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In a move that may affect the entire manufacturing industry, Hitachi Ltd. plans to introduce a new pay system based entirely on job performance and abolish seniority-based annual pay hikes.

Hitachi Vice President Takashi Kawamura said Monday the company aims to switch to the new merit-based system in October and have it fully reflected in salaries beginning in April 2004.

However, Hitachi management has abandoned its original goal of reaching an official agreement on the shift with its labor union in the course of the ongoing spring wage negotiations.

Kawamura, who hinted that the union is increasingly receptive to the plan, said he hopes to at least receive the basic consent of union leaders Wednesday when management is due to present the latest set of wage proposals for the business year starting April 1.

Hitachi’s move follows in the footsteps of companies that include Canon Inc. and Honda Motor Co.

It is the first major electrical appliance maker in Japan trying to dismantle its seniority-based pay structure.

The plan comes at a time when Hitachi, like other major electrical appliance makers, is struggling under a prolonged slump in the information technology sector while facing tough competition in the global market posed by China and other emerging economies.

For the year starting April 1, Hitachi and its union have agreed to maintain the system in which regular pay hikes are secured effectively based on seniority.

Both sides have also agreed on bonus payments equivalent to a little more than four months of salary.

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