Panasonic will exit the plasma television panel business in order to focus on higher profit margin products.
The firm will back out of the now unprofitable sector by the end of the financial year to March 2014, according to Reuters. Sources familiar with the situation said that the closure of Panasonic's single plasma panel factory in Japan will result in an impairment loss of more than 40 billion yen on the last remaining factory building in operation.
To cover restructuring costs as Panasonic President Kazuhiro Tsuga battles to strip away the company's unprofitable sectors and focus on high-end products, the firm set aside 120 billion yen at the start of the financial year.
While the popularity of liquid-crystal displays continues to rise, Panasonic's television division has remained a major part of the company's years of losses. Over the past two years, the company has lost a combined $15 billion, while its TV business posted a loss of $913 million alone in the past fiscal year.
Sources also told the news agency that the several hundred employees affected by the closure will be deployed to other parts of the company. In May, 5,000 staff members faced the axe in the company's automotive and industrial divisions, where a third of the firm's full workforce is employed. Yoshihiko Yamada, head of the automotive and industrial division, said that a "reduction in labor costs will be a big part of our plan to improve profitability."
The Japanese electronics giant's president, after taking charge in 2011, promised to weed out any division that is unprofitable. Non-core assets are being sold and legacy products removed from the shelves in order to turn around the firm and make it a company which provides high-end business products, rather than low-margin consumer goods. As a result, Panasonic has also retreated from the smartphone market in its home country, cutting down smartphone operations in order to outsource production in cheaper markets including India.
While these changes take place, Tsuga expects the firm to lose up to $11 million this financial year.
"It's not acceptable for the company to be bleeding red ink like this, so we have to think about ways to develop assets that we do have in a more effective direction," Tsuga said.
The Panasonic president had warned he would eliminate any division that did not meet a five percent operating margin within three years.