TOKYO — Hitachi plans to sell a 60% stake in its overseas home appliances business to major Turkish manufacturer Arcelik for $300 million and to jointly bolster the operations abroad.
The domestic market accounts for 80% of Hitachi’s home appliance sales, with China and Southeast Asia accounting for the bulk of its relatively small overseas operations. By teaming up with Arcelik, which is strong in such markets as Europe and Africa, the Japanese company aims to expand overseas sales of Hitachi brand products and improve profitability.
Business unit Hitachi Global Life Solutions handles appliance operations, of which the overseas segment is worth about $500 million.
Hitachi is rapidly overhauling its group businesses, seeking to concentrate on core operations while shedding others, such as its metals business which is now in sales negotiations. Although the appliance segment is considered to be a non-core operation, it is one of the few areas where Hitachi has direct contact with consumers, providing the company with valuable data on people’s lifestyles, especially as it develops its internet-of-things operations
But sales at its home appliances business, which mainly consists of white goods such as refrigerators and washing machines, were a mere 465 billion yen ($4.5 billion) in the fiscal year that ended in March while the operating profit margin was just under 5%. In order to survive in global competition, Hitachi is aiming for a company-wide margin of over 10% next fiscal year, and strengthening the appliance segment has become an urgent issue.
Low-cost Chinese appliance makers such as Haier have made the overseas market particularly tough. Going into the future, GLS will concentrate on the domestic Japanese market while the partnership with Arcelik will be used to improve overseas profitability.
In 2015, Hitachi sold a 60% stake in its overseas air conditioning business to Johnson Controls, a major US automobile parts company. GLS, which owns the remaining 40%, is expanding those overseas sales via a joint venture with Johnson Controls. It plans to use the same approach in its partnership with Arcelik.