Hitachi says still expects to win big UK train deal

Japan’s Hitachi Ltd said on Wednesday it still expects to win an order for a large train project in Britain, but it acknowledged that some modifications to the $11 billion deal were likely.

Hitachi shares have been under pressure in recent sessions after media reports that the train project may be canceled or delayed given a spending squeeze at Britain’s transport department.

A Hitachi consortium was chosen as a preferred bidder for the deal in 2009.

“This project is to replace 30-year-old trains, and we don’t expect the project itself to be scrapped,” Gaku Suzuki, head of Hitachi’s train business, said at a company investor relations event.

“There will probably be some modifications due to the change in the government, but we believe we can still do it.”

Hitachi, a sprawling conglomerate which makes everything from nuclear power plants to rice cookers, also said it wants to buy an IT company or business that generates about $3 billion in annual sales as part of its plans to double overseas sales in six years.

Possible targets include existing data centers, said Junzo Nakajima, head of Hitachi’s IT division, which is aiming to offer comprehensive IT services in the hope that this becomes a major business for the company.

Nakajima said Hitachi could spend hundreds of billions of yen on the acquisition, but he declined to be more specific.

“Our information and telecommunication business generates about 50-100 billion yen ($546 million-$1.1 billion) in cash flow every year, so you can imagine how much we would be able to spend on the acquisition over several years,” he said.

Hitachi also said it was not planning to change the ownership structure of its nuclear power joint ventures with General Electric.

Earlier this month a spokesman for Hitachi said it was reviewing the structure of its partnership with GE, as part of an overhaul of Hitachi’s global sales network.

Koji Tanaka, head of Hitachi’s power business, said the companies will work together more closely to expand overseas sales. Hitachi has been leading Japan sales, while GE has been in charge of other markets.

GE, the largest US conglomerate, said at the time it had held no talks with Hitachi about changing the ventures. They compete with the likes of Japan’s Toshiba and France’s Areva in nuclear power.

The companies teamed up in 2007 and set up joint ventures in Japan and the United States. Hitachi owns 80 percent of the Japanese venture, while GE has a 60 percent stake in the American company, which caters to the US and other overseas markets.

Hitachi shares fell 3.4 percent to 337 yen, underperforming a 1.4 percent fall in the benchmark Nikkei average.

Chinadaily

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