2021/10/01
Panasonic Announced their Upward Revision in the Financial Results for the Full Year – Structural Reform is Inevitable for Making the Company into a Holding Company
(The original article in Japanese was posted on February 5, 2021)
On February 2, Panasonic Corporation announced their third quarter results in fiscal year ending March 2021, saying that “the sales and profits increased on a constant-currency basis”, and revised the projection upward for full year results of the fiscal 2020.
Panasonic’s performance by company reflects the harsh condition in 2020 influenced by the COVID-19 pandemic. Although all companies and divisions registered year-on-year decrease in the first quarter, the performance of Automotive Company achieved a V-shaped recovery along with the recovery of sales of automobiles in the second quarter. Moreover, the performance of Appliances Company and Life Solutions Company was boosted by the demand of air conditioning appliances and products in the Indoor Air Quality field due to the increased rate of at-home consumption as well as by hygiene products due to the raised awareness of the needs for sterilization in the second quarter. Sales in Industrial Solutions Company, especially in products related to communication infrastructure and electricity storage system, was also increased. On the other hand, Connected Solutions Company could not recover the sales drop of electronic devices for aircraft and inevitably lowered both the income and profit.
Panasonic has been working on structural reforms for a long time. In 2019, they announced that they would withdraw from the liquid crystal display panels business and the semiconductors business. And this time in 2021, at the timing of the above-mentioned announcement of financial statements, they also announced that they would get out of the solar cell business. In the financial results briefing, following those restructuring, they proudly said, “reinforcement of business structures has been steadily progressing, and in addition, sales increase of the businesses focusing on the change of the society has contributed to our growth.”
Moreover, the business with Tesla, Inc. could be expected to become profitable. Panasonic invested 210 billion yen in building a “Gigafactory 1” (in the State of Nevada, the U.S.) for manufacturing lithium-ion battery cells and the factory started supplying the cells in 2017, but the business has been continuously in deficit until recently. In July-September quarter last year, the strong performance of “Model 3,” the major automobile model of Tesla, encouraged this business by the Nevada factory to finally turn into a surplus. This will bring the undoubted achievement of making profits for the full year. In June 2020, additional investment amounting to ten and several billions of yen was determined.
Despite the success of their battery business with Tesla, Tesla themselves has been taking action to insource the battery cells. China’s Contemporary Amperex Technology Co., Limited. (CATL) and Korea’s LG Chem Ltd. also have been strengthening the investment in the business of in-vehicle batteries. Although Panasonic wants to avoid the price competition with Chinese companies, their technological abilities cannot be underestimated, and “price” is an important factor for competition in EV (electric vehicle) market once EVs have started widely penetrating. “High quality” that is not demanded by the consumers is meaningless. Long-term strategy to win through the worldwide market is required.
Panasonic will restructure its organization and abolish the “company system” to shift to the holding company system. They will accelerate “narrowing down or specialization of the business field of the subsidiaries” through adventurous delegation of authority and thorough self-imposed responsibility management. And yet, I do not want each subsidiary be a company operating just nicely and innocuously based on the thought of “selection and concentration” focusing on the efficiency. I would like to expect the holding company to have a strong will and strategic determination to realize the truly strong growth in the highly competitive global market.
This Week’s Focus, February 5
Takashi Mizukoshi, the President