Message from the President Feb.2009

The year 2009 has dawned, bringing with it a growing premonition of imminent upheaval and crisis. For Meitec, I predict that this year will mark the point when a truly crucial test is faced in many respects. As the media including newspapers and television bring updates on deteriorating business conditions on a daily basis, I must question the validity of the view that what’s happening now is only a “slump in business conditions.” Business conditions naturally move back and forth between peaks and troughs, and that’s why the process is called a business cycle. Though I grant we can view the current economic slump as a phenomenon where the economy is descending rapidly from peak to trough, I can’t help wondering if there’s more to it than that.

It’s been stated that the present economic downturn was triggered by the subprime loan problem in the United States and that the main culprit was the bursting of the so-called “debt bubble,” which destabilized global financial systems and caused a credit crunch, hindering the flow of money. According to this view, all these things are the cause of today’s recession. But if that’s the case, when the financial system problem finally resolves itself, will we see an economic turnaround worldwide, and will Japanese companies regain their vigor? I’m concerned that such a simplistic view won’t do. For example, is it really valid to say that consumer electronics manufacturers can’t generate profits because the price of flat-screen televisions fell too low? For that matter, I wonder if the more than 30% contraction of the global automobile market can be dismissed as merely the consequence of the economic downturn.

I find it hard to imagine that auto sales will soar when the economy turns around. In my view, the auto industry is witnessing the market shrink at a faster rate than predicted due to a major trend in motorization—a shift from gasoline-powered cars toward electric cars—coupled with the economic downturn. But drastic changes in the characteristic of motorization aren’t likely to happen all at once. Thus, the automakers that survive may be limited to those that succeed in shifting to fuel-efficient, low-emission and low-priced automobiles or to next-generation eco-friendly cars, while those that fail will get weeded out. As for consumer electronics manufacturers, focusing on competition concerning thinness of television sets or high specifications will enable them to secure only a matured segment of the market. In emerging countries, on the other hand, low price and durability—not thinness or high specifications—will provide a competitive edge. If manufacturers want to go after this “volume zone” of the market, they’ll inevitably be required to rebuild themselves, starting with product brands.

The problem of non-permanent employment faced by the human resources business industry with which Meitec is involved may be viewed as a case where inadequate legal safeguards were revealed in the area of protection for temporary workers because we failed to predict that business conditions would deteriorate so rapidly. It’s a fact that non-permanent workers have a greater degree of job insecurity and fewer opportunities to further their careers compared with permanent workers. Recognizing this reality, the entire nation should take this opportunity to address the issues of how to realize stable employment and how to create career advancement opportunities at the social level. This situation too is by no means a simple matter that can be resolved by creating a labor market composed solely of permanent workers. Discussion is needed on how society can achieve a balance between corporate survival and stable employment. I think that through such a discussion we must envision the “ideal direction of the Japanese labor market” from the perspectives of both companies and workers, rather than a viewpoint colored by antagonistic relations of permanent workers versus non-permanent workers.

To sum up, we can’t expect that the “society with a strong economy” that obtained in the past will be restored when the economy picks up. Such a simplistic expectation doesn’t apply in the current recession. As changes across the board continue to occur on a global scale, new directions will be sought that allow both companies and individuals to survive and grow. The other day I was talking with an engineer who said, “If my contract expires, I’d like to take advantage of that, taking a long, hard look at not just my way of life and working style but also my relationships with the company and family.” This comment made me realize that many people, to a greater or lesser degree, are beginning to feel that “We now stand at a major turning point of the times. So, with eyes fixed on the future, we need to reflect on our way of life.” It’s not easy to foresee the direction in which the times are headed. Accordingly, it’s better to follow the example of the engineer I just mentioned and take our time to review the situation without letting ourselves be swayed by either elation or despair.