Panasonic signed a deal with Tesla on a large-scale battery plant, known as Gigafactory. The question inside and outside the Japanese company is this: how big an albatross might the Gigafactory become for Panasonic.
More important, Panasonic’s management team has just put the company back on track. Panasonic plans to continue with its rigorous cost-cutting measures — including a reduction in fixed costs.
Fresh in the memory of many Panasonic veterans is the company’s huge investment in mammoth factories for large-screen Plasma Display Panels. Panasonic, who was betting against LCD, insisted for years on the merits of PDP, even when consumers were saying that they saw no discernible quality differences between the two rival flat panel technologies.
Panasonic’s struggle with its TV business, once the company’s pride and joy, shook the company to its core. Between fiscal 2011 and 2012, Panasonic racked up group net losses totaling a 1.5 trillion yen ($14.4 billion).
In Panasonic’s latest quarter, the company’s AVC Network sales increased by 1% to 273.8 billion yen from 270.6 billion yen a year ago, due mainly to stable sales in core businesses,
Panasonic added, however, that sales of PDPs and smartphones for consumers decreased, as it winds down both businesses. In fact, Panasonic continues to suffer from losses in this segment. However, at 8.1 billion yen, numbers were significantly improved from a loss of 15.4 billion yen a year ago, according to the company. Again, Panasonic attributed the losses to the effects of “reforms in challenging businesses.”
For any CEO, vigilance with spending and staying the course is the easy part. Panasonic’s investment in Tesla’s Gigafactory will test Panasonic President Kazuhiro Tsuga’s willingness to bet on the future and dream big.
At a time when internal disagreements are speculated among Panasonic's senior executives as to Gigafactory investment, Panasonic's next move also tests how much Tsuga trusts his own judgment, as well as his ability to rein in his management team.
— Junko Yoshida, Chief International Correspondent, EE Times