Panasonic is now in the 8th year of Kazuhiro Tsuga’s Presidency but none of the seeds he has sown seem to have blossomed. The most recent quarterly results, unveiled on July 31st 2019 showed that despite Tsuga’s focus on profit over turnover, operating profit fell by 44% on the previous year, with tunover down 6%.
Of the 5 internal companies, only the Life Solutions business showed a profit. The slowing down of the Chinese economy had an impact but profitability in China was worse than forecast even taking that into account. It had been designated a growth area and a special company set up to focus on it. The US China trade conflict and decrease in infrastructure investment seem to be at the root of the problem.
The automotive business is also challenging. The joint venture with Tesla for battery supply is still loss making. Another joint venture with Toyota has been set up, but this might be outside the consolidated Panasonic earnings.
A third area of concern is the home appliance business. Although airconditioning and washing machines are selling well in Japan, profits were thin overseas. Panasonic executive Hirokazu Umeda says the price of EL panels fell far more sharply than expected in Europe and Panasonic could not compete on pricing even in Asia. Panasonic is going to shut its TV factory in Mexico and look at OEM and ODM (original display manufacturing) options and withdrawing from the USA and China markets.
As of June 2019, there is no representative of Panasonic’s original founding family on the board, with the retirement of Matsuyuki Matsushita, a grandson of the founder Konosuke Matsushita. Matsuyuki Matsushita’s eldest son is still working at Panasonic however. As to whether he wants him to become a board director “that is up to his effort and ability” says Matsuyuki Matsushita. “Sometimes founding families are involved in management, sometimes they are not involved at all. Which is better is up to the management academics to debate.”
Matsuyuki Matsushita says his father set up to the internal company system so that each division could focus and compete with specialist manufacturers. “The current problems are probably showing the limits of monozukuri (manufacturing or craftsmanship) and the shift from analogue to digital, to services. Panasonic has not shown the answer to this yet.”
For more content like this, subscribe to the free Rudlin Consulting Newsletter.
