Panasonic Corp.'s record-high after-tax loss of 780 billion yen(US$10 billion) on a consolidated basis for fiscal 2011 ending in March is primarily the result of sluggish performance in its production of TV sets, which were once the company's flagship products.
Panasonic intends to go on the offensive after eliminating all negative factors from the past, including goodwill amortization related to Sanyo Electric Co.
But although it expects growth in the business of environmentally friendly energy, competition is fierce in this field. It is uncertain whether Panasonic will be able to escape its current slump.
"We should be cautious about whether the conventional policy of [production] by Panasonic itself is right," Panasonic President Fumio Otsubo said at a press conference Friday in Tokyo. Otsubo frankly admitted that Panasonic's production of TV sets was at a crossroads.
In October, Panasonic revised downward its forecast for unit sales of TV sets in fiscal 2011. It later revised the figure downward by an additional 1 million units, to 18 million units.
This was partly because the domestic market for flat-screen TVs has rapidly cooled after the end of special high demand ahead of the complete shift to digital terrestrial TV broadcasts.
Due to the sales slump, Panasonic's flagship audio-visual products division in fiscal 2011 is expected to go from an operating profit of 36 billion yen to an operating loss of 30 billion yen.
Panasonic especially aims to reform the structure of its TV business. For example, the company decided to halt production at its Amagasaki No. 3 plant in Amagasaki, Hyogo Prefecture, which manufactures plasma TV display panels.
But quick recovery of demand for the products is not expected in fiscal 2012. It is an urgent task for Panasonic to drastically rebuild its TV production division.
Among flat-screen TVs, sales are growing of models with liquid-crystal display panels. Plasma screen models are noticeably lagging behind.
But Panasonic continued to build production facilities for plasma TV sets, investing about 200 billion yen.
"It was the wrong investment, like building the battleship Yamato," a member of the home electronics industry said.
Flood damage in Thailand also hurt Panasonic's performance, causing a fall of about 60 billion yen in operating profit.
Likewise, the economic slump in Europe has had a severely negative impact. Panasonic predicted its sales in Europe in fiscal 2011 will fall 16 per cent from the previous year to 720 billion yen.
Panasonic's growth also has been waning in emerging countries, a market the company expects to grow.
In China, where growth had continued, Panasonic revised downward its sales forecast for fiscal 2011 by 7 per cent from the previous year to 1.1 trillion yen.
Sharp Corp. President Mikio Katayama said the number of TVs sold in China "has rapidly fallen since January. There are large risks there."
Panasonic has made Sanyo and Panasonic Electric Works Co. wholly owned subsidiaries, and in January launched a new business structure that revamped the two firms' operations.
In particular, Panasonic aims to accelerate growth in a business field that creates combinations of energy-saving home electronics and systems, in response to the desires of individual households and companies.
In the fields of devices for solar power generation and lithium-ion batteries, Panasonic plans to quickly improve its competitiveness by increasing production overseas.
Otsubo said a V-shaped recovery in fiscal 2012 will be possible. "We'll take drastic measures in business fields in which there are challenges to tackle," he said.
But companies from South Korea, China and other emerging economies have begun mass-producing solar power panels and other energy-related products. As a result, intensifying price competition has made it hard for Panasonic to make large profits.
Many economists predict it will be hard for Panasonic to strengthen its profitability.
