HONG KONG (Reuters Breakingviews) – Panasonic’s incoming boss will have plenty of room to manoeuvre when he takes over in April. Tuesday’s third-quarter results show the $32 billon Japanese conglomerate has moved swiftly since announcing a strategic overhaul, and Yuki Kusumi’s promotion to chief executive in November. Cutting costs and dud assets boosted earnings despite subdued sales.
Departing CEO Kazuhiro Tsuga had already vowed to reduce its sprawl and expenses when Covid-19 struck. The crisis seems to have lent a sense of urgency, with underperforming operations like solar-panel production either closed down or hived off. As a result, despite revenue falling 5%, third-quarter operating profit grew by 30%, and the company raised its full-year forecast by half.
That frees up his successor to focus on the top line. In the past, Panasonic has struggled to add new products to its repertoire while growing sales. But Kusumi, who currently runs Panasonic’s auto unit, is well equipped to take advantage of the growing demand for electric vehicles, whose sales accelerated 40% last year, according to Bernstein.
He should have a smooth ride in his first few weeks on the job. His most high-profile client, Tesla, just turned an annual profit for the first time, and Panasonic expects its battery business will follow suit for the fiscal year ending in March. True, Panasonic is no longer Tesla’s exclusive supplier. But rivals from Ford Motor to Volkswagen are investing tens of billions of dollars in electrification. The growing demand is straining supply chains and putting known quantities like Panasonic in the driver’s seat.
The energy-dense cylindrical batteries Panasonic makes for Musk are more versatile than alternatives like prismatic batteries, and potentially more profitable as well. The company is already looking into opening a new factory in Europe, where electric-vehicle sales grew 46% last year.
Kusumi could even follow the path blazed by Tesla and sparkier startups from China’s Nio to U.S.-based Lordstown Motors by tapping equity markets’ current craze for all things electric to fund new ventures. Panasonic’s shares are up by around a third since his appointment was unveiled, giving him a better currency to do so.
Switching to the fast lane would be out of character for Panasonic. But a new boss behind the wheel of a leaner, meaner machine might inspire a change of pace.
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