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Panasonic Holdings Corp.\u2019s managers need to feel more of a \u201csense of crisis\u201d given the company\u2019s low profitability and will be judged accordingly, Chief Executive Officer Yuki Kusumi said.\u00a0<\/p>\n
\u201cIf they don\u2019t produce results, they will have to be replaced,\u201d Kusumi said in a recent interview. \u201cThe reason for not producing results is the lack of a sense of crisis.\u201d\u00a0<\/p>\n
Those are unusually harsh words in Japan, and especially at Panasonic, where the notion of lifetime employment was embraced for years. Two months ago, Kusumi warned in a strategy briefing that the Osaka-based Japanese electronics maker was falling behind on its profitability targets, and that he would reduce the number of \u201cbusinesses with issues\u201d to zero by March 2027.<\/p>\n
Panasonic\u2019s shares are down 4% this year, after climbing 26% last year. At the same time, Japan\u2019s stock market has been rallying to multidecade highs, with the benchmark Topix Index up around 22% this year.<\/p>\n
Once a global leader in consumer electronics, Panasonic is now a key battery supplier to Tesla Inc. and investing in software, while seeking to retain its relevance in appliances and industrial devices. The slowdown in demand for electric cars has impacted some of its battery factories, resulting in the halt of some production lines at its Suminoe factory in Osaka, the CEO said.<\/p>\n
\u201cWhere I have most concern is that we haven\u2019t achieved the profitability required to gain the support of investors,\u201d Kusumi said. \u201cAlthough stock prices in Japan are rising, our shares are stuck at around \u00a51,300.\u201d<\/p>\n
The fact that Panasonic is trading below book value is cause for concern, the CEO said. The Tokyo Stock Exchange has been on a crusade, backed by the government, to get Japanese companies to improve their market value relative to their total net assets, in order to boost the ratio above 1.0.\u00a0<\/p>\n
Panasonic\u2019s price-book ratio currently stands at 0.7, according to data compiled by Bloomberg. Hitachi Ltd., another electronics conglomerate that restructured and sold off assets, trades at around\u00a0three times book value<\/a>.<\/p>\n Panasonic adopted a\u00a0holding company structure\u00a0<\/a>two years ago, a revamp aimed at making each division more accountable for its performance. That also made it easier for Kusumi to forge deals like the one involving its automotive systems unit, part of which is being sold to affiliates of Apollo Global Management Inc. for \u00a5311 billion.<\/p>\n Kusumi is pushing to improve the profitability of underperforming units over the next two years while considering whether Panasonic is the \u201cbest owner<\/a>\u201d for the businesses. While that doesn\u2019t necessarily mean the goal is to sell, the CEO explained that they will have to stand and survive on their own.\u00a0<\/p>\n After\u00a0taking over<\/a>\u00a0as CEO in mid-2021, Kusumi has been seeking to free up more cash to invest in areas of growth. He\u2019s set goals to achieve a return on equity of 10% or more and cumulative operating profit of \u00a51.5 trillion for the two fiscal years through April of next year.<\/p>\n Konosuke Matsushita, who founded the company that bore his name until it was changed to Panasonic in 2008, is sometimes referred to as the \u201cgod of management\u201d in Japan. He espoused\u00a0principles<\/a>\u00a0such as cooperation, humility and contribution to society as key pillars for any successful company. By the same token, Matsushita also pushed for adaptability and continuous improvement.<\/p>\n \u201cManagement, especially upper management, such as division managers and the presidents of the business units, need to feel a strong sense of crisis about the lack of results,\u201d Kusumi said.<\/p>\n<\/div>\n CEO Daily provides key context for the news leaders need to know from across the world of business. Every weekday morning, more than 125,000 readers trust CEO Daily for insights about\u2013and from inside\u2013the C-suite. Subscribe Now<\/a>.<\/div>\nRecommended Newsletter:<\/strong><\/p>\n