Following the release of 2011 performance results by Toshiba, Sharp, Sony, Hitachi, Panasonic also announced its third-quarter and full-year results as of March 2012. The data disclosed within this week shows that Japanese electronics companies have collectively fallen into a low point of declining performance. According to financial reports, Panasonic's net profit is expected to reach 780 billion yen, setting a record for the largest loss in the company's history.
Accompanying unfavorable financial figures, Japanese companies have also begun a round of structural adjustments and leadership changes. However, industry insiders analyzed that this round of adjustments was not solely triggered by poor performance. In recent years, Japanese companies have successively undergone transformations, and these adjustments can be seen as strategic adjustments during the transition period. "The data from the 2012 fiscal year may show even worse results for Japanese companies, but it is still too early to conclude that 'Made in Japan' has failed."
Panasonic's data indicates that from April to December 2011, over a nine-month period, the net profit showed a loss of 333.8 billion yen, compared to a profit of 114.7 billion yen in the same period last year. Due to deteriorating performance in the third quarter, Panasonic revised its forecast for the 2011 fiscal year downwards, expecting sales to decrease from 8.3 trillion yen to 8 trillion yen (compared to 8.7 trillion yen in the previous year); net profit was adjusted from an expected loss of 420 billion yen to a loss of 780 billion yen (compared to a profit of 74 billion yen in the previous year).
Panasonic stated that the large-scale floods in Thailand in October last year had widespread impacts on the supply chain. Additionally, due to reasons such as the global economic recession triggered by the European debt crisis, sales, centered around digital goods, are expected to significantly decrease. Despite thorough reductions in fixed costs in response to the aforementioned emergency situation, these measures were still insufficient to compensate for the impact of reduced sales, and profits are expected to decline. Furthermore, Panasonic included additional business restructuring costs in pre-tax profits, including losses from impairment of acquired assets.
Not only Panasonic but also other companies experienced record-breaking losses. Sharp expects a loss of 290 billion yen for the 2011 fiscal year, which will be the most severe annual loss since the company's founding in 1912, marking a century-high. Sony reported a loss of 91.7 billion yen in the third quarter of the 2011 fiscal year, with a projected annual loss of 220 billion yen. Hitachi, despite turning losses into gains, saw a sharp drop in net profit to 34.28 billion yen in the third quarter, down 45% from 62.09 billion yen in the same period last year. Net profit for the 2011 fiscal year was 200 billion yen, down 16% year-on-year. Toshiba posted a loss of 10.6 billion yen in the third quarter and lowered its operating profit forecast for the entire 2011 fiscal year from 300 billion yen to 200 billion yen.
As for the reasons for the losses, all major companies mentioned the appreciation of the yen, the global economic recession, and the impact of natural disasters.
Senior director of Pule Consulting, Luo Qingqi, said that the collective decline in Japanese corporate performance could primarily be attributed to the high exchange rate of the yen, followed by the global economic depression; the impact of natural disasters such as the Great East Japan Earthquake and the floods in Thailand; and finally, competition pressure from South Korean and Chinese enterprises.
It is premature to judge the failure of Japanese manufacturing.
Amidst the disclosure of unfavorable performance, Japanese companies also announced organizational restructuring and personnel reshuffling plans. Hitachi announced that it would reorganize its structure starting April 1, 2012, consolidating its business scope into five groups: Infrastructure Group, IT Group, Power Systems Group, Construction Machinery Group, and High-Function Materials Group. A new position, "President of Hitachi Group China & Asia-Pacific Region," was established, to be held by Moriwaki Kazuhiro, currently Executive Vice President and head of international operations at Hitachi. Hitachi hopes to achieve significant improvements in operational efficiency through the establishment of a new management system and subsequent continuous reforms. Previously, Hitachi had decided to halt television production and outsource all TV manufacturing.
Sony proposed a change in leadership, replacing Howard Stringer, who has led Sony since 2005, with Japanese national Kazuo Hirai.
Daisuke Kato, president of Panasonic Corporation, claimed that he would focus on revitalizing the sluggish television business to restore performance. According to the plan, Panasonic will complete the integration of Panasonic Electric Works, Panasonic Electric Industrial Co., Ltd., and Sanyo Electric Co., Ltd. by April 1, 2012.
Luo Qingqi indicated that the issue of the yen exchange rate is difficult to resolve in the short term, and the trend of weak demand in 2012 will not change. Under these circumstances, the above adjustments are unlikely to bring about immediate improvements in the performance of Japanese companies in 2012.
In fact, amidst worsening operational environments, Japanese companies are steadfastly promoting their transformation. Over the past year, Hitachi has been working hard to shift from traditional consumer electronics industries to social infrastructure sectors such as power, railway systems, and information technology, which Hitachi believes have greater development potential. Panasonic has further intensified its industrial planning based on energy, clearly establishing three pillar industries: home appliances, components, and system solutions.
Luo Qingqi pointed out that coinciding with the performance trough, this round of adjustments by Japanese companies is easily misinterpreted as being caused by poor performance, "which can only be part of the reason. However, this round of adjustments shows that their measures are not merely about reducing costs. Currently, the global industrial landscape is undergoing adjustments, and the operational pressure on traditional electronics industries is increasing. The adjustments made by Japanese companies are strategic choices during the transformation period."
Luo Qingqi also particularly emphasized that it will be difficult for Japanese companies to see qualitative improvements in their performance over a longer period, but the foundation of their R&D and technical systems has not changed, and it cannot be concluded that Japanese manufacturing has been defeated. "Companies like Hitachi, Sony, Sharp, especially Panasonic's transformation, which leads to changes in their operational systems, will possess great imagination space when the economic environment improves."
By Wang Haiyan, Nandu Reporter