Panasonic Says Ready to Spend $1 Billion on New Deals

Panasonic Corp. said it can afford a deal worth 100 billion yen ($1 billion) as the maker of electric-car batteries and solar panels looks to expand its automotive and housing businesses.

Acquisitions could include adding a company that can advance its auto technology or an overseas marketing channel for its home-related unit, Chief Financial Officer Hideaki Kawai said Nov. 8. The maker of parts for Tesla Motors Inc.’s electric vehicles last month announced a $460 million deal for a 90 percent stake in an Istanbul-based wiring device maker.

Panasonic, which has eliminated about 71,000 jobs since 2011, is heading toward its first annual profit in three years as President Kazuhiro Tsuga accelerates reform by halting some smartphone and plasma panel operations. The company last month won a contract to supply cells to Tesla’s electric vehicles in a deal that may generate $7 billion in revenue.

“We’ve improved our financial standing where we can afford an M&A at the 100-billion-yen level,” Kawai said in an interview at the company’s Osaka headquarters. “We’ll make a very careful study into any deal but our financial condition won’t limit us.”

The company last month doubled its annual profit forecast and is projecting net income of 100 billion yen in the 12 months ending March 2014, it said Oct. 31.

‘Ending Losses’

Panasonic slid 0.7 percent to close at 987 yen in Tokyo trading today, paring its gain this year to 89 percent. The benchmark Topix index has added 38 percent this year.

Tsuga, who took the top job in June last year, has said he plans to spend 250 billion yen in restructuring during the two years to March 2015 to end losses from televisions, semiconductors, mobile phones, circuit boards and optical devices. Reform expenses may exceed the target because the company now faces deteriorating demand for its digital cameras and air-conditioners, Kawai said.

“Our reform has just started,” Kawai said. “Our business environment is changing so rapidly but our aim of ending losses at unprofitable operations within two years remains the same.”

The company is mulling selling assets, reorganizing offices and increasing outsourcing to revive the five unprofitable operations, Tsuga said Oct. 31.

Kawai declined to say which plants Panasonic, Japan’s second-largest TV maker, may shut.

In March, Panasonic sold its Tokyo office building for 50 billion yen to a real-estate trust. The electronics maker in September agreed to sell the majority of its stake in a health-care unit to KKR & Co. The company has also agreed to a partial sale of a logistics unit to Nippon Express Co. by the end of 2013.

Speeding Reform

To turn around the TV operation, which may book an operating loss of 30 billion yen or more this financial year, Panasonic will focus on its factory-direct business in the U.S. that sells straight to consumers and bypasses retailers. The TV unit probably will turn profitable by March 2016, it said last month.

While speeding up reforms in consumer electronics, the Japanese electronics maker, which also makes car audio systems and solar panels, plans to boost businesses related to automobiles and housing to double sales of each to 2 trillion yen by 2018.

Earnings in those areas have been “better than we had anticipated,” Kawai said. The company announced Oct. 31 it was acquiring a 90 percent stake in the Turkish wiring device maker Viko Elektrik Ve Elektronik Endustri Sanayi Ve Ticaret A S.

Tesla Batteries

Osaka-based Panasonic won a contract to supply 2 billion lithium-ion battery cells to Tesla in the four years through 2017, it said last month. That compares with about 200 million units shipped to the Palo Alto, California-based carmaker in the past two years, according to Panasonic.

The contract to supply Model S and Model X vehicles may add about $7 billion in sales and cement Panasonic’s position as the largest supplier of batteries for electric cars, said Ali Izadi-Najafabadi, a Bloomberg New Energy Finance analyst.

Tesla’s third fire in five weeks involving a Model S led the carmaker’s shares to tumble 22 percent in the past three trading days in New York. The carmaker is investigating the incident in Tennessee.

The Nov. 6 fire took place after the car hit a metal tow hitch that had fallen onto a highway, the Tennessee Highway Patrol said. The driver wasn’t hurt.

“We pay great attention to safety issues and so does Tesla,” Kawai said. “I don’t have any concerns.”

Tsuga built on his predecessor’s push into renewable energy after the 2011 acquisition of Osaka peer Sanyo Electric Co., the world’s biggest maker of lithium-ion batteries then. The deal, Panasonic’s biggest-ever at 936 billion yen, was designed to consolidate Panasonic’s position in businesses including rechargeable batteries and solar panels.

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