Matsushita's Urgent Quest For Leadership

In Japan's ritualized business culture, company presidents sometimes resign to atone for poor results. On Feb. 23, Matsushita Electric Industrial Co. President Akio Tanii stepped down to take responsibility, he said, for "unfortunate events" during his seven-year reign. But he didn't quell speculation he had been shunted aside by Chairman Masaharu Matsushita, 80, who appears intent on solidifying family control of the $64 billion company, the world's No. 1 maker of consumer electronics.

The abrupt transition raises a question about whether Matsushita can get back on the growth track. Although Tanii, 64, denies he was pushed, industry watchers believe the chairman wanted him out before a May stockholder meeting. That's when heads of Matsushita's sales divisions will receive a plan for improving profits in a period of zero sales growth. Taking over from Tanii is Yoichi Morishita, a low-profile marketing expert.

But sources say Chairman Matsushita in a few years will replace Morishita with his son Masayuki--a 47-year-old senior managing director. Restoring family control may backfire. "I doubt the son could execute the kind of total, top-down overhaul that Matsushita requires," says one financial analyst.

RECALL BLUES. The tasks ahead are enormous. Matsushita depends on low-margin video and audio products and home appliances for nearly 50% of its sales. Demand for such goods has been sliding since the late 1980s. In the fiscal year ending Mar. 31, Matsushita's profits are expected to fall 65%, to $413 million (chart). Demand should pick up for the company's high-definition TV sets and other advanced video gear, but that may not happen until the end of the decade. In the meantime, says Chuck Goto, general manager at S. G. Warburg Securities (Japan) Inc., Matsushita should revamp its whole business model. "It can no longer sustain earnings simply on volume sales," he says.

Tanii had tried to restructure operations, rationalizing the maze of retail shops and reducing the number of TV models. But at the height of these efforts, Matsushita had to cover more than $150 million of bad debt racked up by a financial subsidiary. More damaging to its prestige were engineering flaws that sent 400,000 Matsushita refrigerators back for repair. For a company with intense pride in its manufacturing, such revelations were "devastating," says an executive at a rival company.

NEW PALS. On another front, analysts question Matsushita's ability to further integrate MCA Universal, the movie maker Tanii bought for $6.1 billion in 1990. Unlike Sony Corp., which cleaned up at the box office last year, MCA has had a string of flops. Yet Tanii defends the purchase. "We're already seeing some of the synergies between hardware and software," he says. Thanks in part to MCA, Matsushita is now hooked up with Apple Computer, AT&T, and Time Warner in U. S.-based multimedia ventures.

Moreover, MCA may finally have a blockbuster in the pipeline--Steven Spielberg's Jurassic Park, a thriller about dinosaurs running amok in a theme park. But unless Matsushita does something about its own petrified structure, no amount of Hollywood magic will be enough to turn the tide.

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