Panasonic may close some divisions in effort to end losses

Panasonic president and chief executive Kazuhiro Tsuga gives Panasonic president and chief executive Kazuhiro Tsuga gives the keynote address Tuesday at the 2013 International Consumer Electronics Show at the Venetian casino in Las Vegas. Later Tsuga told reporters that his company is considering closing some divisions as it retools for the new electronics market. (Jan. 8, 2013) Photo Credit: Getty Images

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Panasonic Corp., Japan's largest consumer-electronics maker, said it is considering closing some businesses as the company heads toward a second straight annual loss.

Shutting divisions is a "worst-case" scenario and the TV maker will try to safeguard jobs whether units are sold, restructured or closed, president Kazuhiro Tsuga told reporters late at the Consumer Electronics Show in Las Vegas. He didn't elaborate on which operations could close.

Panasonic needs to overhaul unprofitable operations such as plasma televisions and mobile phones to end losses, said Junya Ayada, a Daiwa Securities Co. analyst. The Osaka-based company eliminated more than 38,800 jobs in the year ended September, or about 11 percent of staff, as Japanese electronics makers struggle to compete with Apple Inc. and Samsung Electronics Co.

"The market is expecting Tsuga to come up with a drastic and convincing plan," Tokyo-based Ayada said by phone Wednesday. "He needs to show specifics on how to revive the company."

Discussions about shutting units form part of work on a midterm plan due to be unveiled by March 31, Tsuga said. The company has no immediate closure plans, he said.

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"We really want to avoid it," he said. The company may instead find partners or form ventures for units, possibly including the semiconductor business, he said.

OPERATING MARGINS

The TV-maker has already announced plans to cut 8,000 jobs in the six months started Oct. 1. It also intends to end smartphone operations in Europe by March 31 and to close domestic mobile-phone plants in June.

Panasonic may pull out of businesses with operating margins of less than 5 percent by March 2016, Tsuga said in October. Among Panasonic's seven main divisions, only the appliances unit will have an operating margin above that mark this fiscal year, based on its earnings forecast. Eco solutions has an anticipated margin of 3.5 percent, while the other units, including audio- visual, automotive and industrial devices, are expected to have margins of less than 2 percent.

RESTRUCTURING CHARGES

A Goldman Sachs Group analysis in November advised that to turn the company around, Tsuga needs to close plasma-panel factories, shut operations making smartphones and semiconductors, and end domestic production of products including lithium-ion batteries.

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Such reforms may require about $4.2 billion in restructuring expenses, the author Takasi Watanabe estimated. The company has already been hit by restructuring charges for its TV, solar-panel, lithium-ion battery and mobile- phone operations since April 1, 2010.

It also reversed its full-year profit target in October, forecasting a deficit 30 times bigger than analyst estimates because of slumping sales of TVs, handsets and personal computers. The projected $8.3 loss for the year ending March 31 is the biggest loss estimate by a listed Japanese company for the period, according to data compiled by Bloomberg.

Other Japanese electronics makers are also shedding staff and paring operations because of global competition. Sony Corp. is cutting 10,000 jobs and selling assets as chief executive Kazuo Hirai focuses on mobile devices, games and digital imaging after four consecutive annual losses.

Sharp Corp., which last year warned about its ability to survive following losses, plans to eliminate more than 10,000 positions, two people with knowledge of the proposal said in September.

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