By JURO OSAWA
TOKYO—Hitachi Ltd., facing increasing competition and scrambling to adapt to a new global reality, will continue to consider tie-ups or mergers in infrastructure-related businesses, the company's president said.
"What Hitachi can do on its own is limited, so we have to pursue various alliances," President Hiroaki Nakanishi said Thursday, stressing that such alliances are "essential" for the Japanese technology conglomerate to compete globally.
Last month, the Hitachi chief confirmed outside his house in the early morning a Nikkei report that said his company was in talks with Mitsubishi Heavy Industry Ltd. to possibly merge some major industrial businesses, such as electric power and railway machinery.
Although the report stirred speculation over the possibility of integrating the management of the two companies, Mr. Nakanishi said Thursday that he had never discussed such a scenario with Mitsubishi Heavy. He added that the heads of the two companies have had "frank talks" about how to proceed.
Hitachi will likely continue to explore alliances with Mitsubishi Heavy in specific operations, but such talks are possible with other companies too, Mr. Nakanishi said.
Japanese companies offering infrastructure-related products and services face intensifying global competition, as newcomers offering lower prices increase their presence in the market. In electric-power businesses, for example, new rivals are emerging from South Korea, China and Russia, in addition to traditional U.S. and European competitors, Mr. Nakanishi said.
"That's the reality of competition. It's a severe business environment," he said.
Hitachi, one of Japan's biggest companies with ¥9.316 trillion ($121.59 billion) in revenue in the fiscal year ended in March, has been restructuring its operations by distancing itself from volatile businesses such as electronic devices and focusing more on technology services and infrastructure projects.
Last week, Hitachi announced a deal to acquire U.S. data-storage company BlueArc Corp. for nearly $600 million to strengthen its information-technology business. In March, the company agreed to sell its hard-disk-drive business to Western Digital Corp. of the U.S. for $4.3 billion.
One of the areas Hitachi is trying to strengthen is power transmission and distribution. The company is considering mergers and acquisitions in that field, Mr. Nakanishi said.
In May, rival Toshiba Corp. announced a $2.3 billion deal to acquire Landis + Gyr, a Swiss maker of advanced meters used in highly efficient power-distribution systems.
Among power-related businesses, the nuclear-energy sector faces challenges after the disaster at Japan's Fukushima Daiichi power plant. As a supplier of one of the reactors there, Hitachi is involved in Japan's efforts to bring the plant to a more stable condition.
Despite the Fukushima crisis, Hitachi's overseas clients in the nuclear-power business haven't made any drastic changes to their plans so far, Mr. Nakanishi said. For many countries, nuclear power remains important as a way of securing a stable source of energy, he added.
"Quitting nuclear-power operations is not an option, for at least another 100 years," he said, referring to the life cycle of a nuclear plant from the initial planning and construction to decades of operation and eventual decommission.
For Hitachi and other Japanese companies seeking to enhance their global presence, the yen's relentless strength makes them less competitive against overseas rivals, even though a strong yen helps when Japanese companies make overseas acquisitions.
Mr. Nakanishi said Hitachi has already been taking steps to mitigate the currency impact by increasing overseas procurement of raw materials and through other measures. As the company is already making efforts, "it would be difficult for us to speed up our efforts" to cope with the strong yen, he said.
Write to Juro Osawa at firstname.lastname@example.org