Stimulus Spending Boosts Japan's Train Manufacturers

As electronics and auto companies flounder, global stimulus spending may aid Japan's rail companies

With plunging at a faster rate than Europe or the U.S., thousands of jobs lost, and failing politicians lapsing from one crisis to the next, it's been a miserable few months for Japan Inc. Yet amid mounting grim headlines, one deal stands out. On Feb. 13 the British government signaled that a consortium led by Tokyo-based Hitachi (HIT) had won preferred bidder status for a $10 billion contract to build and maintain rolling stock for train lines running along Britain's east and west coasts.

For Hitachi, a sprawling conglomerate that makes everything from flat-panel TVs to nuclear plants, the British contract could not come at a more important time. Hitachi expects to lose $7 billion in the financial year that ends later this month, marking it as one of Japan's worst-performing large companies. This year, despite the huge loss for the group, railway-related sales at the company are forecast to jump a healthy 17%, to $1.5 billion. The British deal, if finalized in October, should see Hitachi and its partners John Laing and Barclays Private Equity supply up to 1,400 train cars. The consortium will also service the trains over a 20-year period.