Panasonic will actively pursue growth in the U.S. and China as Tesla’s supplier bolsters its cash management to deal with technology disputes between the world’s two largest economies.
In an interview with the Financial Times, chief executive Yuki Kusumi said the Japanese conglomerate will also conduct a review to streamline its large business portfolio, which includes car batteries, air conditioners and microwave ovens, after two years of trying to speed up operations. and cost savings.
“It’s true that the decoupling of the U.S. and China is a bigger challenge for us,” Kusumi said, adding that the company is studying ways to produce other car battery materials in the U.S. that were previously purchased in China.
“But the US and China are the main markets that will continue to grow,” he said. “For us, both markets are important and we will bring each of these businesses to a country that will be less vulnerable to political influence.”
The US is a very important market for Panasonic’s car battery business. The Japanese group is opening a $5bn gigafactory in Nevada with electric vehicle maker Tesla.
Panasonic plans to invest $4bn to build a plant in Kansas, a decision Kusumi said was helped by the new passage of US President Joe Biden’s Inflation Act, which includes $369bn in incentives to finance clean energy efforts.
The Kansas plant is likely to be partially funded by the ¥400bn ($3bn) Panasonic has set aside to invest in growth areas such as EV batteries, supply chain software and air conditioners over the three years to March 2025. Another ¥200bn has been earmarked for developing hydrogen fuel cells and other new technologies.
But Panasonic has also made an aggressive bet on the expansion of home appliances and refrigeration systems in China, where local management is given autonomy through its operations, in marked contrast to other regions.
Kusumi said companies could try to sell products made in China in Asian markets that are not subject to US export controls designed to block Beijing’s access and ability to develop advanced semiconductors.
“Honestly, we cannot be optimistic about the market situation next year,” said Kusumi, adding that the tougher outlook will increase the need for each Panasonic division to be more vigilant about inventory management and speed up the conversion of profits into cash flow.
In late October, Panasonic cut its annual operating profit forecast by 11 percent to ¥320bn, blaming a slowdown in its automotive business and US supply chain specialist Blue Yonder, which is expected to earn $7bn in 2021.
Geopolitical challenges have emerged as Kusumi tries to bring Panasonic to the next stage of growth. Since becoming chief executive in April 2021, he has eliminated heavy restructuring of non-core assets and made the group focus on green transition efforts.
He has also moved the Japanese group to a parent company structure to instill financial discipline and facilitate faster decision making. According to Kusumi, these efforts have shown which parts are more competitive and which are lagging behind despite reforms during his tenure.
Some analysts have criticized Panasonic’s vast portfolio for lack of focus, warning that many businesses are vulnerable to macroeconomic cycles.
“We will move to a new form of portfolio management that involves more than just carving-out,” Kusumi said, adding that he will revise the capital structure of some business units.