Matsushita Electric Industrial Co. and Hitachi Ltd. are in the final stage of negotiating a cooperation pact that would allow them to streamline their home appliance units and compete more efficiently with foreign manufacturers.

The companies admitted in a press release that they are talking about a business tieup but declined to elaborate, saying they will give details as soon as they reach an agreement.

Industry sources said the two behemoths are talking about commissioning each other to manufacture refrigerators, washing machines and other so-called white goods, and joining in the development of computerized home appliances, including digital televisions.

With the tieup, the two firms aim to bolster their respective efficiency by streamlining overlapping businesses and jointly procuring parts.

Deals to be struck may further call for closure or consolidation of some of their factories and business divisions, the sources said.

Intensifying competition with manufacturers in other parts of Asia where labor is much cheaper is forcing domestic makers to cut costs and boost efficiency.

Under these circumstances, the two electrical giants decided to promote restructuring in production systems beyond existing corporate frameworks, the sources said.

Sharing technology in developing computerized household appliances would help the electronics giants slash development costs, the sources said.

Matsushita reported 7.68 trillion yen in consolidated sales for fiscal 2000, of which some 40 percent came from household appliances.

The company’s profit-earning capacity, however, has been on the decline, leading the company to map out a drastic reorganization plan.

Already Matsushita has separated the production and sales sections in each of its divisions and later this year will consolidate its 22 regional sales units into a single firm.

Hitachi’s fiscal 2000 group sales came to 8.41 trillion yen, of which household appliances contributed 10 percent.

Industry analysts say Hitachi is falling behind other manufacturers in coming up with smart home appliances.

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