Panasonic Holdings — Company History

Four months on an improved socket, and the insulator plates that opened a way through

Matsushita Konosuke (松下幸之助) was born in November 1894 at Wasa village, Kaiso district, Wakayama prefecture. His father’s losses speculating on rice brought the family down, and Konosuke, who left primary school after four years, was sent at the age of nine to Osaka as a live-in apprentice at a hibachi (charcoal brazier) shop. Three months later he moved to a bicycle shop, where he spent six years until he was seventeen; reading the spread of the city tram as a coming fall in demand for bicycles, he moved to Osaka Electric Light. From assistant on indoor wiring work he was promoted to charge-hand within three months, and in the spring of his twenty-fourth year he became an inspector, the post that wiring men treated as the summit of the trade. Yet a round of fifteen to twenty houses a day was finished in two or three hours, and the work ceased to hold him. When he showed the improved socket he had prototyped while still employed to his supervisor, the answer was No good, this one. He resolved, Right — I shall leave the company, much as I regret seven years of effort, and handed in his resignation.

The capital for setting up was less than ¥100 — ¥33.20 of severance pay together with ¥42 from the company savings scheme and his own savings — to which he added ¥100 borrowed from an acquaintance. The works was the two-mat room of the single-storey house he lived in, plus half of the four-and-a-half-mat room, floored over as an earthen workshop; there was scarcely space left to sleep properly. The sockets were finished in October 1917, but after about ten days of calling round the city only about a hundred had sold, for less than ¥10 in all. Faced with ¥10 in four months, those who had joined him left, until only Konosuke and his brother-in-law Iue Toshio (井植歳男) remained, and the couple’s kimono went to the pawnshop. Then an order arrived from an electrical trader for a thousand insulator plates for electric fans. With no equipment but a stamping punch and a pot for boiling the moulding compound, they finished the work by the year’s end and made their first profit, about ¥80 net. Further orders for insulator plates kept the business going, if only barely, and in March 1918 he founded Matsushita Electric Appliance Factory 松下電気器具製作所 at Ohiraki-cho, Fukushima-ku, Osaka, and began manufacturing wiring fittings.

Demonstration selling opens a market for the bullet-shaped lamp

The first product made at Ohiraki-cho was an attachment plug that reused the caps of old light bulbs; priced at thirty per cent below the going rate, it caught on, and even working through the night they could not meet the orders, so four or five hands were taken on. The two-way socket adaptor that followed drew more attention still, and Yoshida Shoten, an Osaka wholesaler, applied for sole distribution rights; the contract was signed against a deposit of ¥3,000, and that money went into enlarging the works. In 1922, against ¥4,500 of his own funds, he laid out more than ¥7,000 to build a 70-tsubo (about 230 sq m) main factory in the same district. That same year he took up the manufacture and sale of the bicycle lamp that became the foundation of Matsushita Electric. Bicycle lighting then meant a candle or acetylene gas; battery lamps ran down in two or three hours and were of no practical use. Setting himself the targets of no breakdowns and more than ten hours of running time, he spent half a year and nearly a hundred prototypes before arriving at the bullet-shaped lamp.

The bullet-shaped battery lamp put on sale in March 1923 lasted thirty to fifty hours, but selling it proved a harder obstacle than making it. Every wholesaler he called on gave the same answer, the stock built up from June reached two thousand units, and with a standing commitment of two thousand a month to the wooden-tube supplier, production could not be halted either. Deciding that this means drawing up with our backs to the river, he hired three canvassers and had them leave two or three lamps at every retailer in Osaka. One of each was lit on the spot; only after the shopkeeper had satisfied himself that it ran for more than thirty hours was it sold, and he was told he could pay once he felt reassured. Four or five thousand lamps were placed in this way within a month, word spread, and two or three months later orders began arriving from the retailers themselves. Konosuke looked back on it as a piece of selling on which the whole fate of Matsushita Electric was staked. In April 1927 National was adopted as the unified trade mark.

Full employment through the slump, and the declaration of the waterworks philosophy

In the financial panic of April 1927 the Fifteenth Bank, which had been at the centre of the firm’s banking, suspended payments. The failure of a counterparty holding ¥70,000–80,000 of discounted bills receivable and more than ¥35,000 on fixed deposit struck straight at the firm’s cash position — but two months earlier a banking agreement had been concluded with Sumitomo Bank. Approached nearly ten times by a Sumitomo officer, Konosuke had demanded, before opening the account, a standing overdraft facility of ¥20,000, and pushed it through against a bank that objected there was no precedent. In the middle of the run on the banks he checked, to be safe, and was told: There is nothing in the situation that requires us to alter our promise; please draw on it whenever you wish. In 1929, when a 500-tsubo (about 1,650 sq m) factory was built, he borrowed ¥150,000 unsecured.

At the end of 1929, under the government’s deflationary retrenchment, sales halved and stock piled up beyond what the warehouse could hold. Konosuke, who was ill in bed, was asked whether the workforce should be cut by half; he set out his policy the same day. Production would be halved at once, but not one employee would go: the factory would work half-days on full daily pay, and in exchange all holidays would be abolished and everyone would go out and sell the stock. The stock was cleared in about two months and the factory returned to full operation. On 5 May 1932, before an assembly of the entire staff, he set out that the mission of a producer is to make goods as abundant as tap water and so banish poverty from this world, and named that day the company’s founding anniversary. He allotted 250 years to the fulfilment of that mission, divided into ten stages of twenty-five years each.

Self-accounting by product, and wartime shipbuilding and aircraft

In May 1933, at the same time as the head office moved to Kadoma, the works were divided into a First Division for radios, a Second Division for lamps and dry batteries and a Third Division for wiring fittings, synthetic resins and electric heating appliances, each division manager bearing responsibility for the profit and loss from manufacture through to sale. It was Konosuke’s awareness that he was physically weak and could not oversee the whole by himself that turned his way of entrusting work to young employees into an institution. Matsushita Electric Trading was established in August 1935, and in December that year the firm was reorganised as Matsushita Electric Industrial Co. Capital was ¥10 million, and the division system went further still, into a subsidiary system with nine companies split out by line of business. In 1934 the firm took up electric motors, forming an affiliate capitalised at ¥1 million in partnership with Sumitomo on the ground that there was not a single small-motor maker in the Kansai region.

As the controlled economy gave way to war, materials and machinery grew scarce and only military production continued. When a production programme for 200-tonne wooden ships was allocated to Osaka prefecture, Matsushita Electric took it on, obtained 30,000 tsubo (about 99,000 sq m) at Sakai on disposal terms and set up Matsushita Shipbuilding; the yard was built in about six months and launched fifty-six vessels before the end of the war. A yard that had set itself a target of one ship a day came in time to send out one every six days. In the same year the Navy ordered the manufacture of wooden aircraft; 100,000 tsubo (about 330,000 sq m) was bought and a company capitalised at ¥30 million was formed, but the plywood technology proved difficult and only three aircraft were completed — a number far short of the two hundred a month the military had asked for.

The public purge, and the union’s campaign to keep him

For five years after the defeat Matsushita Electric was subject to seven sets of restrictions, beginning with designation as a restricted company, and was not even permitted to move its assets. Konosuke argued continually against the zaibatsu (family industrial combine) designation that Matsushita was no zaibatsu, and the designation was lifted at the end of 1949 — but because he had directed munitions production he was placed in class A of the public purge. He had all but resolved that there was no room to protest against leaving the presidency when the campaign to keep him was taken up by the company’s own labour union. Signatures and seals were collected one by one from the 15,000 employees of the day, and representations were made to the government and to General Headquarters. A month later the designation was altered to class B, and after review the purge of the entire board was dropped.

He kept the presidency, but over those five years the company’s debts reached ¥1 billion and it stood high among defaulters on tax. He brought himself to the workforce reductions he had avoided until then, and employment fell to 3,500. In May 1949 the shares were listed on the Tokyo and Osaka stock exchanges. On 17 July 1950, with the restrictions lifted, he called his senior managers together at an emergency management-policy meeting, set out his resolve to rebuild and said that the will has welled up in me to go at this business and nothing else, morning, noon and night. In January 1951 he spent three months in the United States studying management, and saw at first hand the gap: a standard GE radio sold for twenty-four dollars, two days’ work for a factory hand, while a Matsushita Electric radio cost ¥9,000 against a worker’s monthly wage of ¥6,000.

The Philips alliance, the five-year plan, and the Atami conference

Moving into television required the technology of its heart, the cathode-ray tube, and Matsushita Electric, with nothing of its own to draw on, looked for somewhere to bring it in from. Philips, with which it had dealt before the war, set out terms of an initial payment of US$550,000, a thirty per cent equity holding and a six per cent technical guidance fee. Konosuke set a management guidance fee against these, arguing — and refusing to give ground — that since it was Matsushita Electric that would run the joint company, that contribution too should be valued. Negotiations came within sight of breaking down, but were settled by paying a technical guidance fee of 4.5 per cent in exchange for receiving a management guidance fee of 3 per cent. In December 1952 the technical alliance with Philips brought Matsushita Electronics 松下電子工業 into being, and the four plants of the tube works were separated from the parent. At the new Takatsuki plant, production of light bulbs, fluorescent lamps, vacuum tubes, cathode-ray tubes and transistors began in 1954.

In January 1952 a capital tie-up with Nakagawa Kikai took the firm into refrigerators, and in February 1954 it took an equity stake in Victor Company of Japan. Victor was carrying $1.3M (¥450m) of debt against capital of $69,444 (¥25m), but Konosuke, seeing the goodwill value carried by the dog trade mark, decided to take it on. At the management-policy meeting of 10 January 1956 he made public a five-year plan to quadruple the previous year’s sales of $61.1M (¥22bn) to $222.2M (¥80bn) within five years. In an age when no company announced its future targets outside the firm, a half-believing air lingered even internally; the target was substantially met in the fourth year, and five years on production and sales reached $291.7M (¥105bn). In January 1958 Matsushita Communication Industrial was established, separating the communications-equipment manufacturing operations, and in September 1959 Matsushita Electric Corporation of America was set up, opening the build-out of overseas bases. The two-day weekend he called for in 1960 was realised as a five-day week in April 1965.

The National Shop Association ナショナル店会, launched in 1957, organised small electrical retailers across the country into a keiretsu (affiliated) sales network, and Matsushita Electric came to be called Matsushita the seller. In 1964 the reaction after the Tokyo Olympics turned the home-appliance market down, and most of the sales companies and agents sank into loss. In July that year Konosuke, who had stepped back to the chairmanship, gathered the heads of the sales companies and agents from around the country at the New Fujiya Hotel in Atami. One company with $13,889 (¥5m) of capital had run up a deficit of $416,667 (¥150m); asked to raise their hands if they were making money, about thirty did, and the remaining hundred and seventy or so were in the red. Two days had been scheduled, and on the third the complaints had still not stopped, at which Konosuke said from the platform: In the end, it was Matsushita Electric that was at fault. I believe that says it all. He acknowledged the blame, and more than half of those present took out handkerchiefs. After the conference he took up the post of acting head of the sales division in place of vice-president Yasukawa (安川洋), who was away ill, and from February 1965 put into effect a new sales system made up of one sales company per region, direct selling by the divisions and a new instalment-credit scheme.

Manufacturing operations cut out as subsidiaries, and the fight over the VTR standard

The structure of vertical integration was assembled by cutting manufacturing operations out as subsidiaries: Matsushita Kotobuki Electronics in November 1969, and Matsushita Electronic Components in January 1976, which took over the electronic-components manufacturing operations. In January 1977 Matsushita Housing Products and Matsushita Industrial Equipment were established, taking over the manufacture of housing equipment and industrial machinery, and in January 1979 the battery manufacturing operations were cut out into Matsushita Battery Industrial. Each company was run on a self-accounting basis, as an extension of the division system. On the funding side, the shares were listed on the New York Stock Exchange in December 1971, and in December 1975 US$100 million in face value of dollar-denominated convertible bonds was issued. A finance subsidiary was set up in the United States in July 1985, and two more were placed in Europe in May 1986.

In the fight over the standard for the domestic VTR, Matsushita Electric had missed the leading part by a week. The two-head helical-scan system that later became mainstream was filed for patent by Takayanagi Kenjiro (高柳健次郎) of Victor Company of Japan, by Kihara Nobutoshi (木原信敏) of Sony and by Matsushita Electric; Takayanagi’s application, filed in October 1959, was marginally the earlier, and the patent went to Victor. In 1970 the three companies agreed on a common U standard modelled on Sony’s earlier U-matic, and colour VTRs to the U standard were put on sale by all three in October 1971 — but consumers did not take to them. Victor completed its own VHS system and began selling it in September 1976; Matsushita Electric backed it with its volume manufacturing and its nationwide sales network, and so won the contest against Sony’s Betamax.

The jumping-up of Yamashita Toshihiko, and the pendulum of the division system

In February 1977 Yamashita Toshihiko (山下俊彦), a director, became president. He was jumped up from twenty-fifth in the order of seniority, in a decision taken by Konosuke, by then an executive adviser, together with president Matsushita Masaharu (松下正治) and chairman Takahashi Arataro (高橋荒太郎). Yamashita was a man of the shop floor: six years at Matsushita Electronics learning Philips’s accounting and management methods, the turnaround of the loss-making subsidiary West Electric, and promotion from head of the air-conditioner division to the board. On taking office he asked for the founder’s involvement one or two days a week, saying without the adviser’s authority behind me I can do nothing at all, to which Konosuke replied if that is how it is, I shall do as much of it as you like while I am fit. Yamashita also said: Once I have made up my mind I do not complain. Even when I fail, I shall fail with dignity.

In 1978, the year after he took office, Yamashita abolished the three supervising business groups — radio, electrical appliances and industrial equipment — and connected the divisions directly to the president. Holding that vitality will never arise in a company that does nothing but perfectly safe business, he said the firm would go into ventures carrying as much as thirty per cent risk. The organisation did not settle into any one shape, however: in 1984 a business-group system returned, made up of four groups for television, video, electrical appliances and information equipment. In February 1986 Tanii Akio (谷井昭雄) became president, and in March 1987 the financial year-end was changed from 20 November to 31 March. In April 1989 the founder, Matsushita Konosuke, died at the age of ninety-four.

The MCA acquisition, a departure from making things

Matsushita Electric had a policy dating from its founding of putting the making of things at the centre, and there was not one person in the company capable of running a film studio. Even so, it was thought that the spread of high-definition and other high-picture- and high-sound-quality AV products could not do without the support of software, and Sony, which had bought Columbia Pictures, was ahead. A basic agreement was reached on 26 November 1990, and in December that year Matsushita Electric bought the major American entertainment company MCA for about US$6.1 billion, some $5.4B (¥780bn). It was the largest investment ever made by a Japanese company in acquiring a foreign one. Tanii said he wanted to create new value by combining the hardware that Matsushita Electric Industrial has with MCA’s software, its films and its tradition.

Friction with MCA’s management continued from the outset; in the dispute over the game rights to Jurassic Park, it looked to a Matsushita Electric that regarded MCA as one division within its group like a refusal to do as it was told. A software business in which talent decides value could not be governed by the logic of capital. Morishita Yoichi (森下洋一), who became president in February 1993, had not once sat down face to face with MCA’s leadership by October 1994, when the struggle over control of MCA became public. The vertical integration was beginning to come apart as well: in May 1993 the joint-venture agreement with Philips concerning Matsushita Electronics was dissolved, and Matsushita Electric bought out the whole of Philips’s holding in that company. An alliance in which the party importing the technology had insisted on equality ended, forty years on, in one side taking the other over completely.

The Morishita reforms, and the problem left in keiretsu distribution

The company Morishita Yoichi inherited had sunk into three consecutive years of falling profit as a slump in home appliances, poor weather and weakness in industrial equipment came together, and an operating loss was even in prospect for the year to March 1995. The business-group system revived in 1984 had produced a double structure, and meetings had multiplied to the point where it was said that nobody knew how many committees the head office had. One division head said that most meetings decided nothing and were reports only. In the recall of about 250,000 IH rice cookers in November 1993, two weeks passed between 7 November, when the cause was reported to the president, and the emergency press announcement on 20 November. On 8 December that year Morishita abolished the business-group tier, reorganising so that the president in effect supervised the divisions directly.

The reform stopped at the manufacturing side and did not reach sales. The 25,000 keiretsu shops across the country that had once earned the name Matsushita the seller had become a burden under the discounters’ offensive and the appliance slump, and rebuilding a sales structure centred on appliance distribution was seen as more urgent even than repairing the divisions. Even so, the core question of how to connect the divisions to the sales operations was left untouched. In April 1995 Matsushita Housing Products was merged in, and in June that year the American subsidiary transferred eighty per cent of its MCA holding to Seagram of Canada, withdrawing five years after the acquisition. The remaining shares were transferred to Vivendi Universal in February 2006. In February 1999 the company cancelled 50 million of its own shares out of profits, $867.9M (¥99bn) worth.

Nakamura Kunio’s destruction and creation, and the concentration on plasma

Nakamura Kunio (中村邦夫), who became president in June 2000, has said that watching Matsushita’s televisions beaten outright by Sony’s flat cathode-ray-tube sets on the shop floor left him with a sense of crisis: This company will go under; Matsushita is in danger. Through the 1990s Matsushita Electric had repaired its finances by cutting interest-bearing debt by the order of ¥1 trillion, but it lacked growth, and Sony had overtaken it on sales. The consolidated result for the year to March 2002 was sales of $56.5B (¥7.07tn) and a net loss of $3.4B (¥428bn), the first consolidated bottom-line loss since listing. Nakamura rejected rebuilding plans of the accumulating sort that affirm the present and improve it little by little, saying unless it is something everyone feels the pain of, this company will not change.

In April 2001 Matsushita Electronics was merged into the parent, and in October 2002 five principal companies — Matsushita Communication Industrial, Kyushu Matsushita Electric, Matsushita Seiko, Matsushita Kotobuki Electronics and Matsushita Graphic Communication Systems — were made wholly owned through share exchanges. In January 2003 the group moved to management by business domain. Self-responsible management through separate companies had been received as a sanctuary left by Konosuke, but internal competition, with similar products handled in several places at once, had already become a burden of duplication and lost efficiency. Through early-retirement schemes more than 10,000 people left the group, including the consolidated domestic manufacturing companies. In April 2003 the global brand was unified as Panasonic, and Matsushita Electronic Components and Matsushita Battery Industrial were also made wholly owned by share exchange. In April 2004 Matsushita Electric Works, PanaHome and their subsidiaries were brought in as consolidated subsidiaries, taking in housing equipment and lighting.

Nakamura fixed on plasma display as the mainstay of the next generation of televisions and built a dedicated plant at Amagasaki in Hyogo prefecture. $1.5B (¥180bn) went into the fourth plant, which started up in June 2007, and cumulative investment passed $4.2B (¥500bn). Otsubo Fumio (大坪文雄), who succeeded as president in June 2006, continued to invest. In October 2008 the company name was changed from Matsushita Electric Industrial to Panasonic, but the Lehman shock that year cut consolidated sales by more than $11.8B (¥1.1tn) on the year, and the year to March 2009 brought a net loss of $4.1B (¥379bn), the first since the founding. The division of the market — plasma for large screens, liquid crystal for small and medium — collapsed as LCDs grew larger, and plasma fell three or four years behind in going to full HD. At precisely the time of demand for large televisions around the full switch to digital terrestrial broadcasting, that delay was fatal.

The price of the Sanyo acquisition, and the re-cutting into operating companies

In November 2009 Panasonic resolved on a tender offer for Sanyo Electric at ¥131 a share, $4.3B (¥402bn) in total, and in December that year acquired 50.19 per cent of the voting rights, making it a consolidated subsidiary. The aim was lithium-ion secondary batteries and solar cells, with energy set up as a new priority business. In April 2011 Sanyo, together with Panasonic Electric Works, was made wholly owned through a share exchange. Consumer lithium-ion batteries, however, were exposed to price falls of ten per cent a year under a strong yen and a weak won, and the goodwill carried for Sanyo was written down from $6.5B (¥518bn) to $3.1B (¥250bn). The bottom-line loss for the year to March 2012 was $9.7B (¥772bn), with restructuring costs of $9.6B (¥767bn), and the year to March 2013 brought a further net loss of $7.7B (¥754bn).

Tsuga Kazuhiro (津賀一宏), who became president in June 2012, pressed on with clearing up unprofitable businesses. In April 2013 the domains were dissolved and the structure returned to one centred on the divisions, and at the same time the New York listing was withdrawn. Of plasma, of which he had said in March that year that withdrawal is the last judgement, he concluded that there was no visible means of reversing losses that had at one point exceeded $1.0B (¥100bn); on 31 October he announced the end of production, panel manufacture ceased in December, and the Amagasaki plant was stopped at the end of March 2014. Tsuga repositioned television as one white good among others, saying we have no intention of making panels in-house. Interest-bearing debt was cut from $11.7B (¥1.14tn) in the year to March 2013 to $6.1B (¥642bn) the following year. In March 2014 the whole of Panasonic Healthcare and its related assets were transferred, and in June that year the semiconductor business was hived off.

The mainstay moved to business-to-business. On 31 July 2014 Panasonic agreed with Tesla on cooperation at the Gigafactory battery plant in Nevada, going in as far as the manufacturing function itself by making and supplying cylindrical lithium-ion cells. In April 2020 it set up Prime Planet Energy & Solutions, a joint venture with Toyota Motor for prismatic automotive batteries. Kusumi Yuki (楠見雄規), who took office in June 2021, made the American company Blue Yonder a wholly owned subsidiary in September that year for about US$7.89 billion, and in April 2022 transferred the businesses to nine companies and moved to the holding company Panasonic Holdings. In December 2024 the whole of Panasonic Automotive Systems was sold. The year to March 2025 recorded sales of $56.5B (¥8.46tn) and operating profit of $2.8B (¥427bn), but in May that year, in the middle of a twelfth consecutive profitable year, the company announced reductions of the order of 10,000 people at home and abroad, and net profit for the year to March 2026 fell 48 per cent on the year to $1.2B (¥190bn).