The reaction of Panasonic wonders me a lot, but from their point of view it makes sense to try to extract as much as possible from the deal with tesla. From their perspective if they enter the agreement with tesla and join venture in the Gigafactory they will have 20% of the factory considering investment of $1B and less than 3% of Tesla in shares which they currently own . The problem for them seems to be that this factory will be in competition with their current facilities. They know that capacity and efficiency will be much higher in the new factory and they will have to redirect all of their partners, suppliers and technology into the Gigafactory. Is this a good deal for them, or do they have other options?
Their situation is really complicated because if they decide not to participate in this factory will be disaster for them. Just look their other businesses:
Cameras: constant declining sales- smartphones are eating the market. According to Credit Swiss:
Mid-tier camera companies Panasonic, Fujifilm, and Olympus may not stick around, leaving only Canon, Nikon, and Sony competing in the top-tier and smartphones taking over the
TV’s their they are 4[SUP]th[/SUP] biggest producer but this business is not profitable at all- strong competition, small margins, constant R&D expenses where they can’t afford to cut because each year the technology shifting from HD to 4K, from LCD to LED to OLED. Panasonic is best known for their Plasma TV’s (outdated technology). They just can not catch up and for 2012 they posted more than $1B in losses from their TV division (same amount as their investment with Tesla)
Mobile phones- Panasonic Mobile Communications division 5.4 billion yen operating loss for 2013.
Panasonic Automotive Systems ; looks like one of the perspective directions for Panasonic
The have a lot of other businesses like: Eco Solutions, Appliances, Industrial Devices, Systems and Communications, Healthcare, and Manufacturing Solutions but most of them are losing money. Panasonic annual report 2013:
http://panasonic.net/ir/annual/2013/pdf/panasonic_ar2013_e.pdf
Note that for 2013 they lost $13 billions, they are facing difficult and expensive restructuring, cutting jobs and many unprofitable productions.
From performance summary they noticed they have increasing sales of Car AV systems, automotive batteries and other car related products.
Panasonic is not in good condition and it is not profitable company from a long time. After their restructuring they will have to cut majority of their businesses and I believe Tesla is in much stronger position as high growing company a lot of cash available for investments and bright future. Panasonic needs to ensure their survival and I do not think they can afford to lose Tesla as customer and partner. Totally both companies are interdependent but in the end of the day Tesla can do it without Panasonic only with short term implications, as there are other manufacturers who are producing just the same batteries. Panasonic Battery division in other hand will not survive without Tesla.
Interesting statement from their report is that sales of batteries decreased in 2013 by 4% because of stagnant demand for laptops but profits increased from -20 billion yens in 2012 to + 8 billion yens in 2013. Note that Tesla bought a lot of batteries in 2013 so without them this division would be just the next losing money segment which needs to be cut.
We know that Samsung ( with $49 Billions of cash) approached Tesla last year for offer, but they were rejected. Now LG and Samsung are planning to build factories for automotive batteries as they see how big the opportunity is. I am sure that both companies will not hesitate at all to join Gigafactory project. (Further more without Tesla there is no future for EVs and respectively demand for automotive batteries). But I do not think they will have this opportunity. Each manufacturer will want to be partner with company which is vividly shifting the industry frontiers. Panasonic s not an exception they are just in really complicated situation with their restructuring.
The Japanese companies have different corporate culture. Their core value is to respect their key partners and Tesla is critical for Panasonic. Tesla has the same in their DNA (that is why I think Samsung was rejected as supplier even if they offered better prices)
I do disagree with the argument that Tesla needs to convince Panasonic that there is a demand for batteries. Nobody here doubt this neither Panasonic do, the negotiations are about return of the investment.
For me is just a matter of time for agreement to be reached. Tesla just need to make it profitable for Panasonic so they can reduce their losses.
Recent split was definitely sign for progress and in my opinion is related with Gigafactory as the purpose cited in the document is so “Panasonic will shift to a business focusing on Automotive power sources”