Struggling Japanese electronics giant Matsushita restructures

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Posted 2:06PM on Thursday, January 10, 2002

TOKYO - Fighting to return to profitability amid a global electronics slump, Matsushita Electric Industrial Co. is restructuring its operations to avoid overlap in research and speed up product development. Under the plan announced Thursday, Matsushita will convert its five group companies into wholly owned subsidiaries and will spend up to 100 billion yen ($757 million) on repurchasing its own shares. Possible plant closures and job cuts have not yet been decided. The announcement from the company known for its Panasonic brand is aimed at unifying managerial vision in advance of posting what is expected to be its biggest annual loss ever of about $2 billion for the fiscal year ending in March. Matsushita has been struggling to make a comeback by shedding thousands of jobs through early retirement packages -- an unusual step for a company that provided employment for a lifetime for decades. Battered by the global downturn and competition from the rest of Asia, Matsushita is forecasting a loss of 265 billion yen ($2 billion) for the current fiscal year. Part of the losses come from huge restructuring costs to trim 10,000 workers, or about 3.4 percent of Matsushita's global work force, under a restructuring effort begun last year. "This is an extremely tough time for Matsushita," President Kunio Nakamura told reporters Thursday via satellite from Osaka, the central Japanese city where the company is based. Nakamura said the massive costs of research for futuristic digital gadgets with the biggest potential for profits require bringing together group companies under one management. In the past, encouraging competition within the group helped produce quality, but those days are over, he said. Under the new plan, Matsushita will acquire shares it doesn't already own in its five group companies -- air conditioning and ventilation, mobile phones, building materials and lighting fixtures, audiovisual and systems development -- through share swaps. The company didn't say how much it would cost to buy the shares. But it said it would spend $757 million to buy back up to 60 million of its own shares. The latest plan does not include Victor Co. of Japan, a money-losing Matsushita subsidiary. Nakamura said Victor has a separate brand identity and should remain independent. Matsushita shares have risen about 15 percent in recent weeks amid reports it planned to restructure. On Thursday, its share price rose 0.7 percent at 1,800 yen ($14) on the Tokyo Stock Exchange. But analysts say Matsushita still needs to prove it can grow, not merely slim down. Kazuharu Miura, analyst at Daiwa Institute of Research in Tokyo, said Matsushita "is still plodding along in its past. I can't see clearly how exactly it will pursue a growth strategy." The recent plunge in computer chip prices and shrinking global demand have dealt a serious blow to Matsushita and other Japanese electronics makers. At one time, the spurt in mobile phone use furnished momentum for growth but demand has fallen off lately around the world. Like its Japanese rivals, Matsushita is banking on the advent of a "network society," where people connect to the Internet everywhere through digital TVs, car navigation machines, mobile phones and personal computers. But those times aren't expected for years. And it is unclear how Matsushita will manage to grow in the meantime, analysts say. Matsushita said it will concentrate products such as plasma display TVs and DVDs, as well refrigerators and washing machines, to raise market share in Japan.