Losses Force Panasonic to Project Worst Year in a Decade

By Ed Silverstein October 31, 2011

Panasonic is predicting a $5.3 billion net loss during the current year – which is reported to be the worst year the company has seen in a decade.

Panasonic is blaming the losses on a “restructuring of its lossmaking television business,” The Financial Times reported.

“Many companies around the world have been moving into flat-panel manufacturing, and that has pushed down prices and prevented us from pressing our technological advantages,” company President Fumio Ohtsubo was quoted by The Financial Times on Monday.

Consumers are getting drawn away from Panasonic to cheaper products made in Taiwan and South Korea, according to news reports.

To help counter the situation, Panasonic plans to reduce the number of panels made by about half, The Financial Times adds. It also is cutting down the number of its employees.

In its analysis of the new projections, Reuters  explains that the rising price of the yen and lower demand from consumers in the United States and Europe have led to lower sales.

Chief Financial Officer Makoto Uenoyama explained that the company needs to “tackle” the “television and related semiconductor businesses” and "If we downsize these, our profits will be completely different.”

He put a spin on the projected losses when he described them as "the birth pangs of switching to a new strategy."

Panasonic has reduced projections for TV sales for the year to 19 million sets from 25 million, Reuters said.

Ohtsubo also made a pledge that "We are determined to make the TV business profitable in fiscal 2012,” TechZone360 reported.

Panasonic projected a loss of $1.34 billion for the July-September quarter, according to The Associated Press. During the previous quarter, Panasonic, like many companies in Japan, suffered from the massive earthquake and tsunami which hit the nation in March.

Panasonic is also trying to become a company with more environmentally friendly practices, according to a company statement, and has come up with a new organizational structure among senior managers.

The company will cut its workforce to fewer than 350,000 employees by the end of the current fiscal year, from around 360,000 employees as of Sept. 30, TechZone360 said.

In a related matter, Sony – which is facing similar problems to Panasonic – “will split its television business into three divisions to make operations more accountable as part of efforts to turn around the loss-making business,” Reuters adds.

Ed Silverstein is a TechZone360 contributor. To read more of his articles, please visit his columnist page.

Edited by Rich Steeves

TechZone360 Contributor

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