SINGAPORE/OSAKA -- Panasonic has decided to eliminate hundreds of jobs at home and abroad as part of a wide-ranging restructuring in response to lackluster earnings.
The Osaka-based technology group said Thursday that it will cease production of refrigeration compressors in Singapore by the end of September 2022. This will affect 700 workers, or roughly a third of the head count in the city-state. The manufacturing capacity will be moved to existing plants in Malaysia's Malacca and China's Wuxi.
On Friday, the news broke that more than 1,000 workers had applied for Panasonic's voluntary retirement program.
Core operations have revolved around televisions and other consumer electronics, but growth has stalled. In the fiscal year ended March 31, consolidated sales dropped below 7 trillion yen ($63.2 billion) for the first time in a quarter century.
Panasonic's operating margin that year amounted to less than 4%, while rival Sony Group came in close to 11%.
In Thursday's announcement, Panasonic spoke of "the challenging global business outlook" and said the Singapore decision followed a "long-term business strategic review of the refrigeration compressor business portfolio."
Panasonic has made refrigeration compressors in Singapore since 1972. Headquarters functions for the components were moved from Japan to Singapore in 2017 "to further increase efficiency," the company said at the time. But in four years, the group was forced to shift strategies.
This reflects the changes afoot in Singapore's manufacturing sector. Factors including rising labor costs have made conditions tougher for production of components and finished products. Meanwhile, the government is moving to attract state-of-the-art manufacturing.
Singapore will continue to house research and development functions for Panasonic, the company said. The city-state will also remain the global headquarters of the refrigeration compressor business and continue as Panasonic's Asia-Pacific headquarters.
Back in Japan, Panasonic took applications for early retirement between July and August. The program targeted employees who had worked at the company for 10 years or more.
Applicants will be able to receive a severance bonus equivalent to up to 50 months' base pay. In principle, voluntary retirees will depart the company at the end of the month.
The staff being let go represents more than 1% of Panasonic's total workforce in Japan. This comes as the group attempts to transform itself from a business reliant primarily on hardware.
Panasonic announced Sept. 17 that it had completed the roughly $7 billion acquisition of U.S. software company Blue Yonder. The Japanese group is attempting to make up for lost time in its digital transformation by switching in the necessary tech talent.
"Up to now, we have done business premised on selling goods," a Panasonic executive said. "Some people will be unable to keep up with the big changes."
Panasonic will transition into a holding company when the new fiscal year starts in April 2022. Operating units will be allowed to set their own pay scales and staffing arrangements, which have been uniform until now. Wages will depend partly on what the competition offers, meaning that some employees may end up with pay cuts.