For Panasonic, life after gadgets enriched by self-driving cars

Panasonic Corp.’s ratings upgrade shows that its investment in self-driving autos and car batteries has breathed new life into the company as it scales back on consumer electronics.

Japan’s Rating & Investment Information Inc. raised its ranking on the company one level to “A” on Oct. 20, the credit assessor’s first increase for the manufacturer. The price of Panasonic’s bonds maturing in 2018 is near the record high reached July 9.

President Kazuhiro Tsuga is pouring tens of billions of yen into its battery venture with Tesla Motors Inc. as the company develops new businesses while cutting back on TVs, smartphones and circuit boards. Panasonic forecasts its highest annual profit since fiscal 2007, coming back from losses just two years ago, and is due to report first-half results this week. 

“When restructuring, you need to do it aggressively, because the more you do the quicker the recovery,” said Mana Nakazora, the chief credit analyst for Japan at BNP Paribas SA. “Panasonic has done that and experienced a V-shaped rebound that has resulted in the ratings upgrade. The company is now in a really good shape.”

Tsuga halted production of money-losing plasma TVs and stopped offering mobile handsets in Europe as part of his strategy of targeting businesses and reducing reliance on consumer goods. The company set up a manufacturing unit at Tesla’s battery “gigafactory” in Nevada and is developing self-driving technologies including parking assistance.

Panasonic is betting on increasing demand for optical lenses and sensors that allow cars to react to traffic situations without driver input, Laurent Abadie, who heads the Japanese manufacturer’s operations in Europe, said in an interview last month. The technology, adapted from consumer cameras such as its Lumix series, will probably also find buyers in the airline industry, he said.

“With consumer products, a company’s profit takes a hard hit when market prices fall, leaving it with potentially large losses on stock,” said Yusuke Ueda, a Tokyo-based credit analyst at Bank of America Merrill Lynch. “It is very hard to maintain a stable margin. But if you can get into the business-to-business area in the car industry, and have a deal, you sell a lot of volume at a set margin.”

In March, Panasonic reported its first full-year profit since 2011 and projected net income to jump 16 percent to 140 billion yen ($1.3 billion) for the current year. The company’s most recent earnings results are due Oct. 31. (Bloomberg)