Action Plan for Responding to Changes in the Business Environment

Tokyo, Japan - February 10, 2009

Yokogawa Electric Corporation announces the formulation of an action plan that positions FY2009 and FY2010 as a period for structural reform. This plan is Yokogawa's response to sudden changes in the business environment caused by the current global economic slowdown. We believe that this action plan will enable us to act swiftly when the business environment improves.

The Yokogawa Group had been developing its business to attain the Second Milestone targets of the VISION-21 and ACTION-21 corporate strategy to achieve consolidated sales of 600 billion yen and consolidated operating income of 75 billion yen in FY2010. In line with the new action plan, we have decided to discontinue the pursuit of these targets.

The business environment continues to worsen and the situation is changing every day. With the heightening sense of uncertainty over the future, our immediate focus will be on ensuring that the FY2009 and FY2010 targets are achieved, not on the setting of mid- and long-term targets. To make sure we are able to promptly seize opportunities and quickly and successfully scale up operations when the market picks up, we will devote ourselves for the next two years to structural reforms that will lay a strong foundation for our business.

Details of Action Plan

This action plan has the following two main points:
- Drastically reducing fixed costs to lower the break-even point and increase profitability
- Making more efficient utilization of resources by selecting and concentrating on specific businesses

  1. Reduction of fixed costs and lowering of break-even point
    The specific targets are as follows:
    - Achieving a 34 billion yen reduction in fixed costs in FY2009
    - Lowering the break-even point to 350 billion yen or less

    (1) Measures for reducing fixed costs
    The measures to achieve a 34 billion yen reduction in fixed costs will be handled mainly by the Business Process Innovation Headquarters, which was established in January. These measures are as follows:
    - Reducing the remuneration of directors, officers, and managers
    (directors and officers -20 to -40%, managers -10%)
    - Freezing mid-career recruitment
    - Halving the number of new graduates recruited by Japanese Group companies in FY2010
    (to approximately 100)
    - Reducing the number of departments by 30% through the integration of divisions
    - Assigning to regular employees the work that has been performed by non-regular employees

    (2) Reducing capital investment
    In FY2009, we aim to reduce capital investment to one half the forecasted FY2008 level of 32 billion yen.

    (3) Reducing costs
    We will reduce costs by switching whenever possible from subcontracted to in-house manufacturing of parts, and by reducing other manufacturing and engineering costs.
  2. Selecting and concentrating on specific businesses
    (1) Industrial automation and control business
    1. Further reinforcement of our strengths
      We will concentrate our resources on the industrial automation and control business because energy and materials related demand and investment are expected to recover in the mid- to long-term. We will focus on businesses that we are already strong in, such as oil, petrochemicals, chemicals, electric power, and gas.
    2. Move into new energy resource, environment, and social infrastructure businesses
      Yokogawa's control technologies for the process industry are second to none when it comes to conserving energy and reducing CO2 emissions. Based on the "Energy on Demand" environmental conservation concept, we will apply these energy-saving technologies not only to individual plants but also entire industrial complexes, and provide systems and services that ensure a high return on the customer's investment. Moreover, we are developing new energy conservation solutions for developing countries and offering control systems for CO2 capture and storage plants.

      Yokogawa is strong in the high-level measurement technologies that can be utilized in the industrial automation and control business. We are able to develop next-generation control technologies that make it possible to measure and control what previously could not be measured.
    3. Enhancement of after-sales service and maintenance business
      Yokogawa products are in use at a great number of plants all over the world. We will strengthen our after-sales service and maintenance business for these customers.
    (2) Test and measurement business
    1. Integration of business headquarters (with the exception of the ATE Business Headquarters)
      The Communications and Measurement Business Headquarters, Advanced Stage Business Headquarters, Life Science Business Headquarters, and Photonics Business Headquarters will be integrated to develop measurement businesses that apply our high-value-added, next-generation technologies.

      By bringing together our measurement technologies, we will offer a variety of solutions for promising markets in such fields as energy, environmental protection, medical support, drug discovery support, telecommunications, and social infrastructure.

      - Energy:
      Solutions that support all processes from development to inspection for fuel cells, solar batteries, and secondary batteries
      - Environment:
      Solutions that support environmental protection measures by making it possible to measure and analyze environmental burden
      - Medical support and drug discovery:
      Solutions that provide measurement tools to improve control in the bio-measurement and regenerative medical fields
      - Telecommunications and social infrastructure:
      Solutions that accelerate the use of optical communications backbone subsystems in next-generation networks and introduce optical measurement technologies to facilitate disaster prediction
    2. Concentration on the memory tester business and slimming down the organization
      We will specialize in the memory tester business, reduce the size of our tester business headquarters, and freeze SoC tester development. And through transfers and other measures, we will reduce the number of staff from approximately 500 at the beginning of FY2008 to approximately 300 by the end of FY2008.

About Yokogawa

Yokogawa's global network of 19 manufacturing facilities and 89 companies spans 32 countries. Since its founding in 1915, the US$4 billion company has been engaged in cutting-edge research and innovation, securing more than 7,500 patents and registrations, including the world's first digital sensors for flow and pressure measurement. Industrial automation and control, test and measurement, information systems and industry support are the core businesses of Yokogawa. For more information about Yokogawa, please visit our web site at