Panasonic CEO vows to ‘eradicate’ money-losing businesses

Tokyo: Chronically money-losing businesses and operations that have little prospect of healthy profit margins will have to go, Panasonic Corp. Chief Executive Officer Kazuhiro Tsuga said at a briefing in Tokyo on Friday, declining to name specific divisions. The company will end production of some products, such as the liquid crystal display withdrawal announced yesterday, while other units could be combined. Panasonic also plans a wave of consolidations in far-flung bases from Latin America to Europe and Japan.

Panasonic is targeting 100 billion yen ($921 million) in savings in the fiscal year ending March 2022. Reduction in personnel costs through natural attrition and retirement plus trimming and consolidation of operations will contribute 30 billion yen each. Closing unprofitable businesses will save another 40 billion yen. Panasonic’s stock, which is little changed from the start of the year, closed 1.5 per cent lower in Tokyo.

“Our midterm goal is simple — breaking out of this low-profitability state,” Tsuga said in a media address ahead of Panasonic’s annual IR Day. “We will eradicate losses, starting with operations that are structurally unprofitable.”

Tsuga took the helm of Panasonic in 2012, promising to steer the now 100-year-old company away from money-losing consumer electronics to focus on housing, car information systems and batteries for electric cars, including those for Tesla Inc. As his first act, Tsuga led the wrenching withdrawal from the plasma TV business, on which he last worked before taking the top job. While he succeeded in stemming losses, the profit growth didn’t follow. The company’s 5 per cent operating profit margin is half that of compatriot Sony Corp.

The bet on Tesla has also been a source of concern as the carmaker went through what Chief Executive Officer Elon Musk called “production hell” ramping up output of Model 3 sedans. Work at the Nevada Gigafactory that the two companies jointly operate has improved and losses in the business narrowed last quarter, but it’s not yet clear when it might become a consistent contributor to Panasonic’s bottom line.

Panasonic reiterated its earlier forecast that it expects to make the business with Tesla profitable on a monthly basis later in the current fiscal year. It has struggled to improve yields and boost output to make full use of the factory’s 35 gigawatt hours capacity. Tsuga said achieving those goals is the top priority for the business.

Tesla has announced plans to expand production to China and Europe, which has raised questions about the future of its battery partnership with Panasonic. While the Osaka-based company may still supply Musk’s Chinese assembly lines with batteries made elsewhere, the CEO showed little appetite for doubling down on his Tesla bet.

“At this moment, we have no plans to build a factory in China,” Tsuga said.