Talking with Group CEO Kusumi: The True Meaning of Group Management Reform | Management/Financials | Company | Feature Story

Can you provide an overview of the announcement and its background?

Based on a review of the current Medium-Term Strategy that has been the focus of our efforts for the past three years (since 2022), we outlined the vision of the Panasonic Group and explained to internal and external audiences the issues that need to be resolved right now and the details of the reforms that must be implemented without delay.

There are two main points. First, in order to resolve structural and intrinsic issues within the Group, we will embark on fundamental group management reforms centering on “fixed-cost structure reform and profit improvement by streamlining for leaner¹ HQs and indirect departments,” “elimination of businesses with issues,”² and “focus on Solutions,” seeking to achieve the following profit targets by fiscal year 2029 (fiscal year ending March 31, 2029): an ROE³ of 10% or greater and an adjusted operating profit margin of 10% or greater. Second, in order to contribute to the sustainable development of society and lifestyles that make effective use of the earth’s limited resources and energy, we have defined the globally competitive “Solutions area” as an “area of focus,” and the home appliance-centered “Smart Life area” and “Devices area” as “profit base areas.”

1 A business model that minimizes waste
2 A business is defined as having “issues” if its Return On Invested Capital (ROIC) is lower than its Weighted Average Cost of Capital (WACC)
3 Return On Equity; an indicator of how effectively a company uses the money invested by shareholders to generate profits

In addition to responding better to stakeholders, who viewed the content of our announcement spread across media and social media in a manner that included some misinterpretations and distortions, I would like to take this opportunity to reiterate Panasonic Group’s position.⁴

4 Blog Posts: Regarding some media reports on the television business and others (February 6, 2025), Regarding some media reports on the use of the Panasonic name and brand (February 6, 2025)

I made the announcement at a time when the final year of the current Medium-Term Strategy (FY2023–25) had not yet ended, and although many people viewed the 3Q financial results announced the same day as relatively positive—with increased revenue and profit on a non-consolidated basis excluding the Automotive Business⁵—many were also surprised by the announcement of major management reforms. The fact is, I am still not satisfied with the state of our business, and I continue to feel a strong sense of crisis. This is the background to my February 4 announcement.

5 Due to the transfer of shares in Panasonic Automotive Systems Co., Ltd., the company became a subsidiary of Star Japan Acquisition Co., Ltd., an equity method affiliate of PHD, in December 2024 and was therefore excluded from consolidated results.

Of the medium-term management indicators established under in the FY2023–2025 Medium-Term Strategy, we achieved our cumulative operating cash flow target of 2 trillion yen by the end of the third quarter. However, we are not expected to achieve our ROE or cumulative operating profit targets. While implementing the FY2023–2025 Medium-Term Strategy, we have seen some results and improvements in some areas, but we have also identified more pressing issues that need to be addressed.

As I have been saying since I became Group CEO, our Group has not been able to grow in terms of sales or profits for the past 30 years. Operating profit margin continues to hover around 5% and is not even close to a level that would satisfy our shareholders. We have not been able to set a new profit record since 1984—or 40 years ago. This means that even though each employee is working extremely hard, business management is not generating results that reflect their efforts. I take that responsibility very seriously. Today, we face a crisis that threatens the survival of the group, and I, and the group’s management team, have come to the conclusion that we need to grasp the helm with even greater resolve and determination. This is the background to this announcement.

Some people might ask, “Why are you introducing reforms that will impact employment when you’re already making a certain amount of profit?” It is true that in the past, our company has taken emergency measures such as reducing employment after posting losses. However, from my own experience, when you try to make changes while running a loss, you cannot provide a sufficient level of support to your employees. Moreover, having surplus personnel does not encourage bold, original ideas for improving efficiency. It also hampers the growth of employees, meaning that the valuable human resources entrusted to us by society cannot be utilized. This situation must be avoided. So, although it is a reform that our group has never experienced before, I believe that we must be determined to see it through.