2000 People Homeless Overnight... Company Causing Uproar in Japan [Curiosity Lab]

Funai Electric, a Mid-Sized Japanese Company, Declares Bankruptcy
Established 61 Years Ago, Once Thrived with LCD TVs
200 Billion Yen in Cash Assets Turned into 400 Billion Yen Debt in One Year
Billions Lost After Acquiring Publishing Subsidiary
Signs of Decline Evident, Employees Lament

◆Various Signs of Failing Companies

*Doing well now, so why bother... Complacency with current success
*What’s wrong lately?... Ominous atmosphere prevailing
*Another meeting... Unnecessary meetings
*Changing again?... Frequent changes in organization and personnel
*Mind your own business... Barriers between departments
*Just enough to keep up with others... Self-preservation
*Looks impressive... Showing off superficially
*Here again, gone again... Frequent employee turnover
*Where did all the money go?... Capital flight
*Valuable people leaving... Talent drain
*What did you say?... Lack of communication with employees, customers, shareholders, etc.

On October 24th, at Funai Electric located in Daito City, Osaka Prefecture, Japan, an announcement was made via the company broadcast around 1:30 PM: "All employees gather in the cafeteria." At this meeting, the company’s lawyer announced, "The company has gone bankrupt." He continued, "We have no choice but to lay off all employees. The salary scheduled to be paid on the 25th cannot be paid."

Employees sighed, knowing the company was struggling but shocked by the bankruptcy and the fact that they would be dismissed without receiving their wages. For workers, it was tantamount to a "death sentence." Some employees lamented, "There were several chances to escape earlier, but we missed them." What happened to Funai Electric, which once dominated the display market during its 60-year history?

Osaka Funai Electric Headquarters Exterior
Photo by Funai Electric

Founded in 1961, Funai Electric is a mid-sized company with over 2,000 employees as of March. It developed a wide range of businesses including video devices such as TVs, printers, and air conditioners, and was listed on the stock exchange in 2000. The LCD TV business division, which started production in 2002, once held the highest market share in North America. However, as competition with Chinese companies intensified, performance deteriorated, and after being acquired by a Tokyo-based publishing company in 2021, it was delisted. According to the company’s financial results announced in August this year for the previous fiscal year, the final loss was 13.1 billion yen (approximately 12 billion KRW), and as of the end of March this year, total liabilities amounted to 46.1 billion yen (approximately 41.6 billion KRW).

On the 30th, Japan’s ‘ITmedia Business’ highlighted Funai Electric’s bankruptcy in its online edition. As employees had lamented earlier, Funai Electric showed many signs of failure (or opportunities for employees to escape). These signs included ▲ ominous internal movements ▲ collapse of the core business ▲ outflow of money and people. Japanese media had reported rumors of Funai Electric’s crisis since last summer based on subsidiary insolvency, but most employees paid little attention, saying "It has nothing to do with us." The cause of bankruptcy was not limited to the core business. Although the main LCD TV manufacturing business was struggling compared to the past, consolidated sales for the fiscal year ending March 2024 were about 85.1 billion yen (approximately 7.7 billion KRW, a 4.1% increase from the previous year), showing resilience. As recently as last year, cash and deposits amounted to 22.2 billion yen (approximately 2 billion KRW). However, debts exceeding 400 billion yen (over 40 billion KRW) accumulated within a year.

Funai Electric product image [Photo by Funai Electric]

The downfall of the 63-year-old company began after it welcomed a new owner in 2021 and acquired a hair removal specialty beauty salon (Musee Platinum) in 2022. Especially after being acquired by the publishing company, about 30 billion yen (approximately 27 billion KRW) in funds were drained. As of the end of September, capital was eroded, and the company was in a state of debt exceeding equity by 11.7 billion yen (approximately 10 billion KRW). Debt exceeding equity means that total liabilities exceed total assets. Musee Platinum also pursued aggressive sales but fell into financial difficulties. Although Musee Platinum was sold in March, the debts incurred there were not fully resolved. Japanese media viewed that "the cause of Funai Electric’s bankruptcy was not only the crisis in its core business but also the decisive role played by the outflow of assets externally."

The media pointed out, "The lesson to learn from Funai Electric’s ‘tragedy’ is that the point to identify risks in the company you work for is not only the ‘core business’." It especially noted, "When a company like Funai Electric faces obsolescence of its existing business model, it tries to find new growth engines through mergers and acquisitions (M&A) or business alliances to enter different industries. That in itself is not bad, but the people who come at such times cannot always be called ‘well-intentioned.’ While claiming to grow the company, they may acquire valuable assets or engage in financial juggling that causes damage." The media advised, "Employees usually have little interest beyond their own work, but to avoid becoming ‘employees who cannot escape,’ they should carefully observe internal and external company movements such as M&A."