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Toshiba Announces Radical Regeneration Plan

27 August, 2001

01 Action Plan positions company to respond positively to current downturn

Tokyo--Toshiba Corporation today announced "01 Action Plan," a series of measures that will strengthen business operations in the current downturn, particularly in the IT sector. "01 Action Plan" has three key pillars: "intensified competitiveness," "streamlined management" and "corporate initiative," and will support Toshiba in attaining the mid-term business plan announced earlier this year.

The underlying objective is to achieve a robust organization that can quickly recognize business reality and respond flexibly to a changing business environment, and assure achievement of the mid-term business plan.

Moves making up each of the three pillars of "01 Action Plan" are described below.

  1. Intensified Competitiveness

    1. Redefine businesses

      Toshiba group will redefine itself as a complex corporation with businesses in three essential domains: industry and society, the individual, and components. The company will reinforce its presence in each domain.

    2. Reform business structures with winning business models

      Toshiba will reorganize individual businesses in each domain according to three business models. Businesses adopting the innovator model will take the initiative in developing and promoting new businesses and innovative products. Businesses adopting the integrator model will bring Toshiba core strengths to alliances with third parties. Businesses adopting the platform model will enhance specific capabilities and secure a competitive position.

    3. Restructure business with Toshiba Value Created (TVC)

      a)TVC, the Toshiba version of EVA, provides objective standards for selecting businesses to receive resources and for initiating early action for dealing with unprofitable businesses
      b)Businesses that record negative TVC for two consecutive fiscal halves will be regarded as requiring attention. Businesses recording negative TVC for four consecutive fiscal halves, with no improvement, will be candidates for divestiture or termination.

  2. Streamlined Management

    1. Reorganize manufacturing plants

      a)* Reorganize domestic manufacturing plants in light of domestic demand.
      * Rationalize 21 domestic manufacturing plants by 30% by FY2003.
      * Reduce 98 domestic manufacturing and engineering companies by 25% by FY2003.
      b)Expand outsourcing
      c)Expand overseas manufacturing plants and so enhance competitiveness.
      d)Concentrate engineers dedicated to development of digital products at Ome Operations, in order to reinforce Ome as a development and production center

    2. Reduce human resources

      Reduce the consolidated workforce of 188,000 employees by 10% by FY2003.

      a)Reduce domestic workforce of 144,000 employees by 12% to 127,000 by FY2003
      b)Promote job shifts by 10,000 group employees within the group in Japan by the end of FY2003.
      c)Promote a limited term program to assist people who voluntarily retire in the second half of this fiscal year.

    3. Promote asset light management

      a)In addition to the 350 billion yen reduction in assets announced in the mid-term business plan, Toshiba will reduce assets by another 450 billion, to achieve a total reduction of 800 billion yen.
      b)100 billion yen of the additional 450 billion yen in cuts will be made in FY2001.

  3. Corporate Initiative

    1. Realize a small, strong headquarters

      a)A restructuring of the headquarters function in October 2001 will reduce the headcount by 10% and achieve a corporate stuff of 290 people by the end of FY2001.
      b)Two new headquarters organizations will be established this year to promote group unity: the procurement promotion division in October and the Internet-ready promotion division in September.

    2. Accelerate innovation in procurement

      a)The cost of consolidated procurement will be cut by 20% in fiscal year 2001 and 2002, and amount to 560 billion yen.
      * Establish procurement promotion division
      * Promote cost reduction with group-wide joint procurement
      * Halve the number of suppliers, from 6,750 companies at present.
      * Expand electronic procurement

    3. Promote Internet-readiness

      a)Establish Internet-ready promotion division in September 2001
      b)Establish shared IT systems
      c)Bring IT systems proved successful in one business group into use throughout the corporation.

    4. Reinvigorate the Toshiba brand

      a)Measures will be taken to reinvigorate the Toshiba brand and reinforce brand management.
      b)License the brand from April 2002 on.

    5. Enhance management through MI2001

      a)Raise income from MI2001 activities by 52 billion yen to 237 billion yen, against an initial target of 185 billion yen.
      b)Build a new corporate culture through continuation of MI2001 activities.

Supplement: "01 Action Plan"

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