Panasonic’s (6752.T)decision to sell part of its automotive unit suggests CEO Yuki Kusumi’s plans are taking a promising turn. The business, which pioneers technology like infotainment systems for the next generation of internet-connected cars, is a growing but capital-intensive opportunity. In the year ending March 2023, it was the second largest of Panasonic’s five segments by sales, with revenue of 1.3 trillion yen ($8.8 billion), yet its 1.2% operating margin was the slimmest. Selling a stake to Apollo Global Management (APO.N), with the possibility of a listing later, could help fund faster development without denting Panasonic’s balance sheet or returns.
He could go further. A decade ago, Sony (6758.T) and Hitachi (6501.T) trimmed multiple underperforming businesses. Their shares have since quadrupled in value, while Panasonic’s gained around 40%. It’s not clear if Panasonic can follow Sony and Hitachi’s script, however. This was an obvious target for Kusumi, who previously led the auto unit. Picking other potential candidates for an overhaul could be much more challenging. For example, their consumer products business faces intense competition and weak demand in Asia but it’s also the unit that made the company a household name. Either way, his timing is impeccable. Japanese equities just hit their highest levels since the 1990s and could rise higher according to analysts polled by Reuters, flattering the valuation of any spinoff or divestment.
If he keeps up the momentum, investors are in for a fun ride. (By Katrina Hamlin)
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(The author is a Reuters Breakingviews columnist. The opinions expressed are their own)
