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Diversity in people and industry held as vital to international success

Interview - January 27, 2016

Takuya Shimamura, President and Group CEO of AGC Asahi Glass (AGC), discusses his company’s focus on diversity, customers’ needs, and concern for society and the environment.



What would you say has been the impact of Abenomics and Japan’s economic transformation on the manufacturing sector or indeed AGC Asahi Glass (AGC) specifically?

I think Abenomics effects have started to come out gradually with the monetary easing and also financial expenses. However, regarding the final arrow, which means the increase in the private sector capital expenditure aiming to boost up the overall economy, I have to say that it is not yet enough.

To think about why it is not sufficient, I think looking back the yen had been very strong, which broadened the manufacturing industry in Japan to shift to the overseas market. Actually the Japanese economic business model, such as the Japanese Corporation, imports raw materials from foreign countries which we produce products from and then have them exported to overseas countries. Thereby we obtain different currencies. However, I think this kind of business model is broken. It will take a little bit more time before the domestic economy really recovers from it.

Regarding the fact whether or not those Abenomics policies have had an impact on the private sector and especially on AGC Asahi Glass, well, I have to say I have a sense that to some extent the product volumes have increased. However, I don’t think that improvement is significant.


What opportunities do you see with for AGC the signing of the Trans-Pacific Partnership (TPP), not only in the US where you have significant operations but also the rest of the Asia-Pacific region?

The signing or successful conclusion of the TPP will be temporarily a good thing for the entire industry in the long term. But we may sustain some sort of pains from it as well. Because when we talk about the glass sector, back in 1980 there were structural impediments initiatives between Japan and United States in order to correct the trade imbalances and at the end of the day tariff barriers were lifted. I do not think the TPP’s successful conclusion will be having a big impact on the Japanese glass sector.

For example, to talk specifically about AGC, our revenues are break down as 30% coming from Japan, 30% from the Asian countries and 30% from the United States and Europe. Secondly, we have adopted a “local production for local consumption” strategy, therefore, I don’t think that this TPP initiative will have a significant impact on Japan and particularly on us.


AGC has a rich history that goes back over 100 years, but the last 4-5 years has been marked by difficulties as you’ve worked to restructure your operations. The signs are very positive: your 3Q results show a 20% increase in operating profit for the same period last year. What would you attribute this impressive growth to?

Well, for the past four years we have seen consecutively a downward trend. I think this is attributable to the following two factors. The first one is that the prices of the glass for LCD dropped. The second one is that if you look at the glass sector in the United States and Europe, the demand also dropped because of the overcapacity they already have. As a result the market followed a downward trend which exacerbated the profitability.

So first of all we conducted a business structure reform in the United States and Europe, and at a second time we conducted a cost structure reform, not only cutting down the cost but also we focused on the investment for the growth of the chemical sectors. As a result, this kind of a strategy started to pay off. And thirdly the oil prices dropped. This year, finally, we saw a 20% increase year on year. Of course personally I wish to see a much higher percentage increase.


Which markets are of particular interest for you and how you are planning to enter them?

To talk about our business lines, we have glass, chemical, ceramics and electronic sectors, and especially when it comes to the glass business, we have technology and products in quite broad areas. I’m sure we are the only company in the world who produces the glasses for a wider product lines, including high-end displays, automotive, and also architecture. Each department has a minimum route to access to a variety of industries. Also given this kind of wide network, we are able to apply the existing technology for the applications quite easily and also we can add new functions to existing technologies to add new values to existing users. I think we have this kind of potential, to bring existing products to new markets and also bring new products to existing ones.

Because of the diversity of our businesses, I think depending on the different combination it is possible for us to come up with something new. Introducing new technology or products into new markets, that is exactly what our Research and Development Department is all about and it means that we have to continue to make investment in thinking of the next five years or 10 years. We should never forget that it will take time.


In fact, this is your new management strategy, AGC plus – it’s more long-term oriented and it strives to add to your operations more intangibles such as security, safety, even job satisfaction. Why do you think AGC plus is not only the right thing to do, but is also going to pay dividends in terms of profits and increase revenue?

Well, what I would like to accomplish under this AGC plus is not something difficult or complicated; it is very plain and simple in fact. We manufacture products and offer value to society. We offer new functions, new products and new value to customers, and we hope to get across different customers. Also people who are producing these products need to have job satisfaction.

Eventually as a company we can get the profits and then we will return or distribute those profits to shareholders. I think this is something quite obvious and an ordinary thing. However, we really wanted to remind everyone of these ordinary things, so this what AGC plus is about.

I also really wanted to know how this concept is received by the people not only in Japan, but also by employees in the United States and in Europe. Therefore I wanted to have thorough face-to-face discussions. I visited 45 locations, had 140 meetings and a face-to-face meeting with 5,000 people over the group, which is 10% of our total employees. In total there are 50,000. I had an opportunity to directly hear at first hand their impressions on this AGC plus concept. It seems that they think this is an acceptable concept and they think that they get the gratification or job satisfaction by working for a company that is contributing to society. I think that this is a great opportunity for the company and employees to be united together.


Indeed along these lines I think AGC is very Japanese and even pioneering here in Japan in the sense that you have put a lot of importance on creating a diverse international company especially in terms of human capital. This is something Abenomics of course is also aspiring to, and trying to implement in the overall economy. Why do you think a diverse employee human capital is so important AGC and its success?

Given the importance we place on diversity we should not forget to look at the globalization process in our corporate history. Back in 1950s through 1960s, this was quite an early phase in the Japanese private sector; AGC went into India and Southeast Asia for the glass and the commodity chemical businesses.

Well, this is one part where we were entering into this growing country or emerging country at the request of those growing countries. One of the turning points around 1970s, 1980 was the acquisition of a Belgium company called Glaverbel. We also have a history of expanding our network globally by leveraging the resources of this Glaverbel.

When it comes to glass, we already have a network that covers the entire world. Therefore, the diversity is essentially indispensable.


Eco-friendly business practices are very popular now and this is a very trending topic, but in fact it’s been one of the cornerstones of AGC’s operations for decades. Indeed AGC is committed to reducing emissions by six times by 2020. Are you looking to capitalize on these growing trends?

When we use the term environment I think there are two meanings. One is the environment that surrounds us. Another one is the environment in the sense that in manufacturing we have the environment of the company itself. How are we going to address this environment through our product that we offer to the market? Well, I think that in the area of glass we can offer the high insulating effect glass, and also in the chemical segment we can produce the air conditioning gas so that way we reduce the CO2 emission. In the area of ceramics, not the organic materials but by applying the inorganic ceramics on the roads, we can alleviate the heat island phenomenon by almost 10%. By offering this kind of eco-friendly products to the market and also by offering the products that we reduce the CO2 emission and also by offering a solution-based product to the customer.


Your company has an almost obsessive focus on the customer and the contribution to the society and the markets that you operated in. Why make these smart investments from the long-term perspective and how do they translate into day-to-day operations?

At to how our efforts have led to our success, I’d like to share with you the founder’s spirit. The founder said that if I was only thinking about pursuing profits, I wouldn’t have started to produce glass. Glass is the material that no one was willing to produce, or it was very difficult to produce. That is why I saw that the production of glass as very critical and significant for society.

First we have to produce something that is necessary for society and then based on that we have to produce the stable cash and profitability and then we can develop something new. That is the circle or the loop and also that is how we operate. I don’t think that this is something extraordinary or outstanding. I think there is something foundational or base and the key point here is to keep producing the cash and then based on that we will add on something new. That has been the history of AGC and that will be also the future for the AGC.


What advice would you give to maybe other Japanese CEOs and chairmen who want to follow in AGC’s footsteps and aspire to build global companies? What’s the key to build in a global company in your mind?

Well, I think there are two key points. The first one is to remember what you are going to enter into, and the second one is you need to have a side communication with the local people and you need to share the same values with them.


How would you like the international community and world leaders to perceive Japan as it leaves behind two decades of poor economic growth and deflation?

Well, I think if you look at the Japanese people, they are earnest and diligent, and that is applicable when Japanese people are dealing with other people. When we enter countries, it is a characteristic of the Japanese to try to deal with the local people in a fair and an honest manner, so I sincerely hope that the G7 top leaders will mutually deepen their trust and confidence. I hope that they will create an environment that will facilitate the mutual interaction of different corporations.

To that end I hope they will join hands and they will make efforts.