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Wed, Aug 16, 2006 - Page 10 News List

Matsushita targets overseas factories in restructuring bid

AP , TOKYO

Matsushita Electric Industrial Co is reviewing its 170 overseas manufacturing plants to assess their profitability and decide which to close under a major restructuring effort led by its new president, a company spokesman said yesterday.

The Japanese electronics maker of the Panasonic brand is targeting an operating profit ratio of 10 percent by the fiscal year ending in March 2011 under the leadership of Fumio Ohtsubo, who took office as president in June, spokesman Akira Kadota said.

The ratio is a standard measure of a company's ability to rack up profits and is a ratio of operating profit -- the profit resulting from its core business -- over sales. Matsushita Electric, based in Osaka, now has an operating profit ratio of about 5 percent.

The company has decided to use five criteria to calculate a plant's profitability and is reviewing all its plants, including those in North America, Europe and the rest of Asia, to see whether they should stay open, Kadota said.

Matsushita has embarked on an overhaul of its business over the last several years and has boosted profits, led by the stellar sales of digital electronics products such as plasma display TVs and DVD recorders.

Much of the production of such high-end products is at Japanese plants, and Matsushita is considering closing money-losing overseas plants such as those producing old-style cathode-ray tube TVs.

Japan's top business newspaper, Nihon Keizai Shimbun, reported Tuesday that Matsushita will reduce its number of plants by about half in five years. Kadota said a study of the plants was still going on and declined to confirm the report.

The five factors to be used to assess whether a plant should stay open include whether it has lost money for three straight years and whether sales have declined over the three years, Kadota said. The largest number of Matsushita's overseas plants are in Malaysia, Thailand and other Southeast Asian nations, he said.

"We will be taking a serious look at profitability and withdraw if necessary," he said.

In fiscal 2001, Matsushita posted its worst loss since its founding 80 years ago. Ohtsubo's predecessor, Kunio Nakamura, who became president in 2000, embarked on a cost-cutting overhaul and concentrated on key profitable products to nurse the company back to health.

The goal for a 10 percent operating profit ratio was initially set by Nakamura, and Ohtsubo is hoping to keep that turnaround on track and initiated the plant review, Matsushita said.

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