With alliances seemingly out of the question, makers are streamlining their product lineups in search of earnings.
Manufacturers of white goods have launched their spring sales offensives fully aware that a fortune does not await them.
The domestic market for traditional home appliances such as refrigerators, air conditioners, washing machines and vacuum cleaners is saturated and has been shrinking since its peak in 1991.
Yet major electric appliance makers continue to wage a fierce competitive battle over the goods, resulting in deteriorating profits in recent years.
Indicating just how bad the situation surrounding the market has become lately, Hitachi Ltd. actively sought alliances with other companies in the past year or so, with sources saying the company even tried to unload part of its stake in group firm Hitachi Home & Life Solution Inc., Hitachi’s arm for white goods.
Major U.S. investment fund Ripplewood Holdings LLC emerged as a candidate to purchase the stake late last year, the sources said.
In the end, though, Hitachi President Etsuhiko Shoyama decided Hitachi would rebuild the white goods business on its own.
A Hitachi executive said the decision not to sell the stake to Ripplewood was based on an aversion within the company to foreign capitals and Shoyama’s personal attachment to the home-appliance business.
Hitachi is forecast to post a pretax loss on its white goods operations for the third consecutive year in fiscal 2003. The red ink has so far resulted in two major personnel cuts over the three-year period.
Sanyo Electric Co. also expects its white goods divisions to lose money for the third year in a row, even though its digital appliance business is doing well.
Compared to other electronics sectors such as semiconductors, the white goods industry is not accommodating to realignment.
To ensure a good brand image, home appliance giants such as Hitachi, Matsushita Electric Industrial Co. and Toshiba Corp. need to maintain their after-sales service channels.
Because they sell home appliances directly to consumers, it is difficult for the companies to form alliances or withdraw from the operations, industry officials and analysts say.
The four main white goods products of air conditioners, refrigerators, washing machines and vacuum cleaners are areas that are especially resistant to change, analysts say.
Because manufacturers consider the four items to be their mainstay products, it is difficult for the firms to even cooperate in the commissioning of production as a cost-cutting measure, says one industry executive.
Instead, the companies have shifted production overseas, and have targeted larger sales abroad. But unlike TVs and VCRs, sales of white goods overseas have lagged, largely due to a difference in lifestyles and preferences.
A TV in Japan is a TV in Thailand, for example, but a popular Japanese refrigerator with two doors that open from the middle of the unit does not sell well abroad, where consumers prefer one large door.
With few other options at their disposal, manufacturers should streamline their product lineups by focusing on their most competitive products, analysts say.
Matsushita, for one, has followed this advice. By specializing in certain product categories, the company has posted profits on its white goods operations.
Mitsubishi Electric Corp., meanwhile, has managed to break even as it backs out of 13 of the 33 white goods it markets. Among the products Mitsubishi has decided to give up are electronic rice cookers and kotatsu heaters.
From Aashi.com