Kazuhiro Tsuga, the new head of Japan’s sprawling electronics maker Panasonic Corp, has set a priority to get the lumbering and loss-making company to make decisions quickly.
The 55-year-old, three-decade Panasonic veteran replaces Fumio Ohtsubo, 66, who moves to the chairman’s office where he will still wield some influence over business strategy in a corporate culture that tends to take its time when it comes to making decisions.
“My main concern is whether I can instill a sense of speed,” Tsuga told reporters at a briefing on Wednesday.
Panasonic, founded as a plug maker almost a century ago when Japan embraced electricity, has to move rapidly. It has warned of a record 780 billion yen ($9.7 billion) loss for the year to end-March.
Much of that – some 580 billion yen – is for restructuring operations and cutting costs, particularly in the struggling TV business, which Tsuga has led since April.
But he comes to the top job with a record for taking tough decisions and turning businesses around.
A fluent English speaker who completed his education in California, Tsuga last year unveiled plans to end production at a plasma panel plant in the southern industrial city of Amagaski, which had only been completed two years earlier and had capacity to produce 330,000 screens a year.
He will be Panasonic’s youngest chief from outside the group’s founding family, and his appointment is something of a departure in Japan, where promotion is traditionally age-based.
“At 55, I don’t feel that young,” he quipped.
Turning down the volume
Tsuga has said he will pursue profit over volume, and pledged to get the ailing TV business back on a firm footing within 2 years.
That will be some challenge, and analysts say the blood letting – Ohtsubo’s cost-cutting axed 17,000 jobs – may not be enough if TV sales continue to shrink.
By 2015, flat panel industry research company DisplaySearch reckons annual global sales of liquid crystal TVs will contract by 8 percent to $92 billion. Plasma sets, a market Panasonic dominates, will decline 38 percent to $7 billion.
Even the deep staff cuts leave the sprawling conglomerate fatter than its rivals. The group’s vast product range stretches from refrigerators, TVs and sound systems to batteries and nose-hair trimmers, as well as running old folks’ homes.
A global workforce of 350,000 is treble that of Samsung Electronics, double Sony’s and 60,000 more than General Electric, whose revenue is $30 billion higher.
For every worker, Panasonic generates revenue of around 23 million yen ($285,700) a year, compared with nearly 43 million yen at Sony and over 55 million yen at Sharp, Thomson Reuters data shows.
In the driver’s seat
Tsuga, a keen golfer who also enjoys driving, has spent much of his career in research, and studied computer science at the University of California, Santa Barbara.
A native of Osaka in western Japan, Panasonic’s home city, he was singled out as someone to watch after he led negotiations in the mid-1990s with other consumer electronics makers to fix a standard for DVDs.
That reputation was further enhanced in 2009 when he was in charge of the automotive systems business and was credited for a quick turnaround in Panasonic’s car navigation business in the wake of the global financial crisis.
Repeating that group-wide is likely to be tougher.
During Ohtsubo’s 6-year presidency, Panasonic shares lost two thirds of their value, double the decline on the benchmark Nikkei average over the same period.
Joining Panasonic in eroding stock value are Sony and Sharp Corp. All three trade at below book price – effectively the value of their assets that shareholders would get if the companies were liquidated – against a domestic sector average of 1.58 times book, according to Thomson Reuters data.
The three combined expect to lose $17 billion this year, highlighting the savaging of Japan’s electronics industry by foreign rivals led by Samsung, weak demand and a strong yen.
Panasonic’s long-term debt – it has close to $13 billion of bonds issued – is now more than a quarter of its total capital and has been growing steadily over the past 5 years. The industry mean is below 5 percent.
Yet it’s not only bond and equity investors who are looking to Tsuga to engineer a rebound.
Sitting alongside him at a flower-bedecked table at the Tokyo press conference, Ohtsubu reminded his successor of his own expectation for a V-shaped earnings recovery.
“I don’t mean for this to pressure him, but the restructuring I did was necessary to ensure a rebound in profitability next business year,” Ohtsubo said, glancing over at Tsuga.
Panasonic shares rose as much as 3.9 percent on Wednesday to a 4-month high, and closed 1.5 percent higher at 759 yen.
The stock has rebounded 30 percent this month since the group warned of its record full-year loss, giving it a market value of around $23 billion, more than Sony and almost three times bigger than that of Sharp.