January 5, 2009
JFE Steel Corporation
New Year’s Message for 2009
New Year’s message from the CEO of JFE Steel Corporation
to JFE Steel and Group Company employees at the start of 2009
Laying the groundwork for future growth
in spite of a challenging business environment
Happy New Year! It is my pleasure to greet you at the start of this New Year.
2008 marked the final year of our Second Medium-Term Business Plan. I am pleased to report that the entire Group worked together as one as we strove to achieve our goals.
We significantly enhanced our manufacturing capability for high-end steel by expanding and upgrading facilities producing value-added products and by transferring our “champion technology” to improve capacity utilization rates and product quality. Furthermore, we were able to steadily reduce CO2 emissions by introducing energy saving equipment at facilities across the group and by commissioning a shaft furnace at Keihin (East Japan Works).
Turning to progress made overseas, we started full production of steel sheet for automobiles at Guangzhou JFE Steel Sheet Company in China; expanded ferroalloy operations in Erdos, Inner Mongolia; and took action to secure access to iron ore resources in Brazil.
Third Medium-Term Business Plan Begins: Three Main Priorities
Until relatively recently, growth in the four BRIC nations and other emerging economies had been driving a steady expansion of the global economy. However, last fall, the financial crisis in the US triggered an abrupt change in conditions and tipped the global economy into a recession. As a result, key steel users, beginning with our customers in the auto industry, starting decreasing their production on a broad scale. Without doubt, the present environment poses unprecedented challenges for our company.
Since November last year, steel demand has fallen so dramatically that current circumstances make decreasing planned production by more than thirty percent unavoidable. Consequently, in mid January, we intend to temporarily shut down the No. 3 blast furnace at Kurashiki (West Japan Works).
It remains unclear when the global economy will return to a growth track. However, despite this uncertainty, we remain convinced that the global market for high-end steel, particularly in the BRIC countries, will expand over the medium to long term.
In 2009, under these difficult circumstances, our company will not only continue to strive to increase profits but also embark on our Third Medium-Term Business Plan, requiring the entire group to pull together as we grapple with the challenging situation that faces us. 2009 will mark the start of activities designed to lay the groundwork for our future growth.
Moving on, I would like to review some issues of particular importance to our company this year.
The first issue is the need to execute a comprehensive strategy to increase profits.
In this weak market, we must expand sales of products that demonstrate our technological superiority into new fields and areas. To do this, we must raise levels of customer satisfaction by keeping abreast of news and developments related to our user base and bringing together our production, sales, and technological strengths, with a sense of urgency, to further improve product quality, delivery, and development.
In addition, at our production sites, exhaustive cost reduction efforts must continue. Over the past few years we have worked to expand production even when it has meant higher costs. However, with demand declining, we must further refine our flexible manufacturing systems and our minimum-cost operations.
I also urge corporate headquarters staff to work hard to lower costs in their own departments while also providing ideas for initiatives at production sites from a companywide perspective that crosses all mill and regional boundaries. We will also continue the companywide business restructuring initiative that we began working on last year. Enhancing the efficiency of meetings and reporting using teleconferences, for example, should be promoted, and the extra time created by these efforts should be used constructively to come up with entirely new approaches to workplace communication and more efficient use of human resources.
The second issue is laying the groundwork for future growth.
We have already made the decision to increase JFE Steel’s annual crude steel output to 33 million tons. I would like you to proceed with development of a framework that will allow us to respond in a timely manner when the global economy rebounds. Furthermore, as we expect the global market for high-end steel will continue to grow over the medium to longer term, global expansion, including the construction of integrated steelworks overseas, will be necessary. Therefore, as we continue to examine the feasibility of projects under consideration, we will also foster the development of people who can contribute to this globalization effort.
Over the next five to ten years we must continue striving to be in a position where we can take the lead as the most technologically advanced supplier of high value-added products in the world. To make this goal a reality, it will be crucial for us to develop products that meet evolving customers’ requirements, to develop CO2 reduction technologies from a medium to longer term viewpoint, and to foster new talent and pass on skills that support company objectives. These steps are ones we must take irrespective of the prevailing economic environment. Consequently, I would like each department to clearly specify concrete targets and an implementation schedule for the next three years, and then work hard to put these plans into action.
The third issue is increasing the profit-generating abilities of group companies.
Our group companies in Japan have been steadily shoring up manufacturing capacity and earnings to establish themselves as a "group of robust companies" that positively contributes to the consolidated earnings of JFE Steel. Nevertheless, as the population ages and shrinks, the environment for businesses dependent largely on domestic demand will become increasingly untenable. Therefore, the level of our competitive strength must be raised yet another notch especially over the next few years, when the business climate is expected to present us with even more challenges. All of our companies must implement comprehensive strategies to increase earnings. Along with lowering the breakeven point through precise cost-cutting measures, I would like the companies to focus on building a strong foundation for our future, for example by leveraging existing technologies to seek out growth areas.
Business re-engineering through self-awareness
So far, I have talked about our priorities for this year. To accomplish what we have set out to do, each of us must continue to reengineer the business with a keen awareness of our individual roles. Even though it is difficult to raise productivity with limited numbers, I trust that you will start from the basics and find the inspiration necessary to take on this current challenge. I hope that our managers, in particular, will demonstrate leadership on this front.
Promptly addressing business issues through management-labor cooperation
I would also like to say a word to our union employees.
In this difficult business environment, quickly addressing business issues requires that we tighten internal communication further and share our conception of problems and issues so we can join forces and grapple with them as one. I recognize that the understanding and support of our labor unions is an important element of this effort, and I ask for your cooperation again this year.
"Safety" and "Compliance" are critical elements that support company activities
Finally, "safety" and "compliance" are the most critical of the various elements that support the company’s activities. Our safety record continued to improve steadily in 2008, for a second straight year. Nevertheless, we cannot afford to be complacent because the current safety levels still leave room for further improvement. With every company and every department working hard to make progress, I hope that 2009 will be the year in which we actually accomplish a safe, accident free working environment.
With respect to compliance, all employees, including group company employees, must renew their whole-hearted commitment to compliance based on a solid understanding of our social responsibilities. If the JFE Steel Group is to continue to enjoy the faith and trust of society then we must each be personally aware of our responsibility to obey the rules and adhere to agreed codes of conduct.
In closing, at the beginning of this New Year, I would like to say that I hope 2009 will be a fruitful, healthy and happy year for you and your families.