Panasonic fears a record loss of $5.5 for 2011. Or, how the LCD TV turned into a dog (part II)

Only minutes after I posted my blog on the disappointing Q2 results of Sony, the following news item on Panasonic caught my eye. Although it was already published on October 31, I didn’t read it yet. However, the conclusions of this article in Het Financieele Dagblad fit seamlessly to my conclusions on Sony:

Panasonic fears net loss of $5.5 bln for 2011

The Japanese electronics manufacturer Panasonic fears a net loss of $5.5 bln for 2011, where it still promised investors a net profit in June, 2011. This was announced by the company yesterday, on October 30. It would be the biggest loss in a decade for the company. This disappointment was caused by restructuring costs being almost three times as high as previously expected. Panasonic increased the speed of its reorganization at the loss-bearing TV branch.

This more decisive intervention means that Panasonic wil finish its plan for a job reduction of 17,000 jobs one year earlier. The new deadline is March 2012. The total number of jobs must be south of 350,000 at that moment.

An important part of the new plan is to pull the plug out of the Japanese production facility of LCD TV’s near Tokyo. About 50% of the reorganization expenses concerns the TV-branch. ‘We must tackle the TV issue’, according to CFO Makoto Uenoyama in a meeting with financial journalists last Monday.

The problems of Panasonic are not unique: also companies like Sony and Philips struggle with their loss-bearing Television branches. Demand is stalling in saturated markets like the US and Europe. In Japan the total TV market even collapsed, after all kind of stimulus programs of the Japanese government have ended. The outlook is a decline of 40% in the number of TV sets sold during this year.

Philips decided at the beginning of this year that the TV-branch should become fully independent, after it yielded sustaining losses. The problems of companies like Panasonic and Sony are increased by the expensive Yen. The currency has a dramatic effect on their competitive force against Korean companies, like Samsung and LG that produce at much lower costs.

As I already wrote in my article of this afternoon: it seems that the production of television sets by Japanese (and Dutch) companies is doomed. And I am even very pessimistic on the future chances for the Korean companies as well, as the TV manufacturing industry is busy with its race to the bottom.