Changes at Hitachi will see its auto parts unit spun off into a separate unit by 1 July.
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The company has named Takashi Kawamura, currently chairman of affiliate Hitachi Maxell, as its new president from 1 April.
Hitachi said it would separate its automotive system group into a new wholly owned subsidiary which would focus on environment friendly or safety automotive equipment, such as lithium ion batteries for hybrids.
The new automotive system company would employ 7,600 initially but names and locations had yet to be decided, Hitachi said.
The company told Kyodo News its board decided on the auto parts spinoff – it is also separating off its TV operations – to combat falling demand and recover its sharply falling earnings through structural reform.
Toyota Motor and consumer electronics giant Sony have also recently decided to replace their presidents after sharp earnings drops due to the worsening global economic slump.
Kyodo noted that Hitachi, hit by weak sales and the yen’s steep appreciation, had projected its worst-ever group net loss of JPY700bn for the 2008 financial year ending 31 March.
