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Fumio Ohtsubo, Matsushita Electric Industrial Co's (MC-OLD) new President as of today has yet to say what he will do about struggling majority owned (52.4%) JVC (Tokyo: 6792). In the year ended March 31st, JVC's sales were off 4% at 703 billion yen ($6b) and it lost 5.8 billion yen ($50m) against a 9.9 billion yen gain the year prior. Following Matsushita's successful corporate restructuring, it's time to let go of the baggage and focus on higher margins.

Outgoing president Kunio Nakamura commented at the firm's annual shareholder meeting that:

"A recovery in JVC's earnings is our urgent task."

"A turnaround plan, which includes drastic reform steps, is being mapped out ... As a major shareholder, Matsushita plans to keep a close eye on that." (Source: Reuters)

I would argue that the probability of success with a turnaround is questionable and will be time consuming as well as costly -- consider the opportunity costs. I don't see JVC being competitive against rival low-cost manufacturers from neighboring China and South Korea no matter how much it can cut costs while trying to maintain quality.

One issue holding Matsushita back from selling off its stake is likely the fact that JVC's shares have tanked over the past two years from a multi-year high of over 1,300 yen at end the of May 2004 to 579 yen at Wednesday's close.

Click here for Reuters coverage of this topic.

Matsushita Electric Industrial Co (MC-OLD) 1-year chart:

Source: Matsushita Needs to Unload Bleeding JVC (MC)