Panasonic’s “tough love” approach to fighting the recession

Huge Recession-Fighting Cuts at Panasonic – BusinessWeek

Those opposed to a massive stimulus plan for the US might want to look at this article…Panasonic is taking a hyper-aggressive approach to fighting off its losses in profits.  Laying people off, closing plants, and taking a HUGE bath on losses for this year.  $3.85 BILLION this year, though March.  That’s TWICE the size of previous estimates.  This will increase the net loss for the year to $4.2 billion. 

However.  Next year’s savings could top $1 billion.  That’s a remarkable number considering this is a consumer electronics company in a market where people are saving at potentially scary rates (US savings rate should be at 4% right about now, possibly more, which is quite high) and consuming at very low ones. 

This speaks to a few things.  First, taking a bath isn’t necessarily bad.  A gigantic government deficit, unto itself, is not a good thing, but in terms of recession, it’s almost always necessary.  Government spending means government deficit, unless you raise taxes at the exact same time (kinda defeats the purpose, though, if you raise taxes the same amount you raise spending).  If huge deficit right now can mean a faster recovery (which, under sound fiscal management should then pay off that deficit), then that’s quite meaningful.