Tesla supplier Panasonic seeks to balance US and Chinese markets in tech war

Panasonic will actively pursue growth in both the U.S. and China as the Tesla supplier strengthens cash management to head off a tech tussle between the world’s two largest economies.

In an interview with the Financial Times, chief executive Yuki Kusumi said the Japanese conglomerate will also conduct a review to manage its broader business portfolio, which includes car batteries, air conditioners and microwave ovens, after two years of trying to make their services more efficient. and cost effectiveness.

“It’s true that separating the U.S. and China is becoming a big challenge for us,” Kusumi said, adding that the company was exploring ways to produce more of the car battery materials in the U.S. that were previously purchased in China.

“But both the US and China are key markets that will continue to grow,” he said. “For us, both markets are important and we will bring each of these businesses to a position where they will be less vulnerable to political influence.”

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The US is a particularly important market for Panasonic’s car battery business. The Japanese group is running a $5 billion gigafactory in Nevada with electric vehicle maker Tesla.

Panasonic plans to invest $4 billion to build a factory in Kansas, a decision Kusumi said was supported by the recent passage of US President Joe Biden’s Anti-Inflation Act, which included $369 billion in incentives to fund the effort. contains clean energy.

Panasonic President Yuki Kusumi
Panasonic president Yuki Kusumi said: “It is true that the separation of the US and China is becoming a big problem for us.” © Eri Sugiura/FT

The Kansas plant may be funded in part by ¥400 billion ($3 billion) Panasonic has earmarked for investment in growth areas such as EV batteries, supply chain software and air conditioning over the three years to March 2025. Another ¥200 billion was earmarked for the development of hydrogen fuel cells and other new technologies.

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But Panasonic has also been aggressive in expanding its home appliances and refrigeration systems in China, where local governments are given autonomy over operations, unlike other regions.

Kusumi said the company may try to sell products made in China to Asian markets that do not fall under U.S. export controls designed to block Beijing’s access and ability to develop advanced semiconductors.

“To be honest, we cannot be optimistic about the market conditions next year,” Kusumi said, adding that the tough outlook will increase the need for each of Panasonic’s divisions to focus on inventory management. be vigilant and accelerate the conversion of revenues to cash flow.

In late October, Panasonic cut its annual operating profit forecast by 11 percent to ¥320 billion, citing a decline in its automotive business and US supply chain specialist Blue Yonder, which it bought in 2021 for $7 billion.

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Geopolitical issues have arisen as Kusumi tries to bring Panasonic to its development stage. Since becoming chief executive in April 2021, he has led a major restructuring of non-core assets and the group has stopped to focus on green transformation efforts.

He also transformed the Japanese group into a holding company structure to maintain financial discipline and facilitate faster decision-making. According to Kusumi, these efforts revealed which sectors are more competitive and which are lagging behind despite the reforms during his tenure.

Some analysts have criticized Panasonic’s sprawling portfolio as lacking focus, warning that many of its businesses are vulnerable to macroeconomic cycles.

“We will move to a new style of portfolio management that involves more than allocation,” Kusumi said, adding that he would review the capital structure of some business units.

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