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CHALLENGES AND OPPORTUNITIES TO ACHIEVE OUR GOALS
PERFORMANCE IN FISCAL 2009
In the fiscal year ended December 31, 2009, Bridgestone
Corporation recorded declines in sales and profitability. Net sales were down 20%, to ¥2,597.0 billion; operating income declined 42%, to ¥75.7 billion; and net income was down 90%, to ¥1.0 billion.
Since the fourth quarter of 2008, the global economic slump has been accompanied by sluggish demand. Despite signs of recovery in certain sectors, the future course of demand remains difficult to forecast. Although the Bridgestone Group implemented various initiatives such as evaluating and prioritizing investment, reducing fixed costs while maintaining and enhancing the quality and safety of the final product, and adjusting production to minimize inventories, the business environment significantly affected the performance of the Group in 2009.
However, over the medium to long term, my fundamental management approach calls for the continuing refinement and evolution of our vision for the company and the resolute implementation of measures necessary to achieve our goals. Operating under the assumption that the business environment is subject to continuous change, we will maintain an emphasis on moving rapidly as we strive to address those ongoing changes through an enhanced management system. In this way, we will implement management policies that will enable us to succeed even in a challenging operating environment.
BRIDGESTONE'S RESPONSE TO CHANGES IN THE OPERATING ENVIRONMENT
In the tire industry, the pace of change has been accelerating in recent years, and we as a company must be in a position to quickly respond to these changes.
For example, there are major changes underway in the demand structure in the more mature, industrially developed countries, such as those in Europe and North America, as well as in developing countries, such as China and India. In the mature markets of developed countries, there is little expectation for steady growth, and consumers are shifting their preferences to products and services that offer true value, such as environmentally friendly products and services. On the other hand, in developing countries, we anticipate continued economic development and substantial expansion in demand, but we must also take into account the growing prominence of manufacturers based in these countries.
The Bridgestone Group’s earnings structure is also being affected by these changes, including the impact of raw material costs and currency appreciation, making it more difficult to be profitable using our previous business models and practices. I believe that we must implement initiatives within our entire supply chain, from upstream raw material development to downstream retail networks, in order to enable us to increase operational efficiencies and compete on a cost basis with manufacturers from developing countries while producing products of high quality. This will, ultimately, help the entire Group contribute more effectively to the enhancement of our brand power.
The changes discussed above affect not only the Bridgestone Group but also our competitors. However, the Group will strive to take full advantage of these changes, viewing them as opportunities to further expand its points of differentiation from its competitors.
MANAGING FOR SUCCESS IN A CHALLENGING ENVIRONMENT
Our ultimate management objective is to be the “World’s undisputed No. 1 tire and rubber company in both name and reality.” The growth of our subsidiaries on a global basis and the enhanced vertical integration of our supply chain will allow us to effectively utilize our management resources. This, in turn, will allow us to achieve success even in a challenging environment in accordance with objectives and plans established for the entire Bridgestone Group.
The Mid-term Management Plan (MTP) and our strategic business unit (SBU) structure will be important tools as we work to optimize our operations. Our MTP outlines the Bridgestone Group’s future vision and the course that we have charted toward the achievement of that vision. Through a process of rolling updates with a five-year perspective, we are positioned to respond to changes in the operating environment. And the SBUs, which are charged with identifying and responding to specific market and customer needs, will implement optimized operations based on the distinctive characteristics of such individual markets. The Group, through both the MTP and the SBUs, will work to achieve sustained and profitable growth.
I would like to emphasize that, regardless of the business environment, the MTP and the SBU structure continue to remain fundamental to the Group’s global management policy.
IMPLEMENTING A “LEAN AND STRATEGIC” MANAGEMENT STANCE
The Bridgestone Group operates according to a “Lean and Strategic” management stance, pursuant to which, we continually reinforce our operational foundation while looking to the future. I would like to take this opportunity to share with you some of the initiatives we have implemented based on this management stance.
To establish our lead over the competition in key markets, we have taken a number of steps that will further differentiate us, including the introduction of enhanced environmentally friendly products such as our ECOPIA brand tires, whose new series, the ECOPIA EX10, was launched in Japan in February 2010. In the retread solutions business, which can also contribute to environmental conservation, the Group is rapidly expanding the market for retread tires for trucks and buses especially in Japan, China, and other Asian countries. Other strategic products of the Group, including environmentally friendly products, are discussed on pages 10-17 of Annual Report 2009-Operational Review-.
For the Group to achieve its ultimate management objectives, it is critical that we further reinforce our competitive position in a number of important categories. This must include further reinforcing our technical strengths, enhancing productivity while maintaining and enhancing the quality and safety of the final product, and expanding our production capacity.
With regard to the reinforcement of our technical strengths, we will accelerate the aggressive development and application of technologies that foster energy savings and reduced fuel consumption. In this way, we will transition to a business framework that will be difficult for competitors to copy and implement, whether from developing or developed countries.
We are also focused on quickly expanding our production capacity, as demonstrated by the fact that production at the Kitakyushu Plant, where we manufacture advanced
technology ultralarge off-the-road radial tires, began three months ahead of schedule in order to meet the steady growth in demand in this strategic market segment.
Going forward, we are positioning the Group to break away from the current competitive environment, which is marked by intense cost competition. In this way, we will transition to a business model in which the Group will succeed relative to the competition on the basis of its technical strengths.
In addition to enhancing our lineup of strategic products and taking steps to reinforce our fundamental competitiveness, the Group is effectively allocating its management resources in order to take full advantage of the opportunity presented by the “once in a century” changes in the global economy and our operating environment. For example, we have taken steps to optimize our manufacturing operations, including the closure of high-cost tire manufacturing facilities in Australia and New Zealand, and the realignment of the steel cord business in Europe and China. In addition, we have taken steps to reduce inventories throughout the entire supply chain, from raw materials to product inventories in our retail outlets. Consequently, we have not only streamlined inventories but also have made further improvements in our inventory management capabilities. Furthermore, we have very closely evaluated and prioritized our investments, and in some cases deferred or eliminated spending on specific, less critical projects, with the result that the Group has realized a leaner management system.
Speed will be an important factor in our implementation of these initiatives. By increasing our speed and agility in such areas as decision making and implementation, we will enhance our ability to anticipate change rather than simply react to it.
COMMITTED TO CSR ACTIVITIES
The objective of enhancing CSR (corporate social responsibility) within the Bridgestone Group is to realize its corporate philosophy–“The Bridgestone Way”–through activities that benefit society as a whole. The Group is committed to practicing CSR through its actions, not just through its statements. I believe that the effective management of corporations must include a strong focus on CSR, and it is only through CSR that a corporation can appropriately respond to the requirements and expectations of society while improving its businesses.
In order to provide a “common language” and to ensure consistency within the Group’s global CSR activities among its more than 130,000 employees who operate in more than 150 countries, the Group has established “22 CSR Focus Points.” Further details about our CSR activities can be found on pages 20-21 of
Annual Report 2009-Operational Review-, “The Bridgestone Group’s Approach to CSR Activities.”
SHAREHOLDER RETURNS
Bridgestone recognizes the interests of shareholders to be of paramount importance to management, and our guiding principle is to maintain stable, steady dividends as a direct return of Bridgestone profits to shareholders. In the past, we have maintained our dividend levels, despite fluctuations in our performance. For fiscal 2009, the Bridgestone Board of Directors declared a year-end dividend of ¥8 per share, which–together with the previously declared interim dividend of ¥8 per share–resulted in an annual dividend of ¥16 per share.
Although, the global economic and business outlook continues to be challenging, the Bridgestone Group remains steadfastly committed to its goal of being the “World’s undisputed No. 1 tire and rubber company in both name and reality.” As we move forward, we will continue to do our utmost to meet the expectations of our shareholders, investors, and other stakeholders.
April 2010
Shoshi Arakawa
Chairman of the Board, CEO and President
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