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New Matsushita head aims to boost margins

Posted: 28 Feb 2006 ?? ?Print Version ?Bookmark and Share

Keywords:Yoshiko Hara? Matsushita Electronics?

Matsushita Electronics new management team is setting lofty goals as they seek to sustain a slow but steady recovery.

Fumio Otsubo, the newly appointed president and chief executive of Matsushita Electric, said he expects the electronics giant to achieve profit margins of 10 percent by 2010.

Otsubo, 60, is slated to take the helm of Matsushita at the end of June, replacing Kunio Nakamura, 66, who becomes the company's chairman.

Otsubo's task will be to continue the company's long recovery since the beginning of the decade. Soon after his predecessor became company president in June 2000, Matsushita exhibited a staggering net loss of $3.7 billion in its fiscal 2001.

After undergoing painful restructuring that resulted in the loss of 20,000 jobs, Matsushita has pulled off a V-shaped recovery.

Nakamura aimed for operating profit margins of 5 percent by fiscal 2006, which ends in March 2007.

Otsubo's track record indicates he's up to the challenge. Presently senior managing director and acting president of Panasonic's AVC Networks Co., Otsubo Matsushita achieve market-leading status in plasma TVs.

"For the PDP TV business, Nakamura and I agreed that higher picture quality and larger size are essential for gaining the upper hand over competitors. So we never compromised on these points. Aggressive management is the most efficient strategy to win over competitors. It worked for the AVC Co. and I am sure that it will work at Matsushita headquarters," said Otsubo.

Nevertheless, Matsushita faces major challenges. Compared to many of overseas companies, the profitability of Japan's major electronics companies is relatively low. The earnings rate of Hitachi, for example, is expected to be 2.6 percent this fiscal year. Sony's projected earnings rate is 1.5 percent, while Toshiba's ratio is 3.3 percent.

Matsushita has so exceeded those earnings rates. It expects to achieve sales of about $75.7 billion, with a 4.5 percent profit margin by the end of the 2005 fiscal year ending in March.

Along with a profit margin of 10 percent, Matsushita is shooting for sales of about $86 billion by 2010.

"The target figure is quite clear. I want to achieve the goal by making use of my experience at Panasonic AVC and gathering company-wide wisdom," said Otsubo.

Matsushita will rely on products incorporating its proprietary "black box" technologies. Matsushita defines them as "V-products," which can attain market-leading shares in highly competitive markets. The category includes plasma TVs and DVD recorders.

Matsushita expects that 67 different products with black box technologies will earn $13 billion in sales in fiscal 2005.

To continue creating new products, Matsushita said it has focused resources on developing key technologies. Nakamura helped organized an R&D system that would yield products in as soon as a decade.

- Yoshiko Hara
EE Times

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