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Panasonic plans massive personnel retrenchment. Viewed favorably by markets

2, 20. 2009

   Panasonic Corp. has announced it would cut its employment by a total of 15,000 workers at home and abroad by March 2010. The company also plans to shut down production facilities at 27 places. These actions constitute the largest ever scale of retrenchment by restructuring for the company. The company has taken the decision to this effect as it could not foresee a recovery from deteriorated business performance in the face of sharp decreases in the sales of flat panel television sets and other digital home appliances, which led the sound business performance in the past, as a result of the sharply worsening economic condition in the world. This shows the company's strong sense of danger.

About 13,000 workers forced early retirement in wake of burst of IT economic bubble

   The latest personnel reduction by the company is more or less equally divided between its domestic and overseas work shops. At the domestic work shops, the workers to be dismissed will include those supplied by staffing agents and non-permanent workers besides employees proper. Of the production facilities the company operates at a total of 230 different locations over the world, those at 13 locations in the country and 14 locations in Malaysia, the Philippines and others in foreign countries are to be closed in fiscal 2008 and 2009. The production facilities subjected to the closure in the country include the Fujisawa factory in Fujisawa, Kanagawa Prefecture and the Gifu factory in Oonomachi, Gifu Prefecture.

   To carry out the massive restructuring, Panasonic will spend a total of 345 billion yen as restructuring expenses which is 190 billion yen more than the 155 billion yen it originally estimated as such expenses as of November 2008. The total restructuring expenses will be declared on its account settlement for the term ending in March 2009. As a result, the company's consolidated profit-and-loss account will drop into a loss of massive 380 billion yen from the earlier forecast black figure of 30 billion yen. The company declared a profit of 281.8 billion yen in the previous term.

   Panasonic reported a big red figure of 431 billion yen for the term through March 2002, or just after the bust of the so-called "IT bubble economy". The company took personnel retrenchment measures at that time, including request to about 13,000 of its employees for their early retirements. The company at that time spent 250 billion yen for carrying out the measures. The latest retrenchment has come out to be of the largest scale in seven years since then. The expenditures to finance the latest retrenchment are also 100 billion yen more than those at that time. Some 240 billion yen, or 70%, of them are expected to be spent for television-related matters.

Reemergence of V-shaped recovery can not be promised

   The flat-panel televisions, which are said to be the "trade mark of Panasonic", have lost their position of the "earning pillar" for the company as a result of the sharp sales and price declines. For the term through March 2009, the company is forecast to fall into an operating loss for the first time. Against this backdrop, Panasonic plans first to reorganize the panel factories in the country. The company then will take steps to rationalize its production system worldwide aiming at reviving its black-figure-oriented management. These steps will include the shifting part of the works at the assembling plant in Czech Republic to Thailand.

   Though the company is forecast to fall into the red for the term ending in March 2009, Panasonic is highly appraised by the markets as the loss would be resulting from the large-scale restructuring. It gives a strong confidence that the company once experienced the "V-shaped recovery" following the restructuring conducted in the term of March 2002. An official of a major electronics company said, however, that the "current financial crisis and economic slump are beyond imagination." Under such a condition, there is no promise that the "V-shaped recovery" will be revived again. Depending on how the current economic condition will developed from now on, it is possible that the company will need enhanced restructuring program.

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