As we began our independent development in the Americas in April 2022, we reorganized into a business unit system that embodies the Kenkijin Spirit. Prior to this, our organizational structure was divided into functions under development, production, procurement, sales, and service. While this organization was effective in terms of efficiency, we felt unsure whether customer needs were being conveyed to development and production, and whether we explained our intentions to customers in a timely manner. Therefore, we changed to a system based on business units. Here, each unit head makes decisions regarding everything from development to sales and services, listening to and incorporating customer input. As customer needs diversify today, we must become a par-ticipating member of their businesses, or we will not be able to understand their vision. For this reason, our new organizational structure is more focused on the individual customer, from the aspect of each of their needs. At the same time, this structure also has a tendency to pursue short-term goals. Therefore, our directors must be sure to lead the company based on a medium- to long-term perspective. I believe this is the role of the board members. We intend to keep a close eye on whether the approach and direction of each department is well-balanced, whether funds are being used efficiently and whether the right personnel are being assigned to the right jobs.

[Organizational Structure Reform] Business Unit Structure Strengthens Individual Customer Orientation

Since fiscal 2016, we have pursued a policy of strengthening our value chain business. Our goal is to increase the share of revenue from the value chain business to 50% or more by the end of fiscal 2022. And expanding our business in North, Central, and South America will be a critical part of achieving this goal. For example, we offer a service solution, ConSite, to customers in Japan, Europe, Asia and other regions to monitor the operating status of machinery. If this solution becomes widespread in North, Central, and South America, we can obtain even further operating data. And we can create a virtuous cycle by applying this data to evolve ConSite further. This evolution will also lead to the growth of other services, including rentals, used equipment and parts remanufacturing. What I hope to achieve is to extend the life cycle of machinery to maintain them in good condition. For example, we will buy used machinery that has been offered on rental in Japan for five years, and then sell it as used equipment in the United States. After another five years, including the installation of refurbished parts, we will then sell the equipment as remanufactured machines to customers in emerging economies such as those in Central and South America. Leveraging our strengths as a manufacturer, we not only repair the equipment but also improve functionality. In this way, construction machinery that would otherwise be discarded after 10 years can be used for 15 years. And we will have the opportunity to continue providing services to our customers during that time. In addition to the parts remanufacturing we performed in the past, in fiscal 2021, we began a new initiative to take hydraulic excavators submerged in typhoon-related floods back from customers and refurbish the entire chassis of the machines. This is a very interesting idea, but such ideas can only arise if we keep our ears to the ground and in close proximity to the front lines of our business. These activities will lead to more value chains, allowing us to continue providing a wide range of solutions and services to our customers. Today, Hitachi Construction Machinery has approximately 300,000 units of construction machinery in operation in more than 100 countries around the world. Extending service lives will enable many of these machines to remain in active use. There are also benefits to be had when considering the environmental issues with respect to circular economies. Customers can enjoy the use of new, used, and rental equipment, while making more efficient use of construction machinery for a longer period of time. For us, this is also a point of differentiation from competing manufacturers. We believe the sales composition ratio of the value chain business in terms of circular economies is not simply an indicator of performance, but also proof that our customers and society recognize the efforts of the Hitachi Construction Machinery Group. At 40% in fiscal 2021, we feel we still have more work ahead of us. By developing our business firmly in North, Central, and South America, we will bring this ratio closer to 50%. The important point for us is to work together with our customers to solve not only their problems, but also issues in society.

[Value Chain Business] Aiming to Generate 50% or More of Revenue From the Value Chain Business

We must also consider diversity and inclusion in terms of organizational issues. At first glance, it may seem that our base of human resources is becoming more diverse. We employ people from more than 30 different countries, and the number of women in management roles is increasing. However, it is also true that we have many areas to review to determine if we are making the highest use of our diverse human resources. Specifically, we believe that individuals must become more capable and responsible. Ideas that die on the vine will never lead to organizational growth. Rather than pursuing short-term numbers and the percentages for ostensible diversity, we must foster human interaction to stimulate growth, or in other words, we must pursue essential communications. To this end, we implemented an annual meeting beginning this year with each regional manager to provide an avenue for communications. The Hitachi Construction Machinery Group employees nearly 30,000 people. I want to reaffirm my commitment here to communicating my thoughts to the very front lines of our businesses and to learn what is happening on the ground. In this way, I hope to establish openness in the truest sense of the word, making the most of our diverse base of human resources.

[To Our Stakeholders] Working Together With Customers to Create Sustainable Societies