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Panasonic’s first female director says gadget makers need major changes

Bloomberg

The economist picked by struggling Panasonic Corp. to become its first female director said Japan’s electronics makers need drastic changes to align their business models with those of companies including General Electric Co. and Siemens AG.

Manufacturers should focus more on growing demand for innovation in life sciences, agriculture and energy saving, Hiroko Ota, a professor at the National Graduate Institute for Policy Studies in Tokyo, said in an interview.

“What people want is a solution rather than an individual technology,” said Ota, 59, who served as the minister for economic and fiscal policy from 2006 to 2008. “It’s an opportunity for Japanese manufacturers.”

Panasonic, the maker of Viera TVs and Lumix cameras, last month nominated Ota as the first female board member in its 95-year history as President Kazuhiro Tsuga prepares to eliminate business units to focus on those with the highest operating margins. The Osaka-based company posted a record ¥772 billion net loss last fiscal year and expects a ¥765 billion loss in the year ending March 31.

Ota declined to make specific comments on Panasonic’s performance, saying her appointment as one of 17 directors is subject to approval at the annual shareholders meeting June 26.

Like peers Sony Corp. and Sharp Corp., Panasonic has seen exports undercut by the strength of the yen in recent years. Its performance has also been dented by intensifying competition from Apple Inc. and Samsung Electronics Co.

Panasonic fell 20 percent in Tokyo trading last year. It has recovered 27 percent this year as the yen weakens in anticipation of greater stimulus under Prime Minister Shinzo Abe’s campaign to revive Japanese growth.

Japanese manufacturers could boost earnings by seeking solutions to consumers’ problems rather than focusing on technology itself, Ota said. Changes have been slow in Japan partly due to its rigid labor system, she said.

“We have a system making it hard to transfer corporate pension funds, while our taxation system is more beneficial to those who worked at one occupation longer,” Ota said. “These make it hard for a company to change its talent pool even as business environments are changing rapidly.”

With more than 308,000 workers, Panasonic is the third-biggest employer among publicly traded Japanese companies, trailing Hitachi Ltd. and Toyota Motor Corp., according to data compiled by Bloomberg.

Japan has continued relying on large manufacturers such as Panasonic for economic growth, without introducing deregulation that can promote growth of startup companies, Ota said.

“Whether Panasonic can find new growth areas is also important for Japan’s economy,” she said.

The yen’s strength in recent years and the growing competition from companies in other Asian countries have underlined the importance of speeding up changes, she said.

“Japanese companies do have a pressing sense of crisis,” Ota said.

Panasonic, also Japan’s biggest appliance maker, is cutting its executive officers to 21 from 30 as part of Tsuga’s reforms. Measures to overhaul the company’s unprofitable TV business will be included in its new midterm business plan to be disclosed March 28, Panasonic has said.

Panasonic booked a profit for the months of October through December after cutting 13,000 jobs, while Tokyo-based Sony, the nation’s biggest TV maker, reported an eighth consecutive quarterly loss.