Matsushita's Creative Destruction

CEO Kunio Nakamura explains why, in order to rebuild the sagging Japanese electronics giant, he began by dismantling five subsidiaries

Few CEOs would covet the job Kunio Nakamura has taken on: turning around the consumer electronics conglomerate Matsushita. Once an icon of Corporate Japan, the $53 billion company has stumbled badly and needs to regain its footing. In April, it reported falling into the red in fiscal 2001 to the tune of $3.4 billion -- the outfit's biggest net loss on record.

A large chunk of that went to pay for restructuring. Nakamura has spent the last year closing plants and ushering some 13,000 employees out the door. Now he's folding five subsidiaries into the parent in order to eliminate duplication and pool research and development funds. Nakamura recently took time to discuss his restructuring plans with BusinessWeek's Tokyo Correspondent Irene M. Kunii. Here are edited excerpts of their interview:

Q: What have you accomplished since taking over as Matsushita's president and CEO in June, 2000?


There was a lot of work waiting for me. As soon as I became president, I drafted a midterm plan to revive growth, which I launched in April, 2001. I spent most of that year carrying out structural reforms in many areas of the company. I call this the period of destruction, during which I believe I accomplished a great deal in terms of reforming the company.

Q: What were your most successful reforms?


There are a number. For example, I overhauled the home-appliance distribution system that had been in place in Japan for 38 years. This April, we moved to an entirely new system.

Q: You have a plan to boost domestic sales by 5% over the next year by focusing on some key products. How are you going to accomplish this, considering the state of the Japanese economy and poor consumer demand?


No matter how beautiful a picture I paint, you're not going to believe me until I've actually achieved something. Therefore, in 2002, the most important thing for us is to begin our recovery.

Q: Can you be more specific about what you plan in terms of structural reform?


I've announced that we'll absorb five of our subsidiaries, with the exception of JVC, by October. The main aim is to eliminate duplication in product development. We'll create 14 product categories in four main business divisions: audiovisual, home appliances, industrial equipment, and devices.

Q: Does that mean you will close or merge more factories?


We've done a lot of our restructuring already, but it's possible. It's an ongoing process.

Q: A lot of Japanese manufacturers, including Matsushita, are shifting production to China. Is this a positive trend?


It's the current trend. However, Japan as a country needs its manufacturing base if it hopes to continue to grow. For many years, it has imported raw materials and developed products. It has been pushing the edge in technology, manufacturing, and miniaturization. Japanese happen to excel at nanotechnology -- they are the only ones who can make good micro displays. So I'm not that worried about losing our technological edge.

Q: Are you attracted by the promise of a big new market?


The Chinese domestic market is huge, and Matsushita will expand its business there. We hope China will become an influential Asian country, but not one that tries to dominate the region.

Q: Is there concern that China will overshadow Japan someday?


Though every country is independent, it must coexist with its neighbors. I think the age where one nation dominates another is over.

Edited by Patricia O'Connell

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