SERIOUS PROBLEMS AT PANASONIC IN 2011 AND 2012

PANASONIC LOGS RECORD NET LOSS OF $9.8 BILLION IN 2011

In May 2012, AFP reported: “Panasonic Corp. posted a record ¥772.2 billion ($9.8 billion) annual net loss, one of the worst ever recorded by a nonfinancial firm, after the electronics titan was hammered by a strong yen, natural disasters and stiff competition from foreign rivals. On the same day the loss was reported Panasonic saw its share prices plunge to 30-year lows as investors fretted about the prospects of troubled electronics maker. Panasonic's stock price fell 1.55 percent to end at ¥570 (about $7). [Source: AFP-Jiji, May 12, 2012]

“The result (for Panasonic) was due mainly to price declines and the appreciation of the yen, in addition to the sales declines effected by the Great East Japan Earthquake and the flooding in Thailand," the company said in a statement. Panasonic, like Sony, has been taking major losses from its TV business. Then its debt soared with the takeover of smaller rival Sanyo. [Ibid]

“But Panasonic predicted it would return to the black in the year ending in March 2013 with a net profit of ¥50 billion. "Although the company expects some risks to continue, the global economy is expected to show a slow recovery in fiscal 2013," the company said. "Under such business conditions, Panasonic regards fiscal 2013 as the first year in which it will achieve positive results following large-scale structural reforms and reorganization," it added. [Ibid]

“The Yomiuri Shimbun reported: “Flood damage in Thailand also hurt Panasonic's performance, causing a fall of about 60 billion yen in operating profit. Likewise, the economic slump in Europe has had a severely negative impact. Panasonic predicted its sales in Europe in fiscal 2011 will fall 16 percent from the previous year to 720 billion yen.Panasonic's growth also has been waning in emerging countries, a market the company expects to grow. In China, where growth had continued, Panasonic revised downward its sales forecast for fiscal 2011 by 7 percent from the previous year to 1.1 trillion yen. [Ibid]

Panasonic “To Reduce Workers at Headquarters by 50 Percent”

In May 2012, the Yomiuri Shimbun reported: “Panasonic Corp. has begun discussions on a plan to halve the number of workers at its headquarters in Kadoma, Osaka Prefecture, by the end of next March to streamline its operations and speed up decision making, sources close to the matter said.The company plans to make most of the personnel cuts by relocating employees to other business divisions in an effort to survive the fast-changing business environment of the electronics industry. To that end, Panasonic also plans to cut some employees through an early retirement program. It will be the first time Panasonic has drastically cut the number of employees at its headquarters. [Source: The Yomiuri Shimbun, May 30, 2012]

“Of about 130,000 Panasonic employees working in Japan, about 7,000 workers at its headquarters will be affected by the plan. Four thousand of the 7,000 employees are from procurement, quality assurance and other business administration divisions. Two thousand employees are from its research and development division, while the remaining 1,000 are from its industrial technology division. [Ibid]

“Panasonic will also study spinning off the research and development division, as well as the industrial technology division into separate companies and transferring employees to the new entities. The company hopes that restructuring its headquarters, which had been considered "safe" from structural reform, will lead to a turnaround next year. [Ibid]

Panasonic Names Tsuga President

In February 2012, Bloomberg reported: “Panasonic named Kazuhiro Tsuga as president three weeks after forecasting a record net loss. Tsuga, 55, replaced Fumio Ohtsubo, 66, who became chairman, Panasonic said in a statement today. Before Tsuga was a senior managing director and president of the audio-visual products unit. He took over the presidency after getting shareholder approval at June 2012 general meeting. [Source: Mariko Yasu, Bloomberg, February 28, 2012]

“Panasonic joins Sony in nominating a younger leader amid worsening earnings as the electronics makers struggle to turn around money-losing TV operations and cope with the stronger yen. “A younger president is promising as it shows commitment to speed up reform, move away from old culture and become competitive again,” said Naoki Fujiwara, who helps oversee $6 billion at Shinkin Asset Management Co. “The most important assignment for the new president will be to cut down the scale of TV operations and boost profits from energy and smart-house related businesses.” [Ibid]

“Tsuga joined Panasonic in 1979 and was promoted to executive officer at the age of 47, according to Akira Kadota, a Panasonic spokesman. Tsuga helped develop DVD recorders and headed the automotive systems unit before taking over the audio-visual products unit in April. “We plan to revive earnings and drive growth by pursuing the goal of becoming an innovative environment company,” Tsuga said in an Osaka news conference. Ohtsubo said he was eliminating jobs, shifting output overseas and closing display factories in an attempt to transform Panasonic into a leader in solar panels and rechargeable batteries amid mounting competition in TVs. [Ibid]

Can Panasonic Turn Around?

Shoichi Shirahaze wrote in the Yomiuri Shimbun, “Panasonic Corp.'s record-high loss of 780 billion for fiscal 2011 is primarily the result of sluggish performance in its production of TV sets, which were once the company's flagship products. Panasonic intends to go on the offensive after eliminating all negative factors from the past, including goodwill amortization related to Sanyo. But although it expects growth in the business of environmentally friendly energy, competition is fierce in this field. It is uncertain whether Panasonic will be able to escape its current slump. "We should be cautious about whether the conventional policy of [production] by Panasonic itself is right," Panasonic President Fumio Otsubo said in February 2012. [Source: Shoichi Shirahaze, Yomiuri Shimbun, February 6, 2011]

“In October 2011, Panasonic revised downward its forecast for unit sales of TV sets in fiscal 2011. It later revised the figure downward by an additional 1 million units, to 18 million units. This was partly because the domestic market for flat-screen TVs has rapidly cooled after the end of special high demand ahead of the complete shift to digital terrestrial TV broadcasts. Due to the sales slump, Panasonic's flagship audio-visual products division in fiscal 2011 went from an operating profit of 36 billion yen in fiscal 2010 to an operating loss of 30 billion yen in fiscal 2011. [Ibid]

“Panasonic has made Sanyo and Panasonic Electric Works Co. wholly owned subsidiaries, and in January 2012 launched a new business structure that revamped the two firms' operations. In particular, Panasonic aims to accelerate growth in a business field that creates combinations of energy-saving home electronics and systems, in response to the desires of individual households and companies. In the fields of devices for solar power generation and lithium-ion batteries, Panasonic plans to quickly improve its competitiveness by increasing production overseas. [Ibid]

“But companies from South Korea, China and other emerging economies have begun mass-producing solar power panels and other energy-related products. As a result, intensifying price competition has made it hard for Panasonic to make large profits. Many economists predict it will be hard for Panasonic to strengthen its profitability. [Ibid]

“Panasonic, for instance, started operating in 2009 the Amagasaki No. 3 plant in Hyogo Prefecture--the latest type of factory for producing plasma TV panels--at a cost of about 200 billion yen. The company, however, had no choice but to halt production there in the business year that ended this March. [Ibid]

“The factory's closure meant a failure in massive capital investment, a managerial misjudgment that some analysts likened to the building of Yamato, the enormous battleship that was unsuitable for the air battles of World War II. [Ibid]

Panasonic’s Restructuring Efforts in 2012

In January 2012, Kyodo reported: “Panasonic Corp. launched its new group structure, reorganizing its business fields and two wholly owned units into three main groups as it places greater emphasis on energy-related businesses. Panasonic's business fields are now divided into three groups -- consumer, components and devices, and solutions -- after it restructured five business segments that included operations of the two subsidiaries, Sanyo Electric Co. and Panasonic Electric Works Co. [Source: Kyodo, January 1, 2012]

“The 16 business divisions were consolidated into nine divisions including appliances, energy and healthcare under the three business fields. The company is also proceeding with a reduction in the group's workforce, aiming to reduce the number to less than 350,000 by the end of the current fiscal year in March from around 360,000 employees as of Sept. 30. [Ibid]

“The move is aimed at expanding Panasonic's energy-solutions business by selling energy-saving products such as solar batteries and LED lighting as a package to owners of homes, retail shops and buildings, an operation that the company is trying to establish as one of the pillars of its group amid the slumping television business. [Ibid]

“The brand names Sanyo and Panasonic Electric will be terminated in principle. By building on the strengths of Sanyo's energy business and Panasonic Electric's housing-equipment operations, the company aims to grow its "comprehensive solutions" business into a 1 trillion yen revenue source in fiscal 2018, according to Panasonic. [Ibid]

“There are multiple factors behind restructuring such as the strong yen and falling prices" of flat-panel TVs, President Fumio Otsubo told a news conference in October. "As a result, we have more facilities than we need." To revitalize its consumer electronics business, the company has adopted a marketing strategy of targeting specific customer segments for its household white goods including rice cookers and cosmetic appliances such as curling irons. For example, its compact washing machine targeted at households of small families saw bigger-than-expected sales following its launch in April, said Yukio Nakashima, executive officer in charge of marketing. "We had been targeting unspecified customers previously, believing that the products would sell well if they were good," Nakashima said. "We can create demand if we specify to whom we'd like to sell.” [Ibid]

“Regarding its comprehensive solutions business, Panasonic is aiming to deliver a combination of energy-saving equipment such as rechargeable batteries in single packages to houses and stores as well as to provide maintenance and inspection for the equipment. "It is a business to offer solutions to the problems customers have," Panasonic Senior Managing Executive Officer Shusaku Nagae said in an interview with Kyodo News. "By providing maintenance and consulting, we will create a new business model," he said. For example, the business will enable households to generate electricity with sunlight and sell surplus electricity and store cheaper electricity supplied at night in rechargeable batteries for use during the daytime, said Nagae, who served as president of Panasonic Electric through December. It will also help commercial facilities make considerable energy savings by centrally controlling air conditioning and lighting installed by the company, Nagae added. [Ibid]

“Many of our businesses had dealt in single-product sales. In the future, we need to find ways to offer our customers (products) as part of systems," he said. To further expand the packaged solution business, Panasonic is considering buying overseas companies that deal in household equipment in a bid to increase its marketing channels in markets such as the United States and Europe, he said. [Ibid]

Panasonic Hopes to Increase Envisions Global Appliance Sales of 1.5 Trillion Yen by 2015

In December 2011, the Yomiuri Shimbun reported: “Panasonic Corp. has set a goal of boosting its global sales of home appliances such as refrigerators and air conditioners to 1.5 trillion yen a year by fiscal 2015, or 50 percent higher than at present, the company has announced.The firm plans to make up for drops in revenues caused by its pullout from TV production by strengthening its marketing capabilities for such appliances, Panasonic said.To attain the goal, panasonic aims to raise the percentage of its overseas sales to 60 percent of overall sales in fiscal 2015, up from 45 percent for fiscal 2010, the company said. [Source: Yomiuri Shimbun, December 5, 2011]

“In Europe, Panasonic will prioritize products equipped with high-performance energy-saving functions, according to the company. From fiscal 2012, Panasonic will market such appliances--referred to in the consumer electronics industry as "white goods"--equipped with energy-saving capabilities or what the company calls "eco-navi" functions. Eco-navi functions work in conjunction with sensors able to recognize where a person or persons are in a room (in the case of air conditioners) or the amount of dust and the floor type (in the case of vacuum cleaners). [Ibid]

“Panasonic also plans to expedite projects to beef up its production capacities in emerging economies. The company will build a new factory for producing air conditioners and washing machines in India for operation from August 2012. Panasonic may also build new factories for goods to be shipped to Africa. In Brazil, Panasonic will build a new refrigerator and washing machine plant, where production will be launched in 2012 or 2013. In Vietnam, Panasonic will build a washing machine factory in 2013, while expanding production of the firm's existing refrigerator factory in that country to double the current level in 2015, the company said. In or after 2012, the company will build "lifestyle research centers" in the United Arab Emirates and Russia to study lifestyles and consumer preferences through R&D activities to develop new products, Panasonic said. [Ibid]

Image Sources: Panasonic

Text Sources: New York Times, Washington Post, Los Angeles Times, Daily Yomiuri, Times of London, Japan National Tourist Organization (JNTO), National Geographic, The New Yorker, Time, Newsweek, Reuters, AP, Lonely Planet Guides, Compton’s Encyclopedia and various books and other publications.

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© 2009 Jeffrey Hays

Last updated October 2012

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