Bloomberg News

Panasonic Restructuring Costs May Increase on Job Cuts

July 10, 2012

Panasonic President Kazuhiro Tsuga

Panasonic Corp. President Kazuhiro Tsuga. Photographer: Tomohiro Ohsumi/Bloomberg

Panasonic Corp. (6752), seeking to turn around after a record loss last year, said restructuring costs this year may exceed an initial estimate as the company takes charges to cut jobs and accounts for depreciation of factories.

Restructuring costs this year may increase from the planned 41 billion yen ($515 million) announced in May, President Kazuhiro Tsuga told reporters in Tokyo yesterday. He didn’t provide a new target.

Panasonic, planning to draft a new mid-term business strategy by February, may rearrange businesses and consider withdrawing from sectors that can’t be turned around in six years, Tsuga said yesterday. Japanese consumer-electronics makers including Sony Corp. (6758), Sharp Corp. and Panasonic are all restructuring after competition with South Korea’s Samsung Electronics Co. (005930) and Apple Inc. (AAPL:US) pushed them into losses.

“The cost increase could be positive if Panasonic uses it to slim down its headquarters,” said Masahiko Ishino, an analyst at Mitsubishi UFJ Morgan Stanley Securities Co. “The company will need to explain if it’s because of depreciation of factories, as the market thinks they were finished with that last fiscal year.”

Panasonic fell 1.3 percent to 610 yen at the close of Tokyo trading, extending its decline this year to 6.7 percent. The benchmark Nikkei 225 Stock Average has risen 4.8 percent.

Preemptive Move

The manufacturer, the biggest employer among publicly traded companies in Japan with 330,767 workers as of March, will reorganize its headquarters and eliminate redundancies to recover from the loss, Tsuga said last month after taking over as president.

“We need to make a preemptive move that increases the costs,” Tsuga said yesterday. “We should allow our sales to fall to some extent, because we are focused on improving profitability.”

Panasonic may cut the number of staff at its headquarters to “a few hundred” from about 7,000, Tsuga said. The office will narrow its focus to investor relations and managing overall business portfolios as early as October, he said in June.

Panasonic may rearrange its businesses into four areas, Tsuga said June 28. They are household appliances, including TV sets and solar panels; business-use goods such as air- conditioners; mobility products, such as car navigation systems and rechargeable batteries for electric cars; and personal products, such as compact cameras and shavers.

Sony’s Restructuring

Panasonic, Japan’s biggest appliance maker, said in May it may post net income of 50 billion yen for the year started April 1, compared with a 772 billion-yen loss the previous 12 months. The record loss included 267 billion yen in charges to write down assets at its TV business, 250 billion yen in similar charges for its battery subsidiary Sanyo Electric Co., and 148 billion yen to promote restructuring.

In Japan, sales of digital appliances including TV and Blu- ray players fell short of its expectations in the last quarter, Tsuga said.

Sony, Japan’s biggest consumer-electronics exporter, said in April it will cut 10,000 jobs, or about 6 percent of its workforce, after a record loss last fiscal year.

Fumio Ohtsubo, Tsuga’s predecessor, eliminated 36,000 jobs last fiscal year while speeding up a shift toward solar panels and energy-saving appliances in an attempt to move away from the money-losing TV business. The company’s cash and near cash declined 41 percent last fiscal year to 574 billion yen as of March 31, data compiled by Bloomberg show.

Standard & Poor’s lowered its credit rating on Panasonic in February to A-, the fourth-lowest investment grade.

In China, Panasonic may consider joining hands with other companies for its TV business, Tsuga said. Combining its system chips business with Fujitsu Ltd. (6702) and Renesas Electronics Corp. is an option, he said, adding nothing has been decided.

To contact the reporters on this story: Naoko Fujimura in Tokyo at nfujimura@bloomberg.net; Mariko Yasu in Tokyo at myasu@bloomberg.net

To contact the editor responsible for this story: Anand Krishnamoorthy at anandk@bloomberg.net


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