When Kunio Nakamura became president of the Matsushita Electric Industrial Co. (MC ) four years ago, he knew he'd have to administer some painful medicine to get the ailing company back on its feet. After all, the maker of Panasonic products had fallen behind PlayStation-powered Sony Corp. (SNE ) and was in danger of being caught by emerging low-cost rivals in China, Taiwan, and Korea. So Nakamura got out the knife: He cut the domestic workforce by 18%, to 120,000 -- a tall order in Japan -- and shuttered 30 factories around the world. "I forced through cuts driven by a sense of crisis -- that Matsushita would go under," says Nakamura.
Thanks to that surgery and some first-class electronics, the 85-year-old company has gone from basket case to case study. Last year, Matsushita posted sales of $71.9 billion and operating profits of $1.88 billion -- up 54% from 2003. That's a massive turnaround from the $3.6 billion loss Matsushita suffered in 2002. The company says sales this year will grow 18% and profits 43% as consumers snap up hit new products such as DVD recorders and snazzy flat-screen TVs.
For all his cost-cutting verve, it's the products that really jazz Nakamura. As low-cost rivals gain steam, he knows Matsushita needs to keep coming up with innovative breakthroughs if it is to stay ahead of the pack. To keep tabs on Matsushita's cool factor, all new products must now be approved by a four-man committee that he heads. "If our product quality doesn't beat our rivals, we will inevitably get sucked into a price war," Nakamura says.
The soft-spoken president has prospered by integrating a pragmatic Western approach with traditional Japanese values placing social concerns above profit. For instance, Nakamura says instituting layoffs was the hardest thing he has done as president, so the company offered generous compensation. And Nakamura insists that management salaries be tied to workers' wages.
Nakamura, 65, got a degree in economics from Osaka University in 1962 and immediately joined Matsushita. By the early 1980s, he had worked his way up to head of sales for the company's domestic businesses. Then in the mid-1990s, he was asked to reorganize Matsushita's British and U.S. operations, helping to hone his restructuring skills. One thing he didn't pick up in the U.S., though, is the typical CEO's instinct for grabbing the spotlight. "He is calm and quiet, but highly respected for his sound logic," says Fuminori Takemura, a veteran of Matsushita's corporate planning department who now works at management consultants A.T. Kearney Inc. in Tokyo.
Nakamura, though, is quick to say that his mission is far from complete. One concern is that while profits are heading in the right direction, there's still plenty of room for improvement. There are external worries, too, such as the overheating Chinese economy and the continuing strength of the yen against the dollar, which hurts profits from the U.S. "We've surmounted the immediate crisis, but the danger still remains," he says. With Naka-mura in charge of rehabilitation, though, the prognosis is for a healthy corporate future.