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Panasonic to cut 17,000 employees

Panasonic chairman and president

Panasonic, Japan’s largest makers of consumer electronics, has announced a broad restructuring plan that will see the company shrink itself from five major divisions down to three, as well as cut some 17,000 jobs. The moves are intended to make the company more competitive with electronics manufacturers in South Korea and China, but also reflect Panasonic’s efforts to cope with the disruptions and devastation generated by last month’s massive earthquake and resulting tsunami, which have significantly dampened demand in an already-sluggish Japanese market.

Panasonic currently employs about 367,000 people, so the 17,000 job cuts represent a roughly 4.5 percent reduction in the company’s workforce. The cuts seem primarily targeted at integrating two recent acquisitions—Sanyo Electric and Panasonic Electric Works—into the larger company. At the same time, Panasonic is going to reduce the number of major business divisions within the company from five areas based on technology platforms to three new sectors based on business models: Consumer, Components & Devices, and Solutions. The Consumer group will comprise climate control and home appliances, along with Panasonic’s AV, home entertainment, and networkable products. The Components & Devices group will handle energy, automotive, and (apparently) smartphones, while Solutions will comprise four primary businesses centers on health care systems, environment and energy systems, communications, and factory systems.

In the consumer sector, Panasonic says it plans to increase purchases of LCD panels from other manufacturers and increase its own overseas production to compete with the likes of Samsung and LG, and also plans to reorganize its semiconductor business to lower dependencies on large-scale integrated circuits from other manufacturers.

Panasonic estimates the restructuring will cost about $2 billion, but says the changes should increase annual revenues by over $700 million a year, particularly as the company ramps up sales of solar cells, lithium-ion batteries, climate control equipment, and LED lighting.

Nonetheless, Panasonic will face many challenges: the comparative strength of the Japanese Yen has made Panasonic products more expensive than products from competitors, particularly in overseas markets.