It has taken Japan’s electronics giants just five years to wipe out the profits of nearly two decades. If Panasonic, Sharp and Sony have their sums right – and that is a big if – the combined Y3.7tn ($46bn) they will have lost by the end of this financial year is equivalent to their profits from the previous 18, according to Capital IQ data. Their plight has led Sharp to admit that there is “material doubt” over its survival and Panasonic to introduce more writedowns and restructurings. Sony alone is clinging to profit hopes this year. Being the best of a bunch this bad does not say much.
Promises of action have duly been made, again. But the problem is not the will to act; it is the ability to get it right. This is hardly their first attempt. Panasonic has spent Y635bn in the past 10 years on restructuring and Sony Y590bn. Such regular one-offs should really be considered an ordinary expense. Doing so would have knocked up to a third off operating margins, already thinner than a flatscreen television. The spend could be forgiven if value had been created. But Panasonic has lost Y1,330bn from asset and goodwill writedowns and investment losses in the past 10 years – the result of poor bets, in other words. And Sony’s equivalent Y64bn gain includes losing Y155bn on asset sales. It is hard to see how more restructuring will produce a different outcome.
Yes, the yen is painfully strong, and Japan endured a devastating earthquake and tsunami last year. But these companies’ problems began when the yen was far weaker. Sales at Samsung, the rival that proves the right bets can be made, have grown an average of 15 per cent in the past 10 years. Japan’s electronics giants have managed an average 2 per cent.