devastated country into an economic giant with 500 trillion-yen GDP. To be sure, the transformation of an ideologically oriented world into a market economy-dominated world, a change triggered by US-Soviet détente, has provided the infrastructure of prosperity. Yet, as we face the changes of these times, I believe that we must now become clearly aware of, and learn to mobilize anew, some shared characteristics that exist in the depth of the Japanese mind.

Dr. Herman Kahn, an American futurologist who declared that the 21st century would be the century of Japan, visited Japan in 1968 at the invitation of Kyoto Sangyo University. In the lecture he gave at that time, he accurately and objectively pointed to the quintessence of the Japanese spirit. This lecture is all the more interesting today in that it enables us to compare the Japanese of those days, who were determined to restore the country, with the Japanese who have since changed, having undergone a period of gluttony. The Japanese as observed by Dr. Kahn in those days can be summarized as follows: enterprising, adventurous, innovative, highly educated and ambitious, inclined toward constant improvement, and having the notion of rendering glory to the nation through business success. These words clearly describe the Japanese spirit of the days when we all worked hard, doing our very best and believing in the country’s restoration, which we accomplished almost miraculously.

I have cited Dr. Kahn’s words above so that we may not lose sight of what we are, the identity that we should cherish and maintain as we enter the age of mega-competition against other cultures. I would be happy if this article could be useful in any way.

November 13, 2007,08:54 +0900(JST) Excellent presentation

The other day, top executives of an American company (which I won’t name here, but I’m sure you know it) visited us at Sumitomo Electric. The company’s CEO himself gave a presentation about his company before members of Sumitomo Electric’s related divisions and me. It was simply excellent!

A PowerPoint-aided, visually appealing presentation is nothing new nowadays. What was excellent about the American’s presentation was its style, ease of visual comprehension, perfect tempo – not too fast, not too slow – and his diction, which was so pleasant to the ears that I listened to him as if in a trance, forgetting the passage of time.

It seemed that the presentation was a slightly revised version of one that had been prepared for an IR meeting. It had obviously been prepared professionally, using sophisticated techniques. The in-house team specialized in IR must have done the work with help from an external service provider. I’m always deeply impressed with the great care that Americans take in preparing presentations and speeches, as exemplified by meticulously formulated public utterances by the US President or presidential candidates. Their level of perfection is beyond comparison with what’s practiced in general in Japan. I wasn’t surprised to learn that there are many excellent students who major in the art of speech writing and communication, and find employment at popular companies in this area in the United States.

Having observed such a masterpiece of corporate communication, I began to think that advanced presentation ability is a requirement for future top management and must be included in the curriculum of SEI University, so that all Sumitomo Electric Group personnel can improve their presentation skills.

After the American’s presentation, I asked him the following question: “One important theme for us is the revitalization of our research division; we’ve carried out various measures, but they’re slow to produce any tangible results. What’s your situation like in this area?” My American counterpart replied that they had the same situation and that he’d appreciate it if I could suggest any good solution. He said that in reality, business doesn’t go as smoothly as in a presentation. We then looked at each other and smiled.

SUMITOMO ELECTRIC President CEO Masayoshi Matsumoto

Born in 1944 in Hyogo Prefecture, Masayoshi Matsumoto joined Sumitomo Electric in 1967. After serving as General Manager of Chubu District Office, Managing Director and Senior Managing Director, he assumed office of President and CEO in June 2004.

His leisure activities include jogging, reading and art appreciation. Also a seasoned athlete, he played baseball in junior high school and practiced judo in senior high school. In university, he threw the javelin competitively and participated in all-Japan inter-university competitions.

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