President Masahiko Terada

In fiscal 2006, ended March 31, 2006, Victor Company of Japan, Limited (JVC), saw, on a consolidated basis, net sales decline 4.0%, to ¥806.9 billion, and reported an operating loss of ¥6.9 billion, compared with operating income of ¥10.4 billion in the previous fiscal year, and a net loss of ¥30.6 billion, compared with a net loss of ¥1.9 billion in the previous fiscal year. We deeply regret having to announce these results after two rounds of downward revisions.
  Although fierce competition spurred by the advent of digital AV products has led to continued deterioration in corporate performance subsequent to the latter half of fiscal 2005, product quality issues are mainly to blame. In response, we kicked off operational reforms in the beginning of fiscal 2006 and launched management reforms to reinforce our business structure, including employment structure reform, Companywide organizational reform, and production site realignment, in the latter half of the fiscal year. Nevertheless, JVC's mainstay Consumer Electronics business segment recorded greater-than-projected service costs for the fiscal year under review, owing to quality issues with DVD recorders. In addition, sales opportunities were lost due to delays in the development of LCD TVs stemming from an unsuccessful outsourcing strategy. Largely as a result of these two events, we were not able to put a brake on the downturn in performance within the promised time frame. This is something that I, as president, accept responsibility for and realize is unacceptable.

Why did performance decline despite the implementation of management reforms? Our first order of business is to clearly identify the true causes of weak results.
  First, management transparency was insufficient. We had to revise our performance forecasts downward twice because we were unable to get a clear read on actual business conditions - from goals and progress to risks throughout the organization - due to the detrimental impact of the conventional in-house company system's multilayered structure and sectionalism.
  Second, management anchored in autonomous responsibility has yet to be firmly established. Since not all department managers were fully aware that they must take responsibility for their plans, management was unable to successfully perform the critical task of ascertaining the status of frontline operations and quickly responding to changes in operating conditions. We were not able to break free from delays in new product development and respond to falling prices because we failed to make speedy decisions linking development, production, and sales as well as take action.
  Right now, the greatest challenge for JVC is to eliminate these two root causes of underperformance. If we are to accomplish this, we must shore up our communication skills, strengthen our ability to respond to frontline needs, and create a new corporate culture that can keep pace in the digital era. In addition, we must remain determined to clear our path of all obstacles.