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In yet another sign of the worsening global recession, Japanese consumer electronics giant Panasonic said Wednesday that it will lay off 15,000 employees, or 5 percent of its workforce, by March. Half of the job cuts will be made in Japan.
Panasonic is the second large Japanese consumer electronics company to announce massive layoffs in the past week. Computer maker NEC (Nasdaq: NIPNY) said it will slash 20,000 jobs on Jan. 30. Hitachi (NYSE: HIT) and Toshiba also recently announced significant layoffs.
Panasonic said it will close 13 factories in Japan and 14 overseas by the end of next month.
The company's restructuring announcement came on the same day Panasonic announced dismal financial results for the quarter ended Dec. 31, 2008. The company lost 63.1 billion yen (US$706.8 million) compared with earnings of 115.2 billion yen ($1.3 billion) during the same period in 2007.
Panasonic's stock was down .25 percent to $12.18 in mid-day trading on Wednesday.
Downsizing a Long Time Coming
"I think the size of the layoffs coming out of Japan overstates the problem a little bit," Van Baker, a consumer electronics analyst with Gartner (NYSE: IT), told the E-Commerce Times. "Historically, Japanese companies have been reticent to do any layoffs at all. I think they've realized that this is an opportunity to do some reductions that they should have done a few years ago."
On the other hand, the recession has forced consumers worldwide to put the kibosh on spending for discretionary items such as computers, cell phones, MP3 players, cameras, televisions and other devices, sending the companies that make those items into a collective downward spiral, he said.
Plasma TVs Falling Out of Favor
Panasonic has a great deal of exposure in the plasma television market, which has exacerbated its current difficulties.
"Panasonic's sweet spot has been the plasma television market, and LCD (liquid crystal display) TVs are eating plasma's lunch right now," Baker said. "All of the past shortcomings of LCD TVs have been addressed by the manufacturers. And plasma is for TVs only. LCDs are used in a variety of consumer electronics items."
Unlike many consumer electronics companies, which often farm out the fabrication of different components of their products to partners, Panasonic owns every part of plasma TV production, said Ben Bajarin, director of the consumer technology practice at Creative Strategies.
"Panasonic does the glass, the chips, everything," Bajarin told the E-Commerce Times. "They do have LCD offerings, but their portfolio isn't as good as other companies like LG, Samsung and Sony."
Weak American Dollar
Another major problem for Japanese manufacturers is the weak American dollar versus the relatively strong yen, Bajarin said.
"The only way for them to fight that is to raise prices, which they can't do," he said. "Or, they have to make it up in sales 
volumes, which they can't do because there isn't as much demand. None of those solutions are really very viable, so what you're seeing is downsizing of the workforce and scaling back of manufacturing. Those things are good to do right now."
A Long Time Ago in a Turnaround Far, Far Away ...
Given the state of the global economy, it could be quite a while before the consumer electronics industry sees any kind of turnaround.
"The way things are looking, I'm not expecting it this year," Gartner's Baker said. "I think it's more a question of when are we going to see the bottom, and I don't think we're there yet. We may even see sequential losses on a year-to-year basis across all the quarters. Hopefully, there will be a turnaround next year."
The consumer market will flag for throughout 2009, predicted Creative Strategies' Bajarin. "We're hoping for a mid-2010 rebound. Big-ticket items are really going to suffer."
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