The past year and our current state of business
Last October 20, the investigation of improper quality control practices at our 22 Works and Factories was completed and the results were reported. I wish to take this occasion to express once again my deep gratitude for everyone’s efforts. Currently, an investigation of practices at our Group companies is being undertaken by the Corporate Quality Assurance Reengineering Group. Once we clear up any remaining problems, we will gear up for a new phase of initiatives to strengthen our core businesses this year. Last year, the business environment was once again difficult. Supply chains were disrupted by Russia’s invasion of Ukraine and Shanghai’s lockdown, and prices of materials and logistic costs surged in Japan due to the yen’s sudden depreciation. Amid this situation, however, our revised forecast for consolidated earnings in the current fiscal year includes revenue of ¥4.97 trillion, surpassing our initial forecast by ¥200 billion owing to robust demand for Factory Automation systems and the impact of foreign exchange rates. Operating profit of ¥270 billion remains unchanged from our initial forecast, reflecting persistently high costs of materials and logistics. Our outlook for 2023 is clouded by increasing geopolitical risks. To address increasingly high components procurement costs, every member of our Executive Officers is committed to exercising leadership and remaining in close contact with you regarding how to pass on these costs appropriately, as we did last year. I am confident that we can overcome this difficult situation by working closely with each other.
Achieving medium-term growth goals while strengthening reforms
Last October we formulated our plans for reform in three key areas: quality assurance, organizational culture and governance. Our goal is to regain society’s trust by ensuring that improper quality control practices never again take place in our company. We began rolling out remedial measures in earnest last year, and now we will deepen and enhance our initiatives as well as ensure their full implementation in every workplace. Guided by our 45-member “Team Sousei (Creation)” task force, which launched as the Company-wide Transformation Project in October 2021, our reform measures have been introduced in all business groups, departments and workplaces. I am grateful for the dedicated efforts of the team members, who are reaching beyond perceived barriers of position and division to drive progress with the single-minded purpose of turning Mitsubishi Electric into a better company. To make our transformation truly successful, however, we must change our outdated thinking and behavior. This is especially true of executives and managers. We have some 5,000 managers at or above the section-chief level, so if these leaders were to earnestly reinvent themselves, the effort would surely spread throughout the company and expand our virtuous circle of transformation even faster and wider. So, this year I am herewith calling on all leaders to commit to changing your thinking and behavior and then to put your resolutions into action. We are now in the third year—and the midway point—of our medium-term management plan that will end in March 2026. Having taken a hard look at our level of progress so far, we plan to implement a range of growth measures in line with our business portfolio strategy, including accelerating business restructuring which consists M&A, to achieve our medium-term growth goals. The basic plan is to raise profitability by first identifying businesses with issues and unprofitable business models at an early stage, and then strategically reallocating resources.
Closing
The uncovering of improper quality control practices has had extremely serious consequences, causing us to lose much of the trust we had established with customers and society over a century of business. But this also has created an invaluable opportunity for us to squarely face a number of critical issues in order to drastically change the way we manage our business. By taking this experience to heart as a profound lesson for carrying out reforms in three key areas, I am confident that we can make a fresh start, regain our lost trust and go on to achieve greater growth than ever before. This year we will begin forging a new future in earnest. Under the Business Area Owner/CxO framework that we created last April, we will flexibly allocate personnel across all departments and move quickly to create a truly optimized business structure. The goal is to become a “Circular Digital- Engineering Company” that provides advanced, integrated solutions by fusing and co-creating knowledge, both internal and external, with sustainability serving as the cornerstone. Realizing this vision will require all of us—from executives and managers to all others—to work together as well as take personal initiative to help expand the scope of our transformation and create a bright new future for our company. In closing, I am pleased to extend my most heartfelt New Year’s greetings once again and my very best wishes for a healthy and fruitful 2023 for each of you and your families.