Panasonic moves beyond living room to reinvent its core

Panasonic used to make televisions, refrigerators and computer monitors in this suburb of Tokyo. Now, six years after closing its factories in Fujisawa, the company is building homes on the site, which is sandwiched between Mount Fuji and the Pacific.

With several partners, Panasonic plans to erect 1,000 houses in Fujisawa, using them to showcase its clean-energy technologies such as solar power systems, LED lighting and sensors for reducing energy consumption. The first batch, sheathed in protective plastic cladding bearing the name of the company's residential division, PanaHome, is nearing completion.

Like other troubled Japanese electronics giants, Panasonic is trying to get its own house in order. Consumer electronics like those that were once made at Fujisawa provided the foundation for Japan's post-war economic miracle. But in recent years, South Korea and Silicon Valley have moved to the fore in technological innovation and marketing, while China has taken the lead in manufacturing.

So, Panasonic is trying to reinvent itself as a provider of less visible but more profitable industrial technologies in two areas: Homes and automobiles.

Panasonic's biggest Japanese rival in consumer electronics has long been Sony, which is sticking with smartphones, TVs, cameras and other devices despite tough times. And even Sony has been doing better with some behind-the-scenes products, like sensors for smartphone cameras, than with some of its own branded electronics.

In October, as Sony reported a loss for the most recent quarter, Panasonic posted a net profit of ¥61.5 billion, or nearly $590 million, and raised its earnings forecast for the full year. "We believe Panasonic has turned the corner into sustainable profit expansion in non-consumer electronics businesses," Damian Thong, an analyst at Macquarie Securities, wrote in a note to clients.

Panasonic once tried to match Sony move for move. In the heyday of Japan's dominance in consumer electronics, in the 1970s and '80s, it was the brand that people chose when they really wanted a Sony Walkman or Trinitron TV but could not quite afford those brands.

Since the nineties, the decline in the Japanese electronics industry has claimed several stalwarts, including Sanyo. Panasonic took over. After that Panasonic got out of several unprofitable businesses.

The company's president, Kazuhiro Tsuga, has announced plans to stop making plasma televisions and smartphones and to scale back output of digital cameras. Panasonic also plans to sell a majority stake in its health care business to Kohlberg Kravis Roberts, the private equity firm, and stop making circuit boards, which are used in smartphones and other devices, at four of its plants in 2015.

"Panasonic's future is being built on far more than a single product category," Tsuga had said earlier. The company declined to make him available for an interview.

From the living room, Panasonic is moving into the garage. It supplies battery cells to Tesla Motors, the American maker of high-performance electric cars, and other carmakers, including Toyota, Honda, Volkswagen, Ford and PSA Peugeot Citroën. It wants to expand into navigation, entertainment, self-driving and parking assistance systems. Panasonic says it intends to double sales in its automotive division to ¥2 trillion over the next five years, becoming one of the top 10 makers of auto parts worldwide. "Tesla has the best car battery in the world right now," says Bruce M. Belzowski, an assistant research scientist at the University of Michigan Transportation Research Institute. "Panasonic has got to be getting some halo effect from that."

Panasonic is predicting comparable growth in businesses related to housing, expecting sales of ¥2 trillion in the 2019 fiscal year, up from ¥1.1 trillion in the most recent year.

The company is not giving up entirely on consumer electronics. It will make LCD TVs, high-end cameras and home appliances. Analysts say it makes sense to keep a limited presence in consumer-focused businesses because of the visibility attached to them. "I think Panasonic needs this kind of PR to maintain its brand," says Lee Kun Soo, an analyst at IHS iSuppli, a research firm. "The brand is an asset it built up over more than 50 years.

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