New Year's Greetings from the President
January 4, 2002
- New Year's Greetings from the President
I wish you all a Happy New Year !
Since the terrorist attacks in the U.S. in September last year, the world situation has remained unstable and uncertain. However, I think all of you have renewed your resolution looking toward the new year and welcome it. As this year is the Year of the Horse according to the Oriental zodiac, I am determined to confront all challenges with tremendous "horse power" to do my part in ensuring that our NYK Group keeps on growing and advancing while wishing peace and stability return to the world as soon as possible. I would now like to express some of my thoughts at the outset of 2002.
- Review of the Past Year
The year that has just passed was both a year of upheaval and of great change. The world economy turned downward from the first half of last year, especially in the U.S. and Europe which had until then enjoyed a boom. Then, against this background, the attacks suddenly happened in the U.S. on September 11. In the aftermath of the terrorist assaults, all parts of the world went into a simultaneous recession which, unfortunately, has started to show signs of becoming protracted.
Last year was the Year of the Serpent, which comes every twelve years according to the Oriental zodiac. Looking back over the past century, it so happened that the Years of the Serpent witnessed, without exception, major events that shook the world economically and politically, or turned out to be big turning points for subsequent history. Last year also proved to be a year that indeed changed the world.
1905Russian First Revolution (Bloody Sunday) 1917 Russian Revolution completed (February/November revolutions) 1929 Great Depression triggered by the New York Stock Exchange crash 1941 War in the Pacific commenced 1953 Stalin died, Soviet-style communism started to change 1965 Vietnam war began to escalate 1977 The Gang of Four deposed in China, Deng Xiaoping reinstated, China's open-door policy initiated 1989 Berlin Wall came down 2001 Terrorist attacks in the U.S. on September 11 Indiscriminate murder using hijacked aircraft constitutes a brutal and heinous act with few precedents in world history and deserves world condemnation.
Experiments based on Karl Marx's ideology and Joseph Schumpeter's have not fared well, and a means for overcoming poverty still remains elusive.
The collapse of the Berlin Wall in the previous Year of the Serpent (1989) was a symbolic incident that led to the end of the Cold War. At the same time, it was the starting point of globalization. The September 11 terrorist attacks, which happened 12 years later, are interpreted by many thinking people as a reaction against the negative part of globalism, which is seen as pervading the world while doing nothing to alleviate poverty.
Be that as it may, at the very outset of the 21st century we are faced with complicated and serious problems, including very grave issues involving civilization, religion, population and poverty.
Accordingly, it is necessary to acknowledge that this year the world has entered a new phase.
What our country pursues more passionately than anything else is everlasting peace in the world. As we are all aware, we have to accept and share pluralistic values, overcoming the differences in ethnicity and religious beliefs. We will continue to take our responsibility based upon this attitude as we confront new challenges.
- Present Economic Situation
Now for the world economic situation. As I just mentioned, the American and European economies, which had already entered a downward phase, were dealt a decisive blow by the September 11 terrorist attacks. As a consequence, the outlook for the world economy is extremely uncertain and serious.
The World Bank has recently announced a downward revision of its projection for world GDP growth for 2001 from 2.2 percent to 1.3 percent, the lowest growth rate since the 1.1 percent registered in 1982.
Meanwhile, Japan's GDP registered negative growth for two consecutive quarters, while its unemployment rate reached 5.5 percent in November. Thus, in spite of the Koizumi administration's various measures for structural reform, there is as yet no definite scenario for a recovery from recession. If things go on like this, there is a growing likelihood that the Japanese economy will register negative growth in two consecutive years for the first time since the end of World War II.
What seems apparent is that we are now experiencing what could be termed a simultaneous recession throughout the world. Our company's earning position is seriously affected by this situation and I believe this must be fully realized by all of us in carrying out our daily business. I will refer to our planned countermeasures later.
- This Year's Challenges for the NYK Group: "Bide Your Time for the Coming Spring"
Firstly, let me call your attention to the possibility that, depending on how things turn out in the aftermath of September 11, our company's vessels such as freighters or passenger ships may come under terrorist attack. I urge you all to exercise even greater care to ensure the safe operation of our ships as well as engaging in crisis management.
In consolidated terms, our company's ordinary midterm profit for the first half of the current fiscal year that started in April last year fell somewhat short of, but almost equivalent to the level in the same period of the 2000 financial year when we enjoyed steady business. This, I think, is ascribable to your efforts and I would like to take this occasion to again pay tribute to all of you.
Nonetheless, in stark contrast with the previous year we now find ourselves in a very severe situation. In my messages at the beginning of last year and on the occasion of the ceremony marking the anniversary of our company's founding, I warned of the "arrival of winter." To be honest, however, I never expected the winter to become as severe as it is at present. Furthermore, because of the uncertainty prevailing in the wake of the September 11 incidents, the situation is such that we cannot foresee exactly what lies ahead. Under these circumstances, when mapping out measures for the future, we need to anticipate the continuation of the severe winter for at least one year or perhaps even two.
Having said that, we should also bear in mind the saying that goes: "Once winter arrives, spring is not far away." Let us regard this winter as a "battery-charging" period for the forthcoming spring and devote our energies to strengthening ourselves and to biding our time in anticipation of the next stage. Specifically, let us do the following three things:
As you know, the NYK Group has markedly expanded its business scope in recent years. Here are the main indexes indicating the changes over the past two decades:
These figures indicate business trends we can be truly proud of. However, when we look at the daily operations conducted by the NYK Group both on shore and at sea in recent times, we cannot help but ask ourselves whether or not blood is circulating smoothly down to the peripheral nerves - that is, whether or not we are paying full attention to front line management which is the starting point of all business activities - at a time when our business scope is expanding rapidly and organizational decentralization is consequently making strong headway. This is an appropriate time to undertake overall front line inspections of all aspects of the NYK Group, such as ships, terminals, logistic hubs, finances, etc. including group companies, and in the process build a renewed, vigorous front-line structure for the group. Let us make this year an occasion to firmly establish a new solid footing in preparation for our next leap forward !
The 2002 fiscal year is the final year for achieving the numerical targets of the "NYK21 New Millennium Declaration." As all of you are aware, we have committed ourselves in the declaration to attaining, in consolidated terms, ¥1.2 trillion in sales, ¥60 billion in ordinary profit and a five percent return on invested capital. However, our container business has deteriorated rapidly in the second half of fiscal 2001 because of the weakening of the global economy and the shrinking of consumption in the U.S. and Europe following the terrorist attacks in the U.S. Indications are that for the full fiscal year, a huge deficit cannot be avoided since the profit earned in the first six months will not suffice to offset the expected loss in the second half of the year.
If things go on like this, it will not be possible to achieve the fiscal 2002 target of ¥60 billion in ordinary profit. Not only that, if the simultaneous recession worldwide should deepen further, there could arise a worse situation in which all our business divisions suffer a devastating slump at the same time. In order to head off such a situation and to fully direct our energies to attaining the numerical targets, we have no alternative but to recognize we are in a crucial period and must lower the break-even point as much as possible through further efforts to create a muscular structure by eliminating fat and thereby reinforcing our profitability.
Fortunately, we have already embarked on "Project C Phase-1" to provide for the winter. Now that a far more severe winter than originally expected has arrived, we have no other choice than to develop this project even more thoroughly and achieve results ahead of schedule. Therefore, I call on you to increase the obligatory minimum target of an operating profit of ¥15 billion in non-consolidated terms for fiscal 2002 by ¥5 billion to ¥20 billion, to map out plans to further develop and advance the project, and to take immediate action to attain the target.
Even though the NYK group companies excluding the parent company NYK presently boast annual sales of ¥400 billion, our projection for the current term is extremely limited since it remains to be seen whether or not we, as a whole, will be able to chalk up an ordinary profit. Accordingly, we intend to ask all group members to participate in "Project C Phase-1" and to draw up and implement plans for boosting the ordinary profit for fiscal 2002 as soon as possible.
We would also like all of you to dwell afresh on the concept of "CHANGE CHALLENGE CREATE" - the basis of Project C - and tackle the tough tasks ahead with renewed determination.
In implementing the above-mentioned plan to boost ordinary profit, it will become imperative to thoroughly develop business in the container division, where performance has worsened sharply. With regard to other sectors, we are placing great expectations on the further development of business in the tramp/specialized carrier division (including car carriers) and the further elevation of efficiency in the management of passenger ships and management of the entire NYK Group, and in the activities of the administrative division.
As I have already noted, it goes without saying that it is essential to devote full efforts to further strengthening profitability by regarding the next one or two years as a decisively crucial stage. However, we must never lose sight of the medium- and long-term points of view. As you are already aware, "Project C Phase-2" has been launched to cope with the challenges presented by medium- and long-term tasks.
At the beginning of last fall, general managers and members of their respective business units presented their "dreams" for the future. When all the members of our board of directors later lodged together for discussions and study, they embarked on converting these "dreams" into a "vision." Consequently we would like to define this year as the first year for coping with the challenges presented by our medium- and long-term tasks, and a "period of preparation" for the coming spring, concentrating on creating a firm "vision."
Concerning our logistics business, which is inseparably connected with the liner/container business, and with its fruit, - the integrated solution business, the creation of a vision was already completed in the stage of the NYK21 declaration, but now, I call on you to even more energetically work this year towards producing substantial results in these business sectors.
Needless to say, moreover, the most important specific tasks for this year are to map out strategies vis-a-vis the Chinese market and also to make concrete approaches to that market now that China has finally joined the World Trade Organization.
- Health Management
In the second half of last year, our counselor Mr. Ono passed away. We also experienced the death of several other colleagues, both current employees and relatively young former employees. Last year thus turned out to be a year of deep sorrow for our company and group. As I have repeatedly stated, able personnel are the most precious asset of our company and it indeed means grievous damage to our company when we lose employees who are still in the prime of life.
Our company will continue to pay close attention to the maintenance of employees' health. We would like all of you to pay full heed to your health in facing up to the challenges of the new, difficult year.
In closing, I would like to pray for the sustained health and happiness of all of you and your families.