Matsushita suffers $155M loss

7/31/01

Tokyo - Dropping demand for cellphones and a global economic slowdown caused Japanese electronics giant Matsushita Electric Industrial Co. to lose 19.4 billion yen ($155 million US) in the quarter ended in June.

The Osaka-based maker of the Panasonic brand suffered a fall in sales in a wide range of products, including computer chips, industrial equipment and vacuum cleaners. For the same quarter the previous year, Matsushita had 9.4 billion yen ($75 million) in profits.

Matsushita's earnings report Tuesday followed similar news of hard times at other Japanese electronics companies, as the U.S. economic slowdown chips away at sales of computerized products.

Last week, Sony Corp., Fujitsu and NEC Corp. all reported sharp drops in profit for the first quarter. Falling prices hurt revenue despite a weak-yen exchange rate that worked as a plus for exports.

Matsushita's sales for the quarter fell both at home and abroad, dropping a combined six per cent to 1.67 trillion yen ($13.4 billion).

"We must be reborn as a 21st-century-style Matsushita," said director Tetsuya Kawakami. "We have a deep sense of crisis."

Matsushita has to move on key reforms by the end of the year if it hopes to achieve a turnaround, he said.

Matsushita, whose sales have languished in recent years, is embarking on a plan to boost annual sales by about 17 per cent by 2003 by shifting to more profitable service businesses, strengthening its digital consumer-electronics products and streamlining its bloated workforce.

Some analysts say decision-making at Matsushita is too slow and bureaucratic by global standards. The big fear is it may be losing out to Sony, which is growing as an international brand by taking advantage of its savvy marketing and entertainment empire.

Matsushita announced a new voluntary early retirement program Tuesday, offering career-counseling services and up to three months vacation for people opting to quit. Matsushita remains pessimistic about the prospects for the six months ending in September, predicting a loss of 45 billion yen ($361 million).

"Signs of hope for an early recovery aren't there," said Kawakami.

On Monday, Moody's Investors Service placed Matsushita's debt ratings under review for a possible downgrade because of uncertainties about profitability in a sagging global telecommunications market.

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