June 26, 2008
Fuji Electric Systems Co., Ltd

Fuji Electric Systems to Carry Out Structural Reform

Fuji Electric Systems Co., Ltd. ("FES") (President and Representative Director: Mitsunori Shirakura) announced today that FES and Control & Drive Systems and Power Supply Sales Divisions of Fuji Electric FA Components & Systems Co., Ltd. ("FCS") (President and Representative Director to be appointed as of July 1, 2008: Naoto Higo), one of the core operating companies of the Fuji Electric Group in charge of ED&C/Drive Systems segment, will join to become one company as of July 1, 2008.

1. Objectives for consolidation

Through this consolidation, a single contact point will be established for customers of Control & Drive Systems and Power Supply Sales Divisions of FCS. We will combine the system solution know-how that FES has accumulated through infrastructure building projects all over the world and the industry-leading component equipment that FCS carries to offer optimal products that satisfy customers' needs of the both companies.
In coincide with the consolidation, we will reorganize our business segment structure to channel management resources into the businesses where we can gain a competitive edge by leveraging core technologies of the both companies. Specifically, Drives and Automation businesses will be given strong focus as driving force for growth. We will also pursue to ensure stable sales volume and increase profitability through core businesses such as Industrial Plant Engineering and Electric Power Systems.

2.Initiatives

1)Establish a new operational framework through consolidation

1.Establish a manufacturing and sales framework optimal for global operation

Targeting Japan, China, the rest of Asia, Europe and the U.S., we will define an operational framework by region and concentrate all functions. As a first step, our sales regime will be realigned, specifically in China. All sales functions will be integrated to ensure that sales, engineering and service will closely collaborate as one team to maximize business.
A manufacturing regime in Japan will also be restructured along with management strategy by redefining function of each site. Our goal is to build a manufacturing framework optimal for global operation.

2.Accelerate reorganization of business structure

We will review each business framework and accelerate structural reform through all possible means including M&A.

2)Launch and thoroughly strengthen new businesses that will drive growth

1.Drives business

We will concentrate both companies' resources for power electronics technology and step up solution business in the fields of machinery (cranes, and ships & vessels) and building automation system, in addition to existing focused fields such as steel, chemical, electric & electronics and automobile. Overseas business will also be bolstered to increase overseas production rate from current 15% to 50% through establishment of four key regions in the world; Japan, China, Europe and the U.S. In this way, we will aim to achieve 10% annual growth rate and increase projected ¥160 billion sales for fiscal 2008 to ¥220 billion in 2011.

2.Automation business

By positioning information control and sensor technologies accumulated over the years as core technology, we will carry out a solution business that integrates IT, controls and sensors under the key concept to safety. To support this strategy, product development will be reinforced to be able to create industry leading, next-generation safety controllers. We will contribute to building safe and comfortable industrial and environmental society by responding to new needs such as requirement for visibility in the production sites and environment friendliness. In this way, we will aim to achieve 10% annual growth rate and increase projected ¥130 billion sales for fiscal 2008 to ¥180 billion in 2011.

3.Business plan

By creating synergy effect through the above stated initiatives, Energy and Electric Systems segment of Fuji Electric Group encompassing Fuji Electric Systems and its consolidated subsidiaries will aim to increase projected ¥450 billion sales and 4.5% operating income margin for fiscal 2008 to ¥560 billion, 25% up from fiscal 2008, and 7% respectively in fiscal 2011.

Company Overview (As of July 1, 2008)

Note: The following businesses will be transferred from FCS: 1) development, design, manufacture, sales maintenance, service, repair, remodeling, and management and operation of drive control equipment, motors and controllers; and 2) sales of power supplies, watt-hour meters and molded-case transformers.