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Panasonic, Leading Change

From its origins as a humble bike lamp maker to its current focus on automobiles, datastorage devices, in-flight entertainment systems and much more, — Panasonic continues to evolve as a global technology leader. This year the company is celebrating 100 years in business. It also shares the distinction of being one of only two companies that have exhibited at every CES since 1967 (the other is VOXX).

The Panasonic booth at the inaugural 1967 Consumer Electronics Show

In the past, Panasonic’s iconic plasma TVs once covered its CES booth. Today Panasonic’s efforts extend to smart homes and self-driving cars and even smart cities. With the tagline, “A Better Life, A Better World,” Panasonic seeks to make life simpler, smarter, safer, more captivating and more fun.

Leading this more nimble company is R&D engineer Kazuhiro Tsuga who joined Panasonic as a college recruit 38 years ago and took the helm as president in 2012. He has since reorganized the company’s many divisions. The task was to reimagine the company’s DNA, which included some painful decisions to stop making plasma TVs, smartphones, optical disks and circuit boards. The company now provides the batteries that power Tesla cars, is developing smart cities, and even sells storage devices developed in collaboration with Facebook to hold large amounts of data, with “freeze-ray” technology.

And last April, Tom Gebhardt, a 32-year veteran of the company, left his role as president of Panasonic Automotive Systems Company of America to take over the reins as Chairman and CEO of Panasonic Corporation of North America. Based in Newark, NJ, the business is focusing on Panasonic’s B2B and Smart City initiatives, which demonstrate how public-private partnerships can help improve the quality of life for residents.

The company is the principal North American subsidiary of Osaka, Japan-based Panasonic Corporation and the hub of Panasonic’s U.S. branding, marketing, sales, service and R&D operations. Panasonic was featured in Forbes Magazine’s 2000 ranking as one of the ten best regarded companies for 2017. Specifically cited were its smart and sustainable technologies, including its contributions to smart cities and the electric vehicle revolution.

Tsuga and Gebhardt spoke with i3 about how the company plans to celebrate its milestone anniversary and where the opportunities are going forward.

Panasonic Corp. President and CEO Kazuhiro Tsuga

Panasonic seems to prosper by reinventing itself. What were the major turning points and new directions?

Panasonic Corp. President and CEO Kazuhiro Tsuga

When I became president in 2012, our company was suffering from a lot of difficulties, including a huge loss that exceeded ¥700 billion. I started by making group-wide management transparent as a way to clarify the cause of this deficit. Then, we took up the necessary initiatives, including structural reform, to address the issues. We also worked to transform the shape of the company by streamlining our headquarters as well as introducing company and business division systems, for instance. Also, with the aim of accelerating growth, in addition to our traditional consumer electronics business, we clarified three other main business pillars: housing, automotive, and B2B. From a regional perspective, we allocated our resources to businesses with growth potential in those key areas. We were also determined to invest 1 trillion in strategic businesses by 2019, and have already been investing in M&A and in such key businesses like automotive batteries. Through these efforts, we expect both sales and profit to grow in this fiscal year.

Congratulations on your 100 year anniversary. How does the company plan to celebrate this milestone?

Our development over the past 100 years has been made possible thanks to the support of our key stakeholders, including our customers and our partners all over the world. Therefore, taking this opportunity, we truly wish to extend our most sincere appreciation to all of those who have provided us with their support and patronage up to the present day. Going forward, on various occasions — including this year’s CES — we truly want to show people around the world our achievements over the past 100 years, and what we at Panasonic aim to become, looking forward to the future.

What is the culture of Panasonic?

Since our founding in 1918, we have been devoted to contributing to the improvement of people’s lives, and the development of society all over the world through our business activities. Based on this basic business philosophy, we have engaged in diverse business activities on a global basis. This attitude is fully incorporated in our corporate culture as the DNA of the Panasonic Group. And today, we are accelerating our efforts to create new contributions to society under the corporate banner of “A Better Life, A Better World,” which has been used since I became president.

CTA President and CEO Gary Shapiro with Kazuhiro Tsuga at CES 2017

How has CES made a difference for Panasonic?

First of all, Panasonic is the only major company that has participated in CES every year over the past 50 years since 1967. We are really proud of this record. CES really is a very influential tradeshow around the world. And by responding skillfully to changes in society, it has continued to evolve further into a tradeshow that covers not only consumer electronics products, but also new areas, including technologies for automobiles, IoT and AI. While Panasonic has been working to transform itself from a digital consumer electronics company that focuses on only TVs, we have leveraged CES in recent years as a very precious opportunity to demonstrate our capabilities in various business areas, such as the automotive and B2B areas. For this reason, we continue to regard CES as a strategically important tradeshow for us.

What will determine Panasonic’s success in the next five years?

The automotive business is our growth driver group-wide, since we expect the electrification and computerization of vehicles to further accelerate. For instance, today, we are the number one global automotive battery supplier, and we also have the automotive infotainment systems business where we can leverage diverse technologies we have built up in our digital consumer electronics business. So, we will focus on these businesses to achieve further growth. However, a multitude of changes are also incrementally taking place in society, and in our business environment. Accordingly, we will have to respond adeptly to changes in society, carefully listen to our customers’ voices, and meet their expectations. I believe these things are the key to Panasonic’s sustainable growth moving forward.

What are your strengths compared to other companies?

Panasonic has 35 business divisions today. Each of them has its own special strengths, including highly competitive engineering and manufacturing capabilities. By leveraging and bringing together the various strengths that we possess, we can offer our customers new value that is unique to Panasonic. This is our advantage.

Panasonic North America Chairman and CEO Tom Gebhardt

How has Panasonic reinvented itself in North America?

Panasonic is a diversified electronics company with strengths in a wide range of technologies, ranging from consumer products to automotive and avionics solutions. In transitioning the company in this region, we prioritized the areas where we could apply existing know-how and technology into emerging B2B spaces. In-flight and in-vehicle entertainment are good examples of applying AV technology in these new spaces. This has resulted in high growth in this region for both of those businesses, with our automotive business more than doubling in size over the past four years. Also, as vehicle electrification continues, we expect to see large growth coming from that sector.

Panasonic North America Chairman and CEO Tom Gebhardt

What is Panasonic’s role in developing smart cities?

In Japan, Panasonic joined with partners to build a community called Fujisawa Sustainable Smart Town in which sustainability and comfort are the key objectives. This development is home to about 3,000 people and is about 30 miles southwest of Tokyo. It was designed to achieve a 70 percent reduction in the use of water and a reduction of 30 percent in CO2 emissions and to use sustainable energy for at least 30 percent of its energy needs. Using many of the lessons learned from this community, we are now working with cities in North America, specifically Denver, but also around the world to apply these technologies. Panasonic strongly believes that only true public-private partnerships succeed in this type of development. That’s our guiding principle.

Can you talk about the project in Denver? Are there others in Japan?

The smart city project in Denver is a partnership with the City of Denver, the State of Colorado and Denver International Airport among others. The project has been instrumental in helping us develop a new approach to the enterprise business, especially where it includes the B2G area. Located in the Transit Oriented District at Pena Station on the light-rail line that goes to the airport, the project has been a testbed for the application of smart and sustainable technologies, including a versatile microgrid and solar panel array installation in collaboration with the local utility Xcel Energy, smart streetlights that improve security and save energy, and autonomous shuttle buses from the smart mobility company EasyMile. There is another Panasonic smart city project in Yokohama and smart housing developments near Kobe and elsewhere in Japan, plus developments with partners in China and elsewhere in Southeast Asia.

When will we start to see smart cities nationwide?

Panasonic is talking to several cities that are very interested in using smart technologies like artificial intelligence and intelligent transportation systems (ITS) to make life more convenient, safer and smarter for their residents. ITS and connected vehicle technologies have enormous potential to save energy, reduce accidents and save lives on the nation’s highways.

What are the risk factors in the North America market?

We believe that trade agreements and tax reform must work to support, not discourage, business investment. In the past few years, Panasonic has made significant investments in the U.S., including the Gigafactory in Nevada for lithium-ion battery cell manufacturing and a solar roof manufacturing operation in Buffalo, NY. In addition, Panasonic acquired the refrigerated display cabinet maker Hussmann Inc. a few years ago. New trade barriers or tax provisions that would discriminate against foreign investment in the U.S. would present a risk to Panasonic’s ability to continue to make similar investments.

How important is NAFTA to Panasonic? What about other U.S. trade agreements?

As a Tier 1 automotive infotainment supplier, Panasonic has developed many of the hardware and software platforms used in passenger vehicles in the U.S. The engineering and R&D for this is done in the U.S., resulting in the creation of a large number of high-tech and high-paying jobs. To complement these efforts, it is equally important to have a globally competitive manufacturing base in in North America and NAFTA has enabled Mexico to be able to provide that.

We, as well as many other automotive companies, have been able to take advantage of the talent and resources in Canada, the U.S. and Mexico to serve what has been a very healthy automobile market over the last several years.

The U.S. economy has been revitalized, creating hundreds of thousands of jobs, in automotive and other industries. The North American Free Trade Agreement (NAFTA) has played a key role in this manufacturing renaissance. It is important to update NAFTA for today’s ‘digital world’ while not undermining the substantial – in fact, net-positive – economic and employment benefits it provides to the U.S. economy.

Is Panasonic involved in self-driving vehicles?

Panasonic engineers around the world are actively working on developing both components and systems for autonomous driving for our car maker customers. For example, we are making good use of our image processing and sensor technologies. In fact, as I have mentioned, many of the technologies that make us strong in the automotive business began as consumer electronics technologies.

How does Panasonic use CES to grow?

At its heart, Panasonic is still a developer and manufacturer of technologies and products that touch the lives of consumers. CES is a great opportunity to show our technologies, and meet potential partners and customers. As most of our North American business has transitioned from B2C to B2B, so has CES for us, and we have embraced CES as a key event to leverage all our businesses. That further ratchets up the importance of the show for us.

What are the areas of greatest opportunity going forward?

We expect to see more growth in our automotive business as well as in solutions businesses that are linked by the Internet of Things. For example, end-to-end food retail solutions which we are working on through cross division activity is a focus area of growth in the short-term. We also have some great consumer solutions coming on line in the next year or two that will contribute to growth as well.

Cindy Loffler Stevens