- Panasonic CEO Yuki Kusumi warns of replacing underperforming managers to boost profitability.
- The company faces a ‘sense of crisis’ as shares lag despite a rising Japanese stock market.
OUR TAKE
Panasonic Holdings CEO Yuki Kusumi has issued a strong warning to the company’s management, stressing the urgent need for a “sense of crisis” to combat persistently low profitability. In a recent interview, Kusumi stated that managers who failed to meet performance standards would be replaced. This tough stance marks a significant shift from Panasonic’s traditional policy of lifetime employment and reflects the company’s wider efforts to streamline operations and improve financial performance. As Panasonic navigates changes in its business model, including its significant role as a battery supplier to Tesla and its forays into software, Kusumi’s approach highlights a determined strategy to ensure the company remains competitive in a rapidly evolving industry.
—Heidi Luo, BTW reporter
What happened
Panasonic’s CEO Yuki Kusumi has called for a radical change in management thinking due to the company’s disappointing profitability levels. Noting that Panasonic’s financial performance has lagged woefully behind historical performance and current market opportunities, Kusumi emphasised the urgent need for a “sense of urgency”.
Panasonic’s stock is down 4% this year, in sharp contrast to last year’s 26% gain and the robust performance of the broader Japanese market, where the Topix index is up around 22%.
The financial downturn has been exacerbated by a slowdown in the electric vehicle sector, which has hit the company’s key battery manufacturing operations, particularly at its Suminoe plant in Osaka, where production lines have been idled.
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Why it’s important
Despite Panasonic’s historical prominence as a global leader in consumer electronics, its recent strategic shift towards becoming a major supplier of electric vehicle batteries has not yet delivered the expected financial returns.
This strategic shift began two years ago with the adoption of a holding company structure to improve accountability and operational efficiency across its businesses. The move is part of a broader effort to improve Panasonic’s market valuation, as evidenced by its current price-to-book ratio of 0.7, which is significantly lower than industry peers such as Hitachi Ltd, which trades at around three times book value.
The emphasis on instilling a “sense of crisis” in management is indicative of a broader shift towards more dynamic and results-oriented practices within Panasonic.“If they don’t produce results, they will have to be replaced. The reason for not producing results is the lack of a sense of crisis” Kusumi said in a recent interview.
“Management, 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,” Kusumi said.
