Four days before the March 11 earthquake hit Japan, major medical equipment manufacturer Terumo Corp. (4543) announced it was acquiring a U.S. company as part of its globalization strategy. Despite the destruction wrought by the disaster, Chairman Takashi Wachi is unwavering in his determination to go through with the plan and expand Terumo's global reach.
Wachi, who says companies need to change their way of thinking to survive this unprecedented crisis, told The Nikkei about how Terumo is dealing with the quake fallout, as well as discussed the firm's expansion plans.Following are excerpts of the interview.
Q: Your company revised its earnings forecast very soon after the earthquake.
A: On March 22, we downgraded our earnings forecast for the year through March this year. We thought we should promptly let shareholders and the government know the degree to which the rolling blackouts and procurement difficulties will impact a company's balance sheet.
We also have to rewrite from scratch the medium-term business plan we were drawing up. The Japanese economy will undergo a phenomenal structural change. We are even prepared to reinvent Terumo to ride out the harsh times.
Q: What specific measures are you planning?
A: Although it costs less to purchase materials from a single supplier, it is better to have a number of suppliers to ensure stable procurement. We will also review how we have centralized production bases in only a few locations. We need to re-examine the balance between spreading risk and cutting costs.
Q: Will your company step up moves to move production overseas?
A: From the perspective of spreading risk, we will proceed with such moves for some products. But Japan is our home base, and with that in mind, Japan is where we will keep our main plants for products requiring strong technological prowess. Otherwise we would not be able to keep up with advances in technology.
Q: You've just announced your acquisition of CaridianBCT Holding Corp. of the U.S. for 210 billion yen.
A: It represents a first step toward becoming a global company. The earthquake has not changed our basic strategy of pushing globalization. Caridian does not have plants in Japan, so it has not been hurt by the disaster. The company is already helping Terumo procure materials.
But we won't stick exactly to our pre-quake globalization strategy. Using lessons we've learned through the quake, the company will trim any fat we find in the original plan. This is a good chance to think over what is truly necessary.
Q: What is the condition of your company's plants?
A: The earthquake that hit Shizuoka Prefecture on March 15 damaged two plants there that mainly produce bags used in blood transfusions. But we have already restored the facilities and put them back into operation.
But because of shortages of electricity and materials, output remains only about half to a third of the pre-quake levels. We have mobilized our in-house power generation and co-generation systems. Still, full-capacity production is impossible. As demand for medical equipment is rising, a tight supply-demand situation will continue for a while.
Q: How are the rolling blackouts impacting your operations?
A: Tokyo Electric Power Co. (9501) doesn't know enough about the state of production plants. Tepco sometimes cancels blackout at the last minute, rendering some of our pre-arranged countermeasures unnecessary.
Q: What role should business executives play in difficult times such as these?
A: Japan's history is one of reconstruction. Top corporate executives are responsible for protecting stakeholders in times of crisis, so they have to be tough. The current crisis pales before the chaos seen after World War II; I'm the only person in the company who experienced that. Still, Japan recovered because the people had hope and resolve.
Terumo will not cut its workforce. I'd like to ask our employees to do their utmost so that we never have to take such a step.
Tokyo-based Terumo Corporation is one of the world's leading medical device manufacturers with $3.0 billion in sales and operations in more than 160 nations. Founded in 1921, the company develops, manufacturers and distributes world-class medical devices including products for use in cardiothoracic surgery, interventional procedures, transfusion medicine and diabetes management; the company also manufactures a broad array of blood collection systems and needles and syringes for intravenous therapy. For information, please visit www.terumo.com