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Panasonic's 'samurai' CEO

Having pulled the company out of the red, Kazuhiro Tsuga, fast-driving president of Panasonic Corporation, is steering it away from consumer electronics as it approaches its centenary in 2018.

'Outside Japan, Panasonic is treated as a consumer electronics maker or say, a TV manufacturer, in some sense, but the reality is - we are trying to change ourselves. Our mission is to provide a better life, a better world.'

KAZUHIRO Tsuga was named to the top job at Panasonic Corporation in early 2012 under pretty dire circumstances: Hit by fierce competition and falling prices in its ailing TV business, as well as a strong yen and natural disasters, the beleaguered company - Japan's biggest appliances maker - was headed for a record loss of 780 billion yen (around US$10 billion then) that fiscal year.

Unfazed, the new company president stepped up to his role in June 2012 with a steely determination and, one would say, with panache - turning Panasonic around within two years and, in the process, transforming the conglomerate into one with diverse growth drivers well beyond consumer electronics.

And Mr Tsuga - who's been dubbed "samurai CEO" - is far from done: The corporate revolutionary has new milestones for Panasonic (which was founded in 1918 and long known in Japan, until 2008, as Matsushita), not least a sales target of 10 trillion yen in its centenary year. He is now scouring for strategic investments and acquisitions to get there, and has set his sights on the automotive, energy and housing businesses in particular.

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Even for a lifelong Panasonic man - among other jobs, Mr Tsuga ran its technology and R&D operations earlier in his career - it was a huge challenge getting an overview of the stodgy giant's sprawling worldwide operations when he first took the helm. There were, to begin with, something like 579 subsidiaries across multiple business units.

The 58-year-old tells The Business Times, speaking in English: "So three years ago, I became president. Though I'd been working in this company for more than 30 years at that time, but the company was so huge, it was very difficult to see, even as the president, what was Panasonic. That was, frankly speaking, my first impression. It was very difficult to see, inside the big company, what was happening, and so (it was) very difficult to predict profitability.

"Around 25 per cent of our business was negative, and not only the TV business. The TV business was quite deeply related to, say, semiconductors, panels, various components, and sales platform-wise, TV's position was very large among consumer electronics sales. So (it was) not only TV but also various related businesses (that) we had to restructure."

He sought visual overview - "I had to visualise so that I could quickly change the company".

But the rest of the management team must also share the "vision", so that decisions can be taken quickly, with fast follow-up action, he adds, alluding perhaps to how decision-making in corporate Japan - typically done collectively - usually takes too long.

Mr Tsuga wasted no time embarking on a series of measures, big and small, to cut the fat and overhaul operations - moves that earned him the "samurai" moniker: To begin with, he shrank the size of his management team down to 10, from 30; had the team meet not just monthly but weekly; and, for good measure, slashed the staff at the Panasonic headquarters in Osaka from 7,000 to 130. He also cut salaries across the board, stripped 35 top executives of their company cars and drivers, shrank managers' bonuses by more than one-third, and suspended Panasonic's quarterly dividend, paid out since 1950 (and since reinstated).

He himself took a bigger pay cut, of up to 60 per cent, during Panasonic's slog back to the black.

There was no big retrenchment, even in the massive downsizing of the company HQ, he clarifies. "Very simple, just redefine... this is HQ, the rest is not HQ. So (the HQ staff did) not lose their jobs, (it was) just redefined, recategorised... they became non-HQ people," he says, breaking into a guffaw, something that he would do several times during the hour-long interview.

"That means they have to face customers or business divisions or sometimes face directly shareholders, not just work together with the president."

In any case, staff downsizing "was not the main purpose", he says, "though the result (of the corporate restructuring) was that total headcount became drastically reduced - currently we're around 250,000, from 385,000 - we split some of the business divisions to outside, (and) sold off some businesses".

Mr Tsuga was unflinching in weeding out poor performers: Businesses that fail to make at least a 5 per cent profit had to be improved or exited. So he eliminated products, shut plants and outsourced manufacturing as he steered Panasonic away from its identity as a maker of flat-panel TVs, refrigerators, Lumix cameras and smartphones, firmly towards the industrial arena, focusing in particular on business-to-business (B2B) enterprises, such as automotive electronics, smart housing solutions in Asia, and the manufacture of electric-car batteries through a high-profile partnership with Elon Musk's Tesla Motors.

Indeed, when Panasonic announced in October 2013 that it would close the last of its plasma TV factories in Amagasaki, it marked the end of a golden decades-long TV manufacturing era for Japan. Mr Tsuga - who had earlier shut two TV plants when he was a senior managing director running the TV business - had waited until his predecessor, Fumio Ohtsubo (who led Panasonic's heavy investment in TV production ) resigned as chairman in June 2013 before deciding to pull the plug on plasma.

Panasonic's operations (still a whopping 468 subsidiaries and 94 associate companies worldwide) have been consolidated into five business divisions - B2B solutions, consumer electronics, automotive, housing and devices - with consumer electronics now accounting for just about a quarter of the group's global sales.

Says Mr Tsuga: "Outside Japan, Panasonic is treated as a consumer electronics maker or say, a TV manufacturer, in some sense, but the reality is - we are trying to change ourselves. Our mission is to provide a better life, a better world."

A Better Life, A Better World, the corporate slogan, is a nod to founder Konosuke Matsushita's philosophy, with Panasonic having ditched, on its 90th anniversary in 2008, the Matsushita name in a global branding blitz. Mr Matsushita - an industrialist and one of the greatest pioneering entrepreneurs of Japan, if not the world - had said, back in 1932: "Our mission as a manufacturer is to create material abundance by providing goods as plentifully and inexpensively as tap water. This is how we can banish poverty, bring happiness to people's lives, and make this world a better place."

Global outreach

The company's core mission "to improve people's lives" hasn't changed, says Mr Tsuga. "Originally it was through consumer electronics, brought about by more products, with reasonable price, based on mass manufacturing."

But its corporate slogan now extends the concept to a global scale - individuals around the world with different demands for "better life" - and to environmental, quality of life concerns.

"A Better World, so issues like air pollution, energy... as a company we have to tackle that type of environmental issues, and have more solutions. So the way we contribute (to a better life, a better world) has changed, but the basic mission stays the same," he says.

The tough decisions paid off : Panasonic returned to the black for the first time in three years in its 2014 fiscal year through March 2014, notching a net profit of 120.4 billion yen (then US$1.2 billion). This April, it reported an almost-50 per cent jump in net profit to 179.5 billion yen for the 2015 fiscal year. For the current fiscal year to March 2016, the company has forecast profit to hold at 180 billion yen on the back of a 4 per cent rise in sales to 8 trillion yen.

Mid-term targets for FY2014 - FY2016 in three areas - operating profit, operating profit ratio, efficient free cash - were achieved one year ahead of schedule.

Of its five business divisions, the housing arm, PanaHome - which began back in 1959 as a Matsushita arm that developed prefabricated housing units - is for now the most domestic-oriented, catering to the home remodeling and eldercare markets for an ageing Japanese population.

But Mr Tsuga sees "big opportunities" in Asean and beyond as well. "Demand is happening and will increase; for example, in the development of new towns."

In April this year, PanaHome Corporation set up a new regional headquarters in Singapore to expand the housing business across the Asean countries, focusing on township projects. And in the housing and eldercare businesses in particular, Panasonic is also fulfilling its corporate social responsibility role, Mr Tsuga says. Supporting Japanese society "is of course quite important because of our origins", he says. "But we also have to find out what will be our new contributions to Japanese society... and in the future, this issue may not only be for Japan."

He is particularly upbeat about the company's automotive business, where it has already received orders to the tune of 70 per cent of its FY2019 sales target of 2.1 trillion yen.

For Panasonic, opportunities abound as vehicles are increasingly fitted with electrical and computer systems these days, from developing next-generation cockpit systems, advanced navigation systems to batteries for green cars.

"We have good technologies and devices... batteries, entertainment systems...we have the number one share in the industry," Mr Tsuga declares.

"Basically we are a technology-oriented company. It was not at the beginning 100 years ago but now we have lots of technologies so we have to utilise them, extend that advantage."

Indeed, he brushes off the notion that Japan is no longer dominant, or even competitive, in consumer electronics.

"Consumer electronics - that market is commoditised; we have Korean, Chinese competitors, they are growing, that is true. But we have more technology, more manufacturing spirit, wide variety of products and customers, not only in Japan but all over the world. So that's why we change our mindset, utilising what we have now and try to redefine our business field, our contribution area - then do more investment for the business areas."

It's "not only just TVs or refrigerators or washing machines" that are in demand, he says. "People want to buy cars, people want to buy a new house... what would be the house (of the future)... that's something where we have to innovate."

Local management

The innovation model has to be changed "from (being) seed-oriented to customer needs-oriented", he adds. "We have to change it, from original, technology or basic material-oriented, device-oriented, to solving customer problems. So that becomes the good sort of feedback for us to decide direction of technology progress.

"We can change that - we have already many skills or technologies available, relationships with customers, brand image. In that sense, we are much ahead of Korean competitors."

Panasonic has placed its bets on electric cars, with its big venture with Tesla Motors in its Nevada Gigafactory. "For us, Tesla represents sort of an interesting intersection of the auto, energy, technology businesses," says Mr Tsuga. "So, for us, that's a big challenge, a good challenge, to change our company - we are turning 100 in 2018, getting old, we have to have new power, from outside," he adds, laughing.

Panasonic carves out the global market into three regions - Japan; Americas and Europe; and what it terms "Strategic Regions", which include Asia and the Middle East. While it's undoubtedly a global player, the 97-year-old company remains quinessentially Japanese in many respects. But Mr Tsuga would like to see autonomous local management across Panasonic operations worldwide.

"Currently we are still too much Japanese executives in the top management," he says. "My dream, or ideal situation, is (for Panasonic companies) in each region or country, (to be) self-independent, based upon the local people. For example, our investments in India, we are having such organisations - the top executives are Indian, and they have a team of Japanese to support the business expansion."

That's also the case in America, where the Panasonic operations are mostly run by Americans, he says, citing in particular Panasonic Avionics Corporation, which is headquartered in California.

Before joining the management ranks in 2008, Mr Tsuga's work in Panasonic was entirely in the technology areas, building up a portfolio of patents. He ran the company's Advanced Appliances Development Center for audiovisual technologies, and later led Panasonic's efforts in digital network and software technology development. Outside Panasonic, he was also involved in industry work to develop a Blu-ray standard for DVDs, and in the formation of the Digital Living Network Alliance and other initiatives.

And so he brought an engineer's perspective - and then some - to running a giant corporation like Panasonic.

"Because I had less experience in management, and my background is R&D, I try to make everything simple... (everything is) simply modelled; that's why this chart, wording and all, must be very simple," he says, referring to a corporate chart of the business divisions. "Everything has to be visualised and simplified."

And no, he does not study industry trends, he says. "I need to feel," he says. "I need to 'feel' the reality or feasibility so... I make assumptions or hypotheses, then (figure) how it is reasonable, so I need to directly go to the customer or market or employees or factory, then I can feel if we can make it real or not. And then if necessary, I will make even some small changes, do some feedback, to change or clarify (targets)."

Hence his frequent trips, to factories within Japan and to Panasonic operations overseas. "Just reading or believing the reports of executive people or HQ, I cannot," says Mr Tsuga, who commutes between Tokyo and Osaka every week.

While he plays golf, sometimes with his wife, and has recently taken up gardening, Mr Tsuga admits also to a penchant for high-powered (or "muscular") cars.

"I drive really fast! Very dangerous!" he quips, to guffaws from his deputies around the table. But since becoming company president, and "because of my business relationship with car makers" - Panasonic works with virtually every automobile company - he's given up his fast cars and now drives "very slowly", he says.

"So maybe after retirement," he adds, chuckling, "I will have muscular cars".



Panasonic Corporation

1956 Born in Osaka, Japan on Nov 14

1979 Graduated from Osaka University with BSc in Bioengineering

1979 Joined Panasonic (then known as Matsushita Electric Industrial Co Ltd)

1986 Graduated from Univ of California, Santa Barbara with MS in Computer Science

2001 to 2004 Director of Advanced Appliances Development Center for Audiovisual Technologies.

Led talks with competitors and Hollywood studios on establishing a Blu-ray standard for DVDs

2006 Executive Officer, led Panasonic's efforts in digital network and software technology development; directed its overseas R&D Centres and Digital Network Strategic Planning Office

2008 President of Automotive Systems Company; Managing Executive Officer of Panasonic Corp

2011 President of AVC Networks Co; Senior MD of Panasonic Corp and Member of the Board

2012 President of Panasonic Corp and Member of the Board