Hitachi in crisis

Hitachi is in trouble this morning after being blacklisted by investment ratings agency Standard & Poor (S&P).

In spite of issuing detailed plans to overhaul its company structure in the wake of financial losses, S&P put Hitachi stock on CreditWatch in anticipation of a severe drop in share value.

Hitachi had been predicting profits of $1.23bn this fiscal year. On Wednesday the company revised its predictions, forecasting losses of $1.7bn for the year ending March 1999 - its worst performance in 50 years. The company hopes to profitable again by 2000.

Stock dropped by 7 per cent, even before S&P removed its healthy double A rating. The investment adviser now expects further "negative implications" on the share value.

Hitachi aims to cut staff costs by almost $0.5bn through a combination of redundancies and salary cuts. Investment in manufacturing plants has been frozen and a number of subsidiaries will either be consolidated or spun off as separate divisions.

Hitachi says it will concentrate its resources on digital technology for consumer products, with an 'ecology focus for the modern lifestyle'. The struggling information services division will be boosted with 1,000 new staff trained in software and services. Further consolidation is due at a later date, following the establishment of a Hitachi Group Committee in October.

Hitachi blames its crisis on falling DRAM prices, slow demand for consumer electronics, fluctuating exchange rates and the stagnating Japanese economy.