Snarl in Sony: CEO Stringer and PS3 creator Kutaragi at odds

Sony CEO Howard Stringer states that he and the tight-lipped Ken Kutaragi have tussled over such things as poor communication and the PS3's astronomical development costs.

By Eugene Huang

A piece today in The Wall Street Journal claims that Sony CEO Howard Stringer is in the unfortunate position of having to contend with conflicting managerial styles. In an interview with the executive in regards to the troubled company, Stringer illustrates the difficulties involved with managing a company in constant cultural chaos.

"Look, in America, I was told to cut costs," Mr. Stringer states in his interview with WSJ. "In Japan, I was told not to cut costs. Two different worlds. In this country, you can't lay people off very easily. In America, you can."

But while the battle between America's obsession with results and Japan's veneration of tradition may seem like the core of the conflict, it certainly isn't the only thing that has the company in tumult. Stringer claims that an apparent lack of communication is hindering the way the company does business. In particular, he cites his recent dealings with Ken Kutaragi, head of Sony Computer Entertainment Inc., as sources of his ire.

Stringer claims that he constantly has to patch up differences between Kutaragi's department and that of Sony's electronics division, which provides the parts for the machines that Kutaragi sells. In one particular instance, Kutaragi unveiled Sony's PSP unit for the first time at the Las Vegas Consumer Electronics Show in 2005, but didn't invite anybody from Sony's electronics division to witness it. Furthermore, during the shortage of blue laser diodes that pushed back the European launch of the PS3, Kutaragi publicly blamed their electronics division, telling reporters, "If we're asked whether Sony's quality of manufacturing has declined, I would have to say 'yes.'"

And finally, when the PlayStation 3's manufacturing costs skyrocketed past the allotted budget, Stringer pleaded with Kutaragi to have dinner with the heads of electronics on a regular basis. According to an unnamed source at the company, he agreed, but only at a rate of once a year.

But sometimes, Stringer feels more directly affected by Kutaragi's decisions, such as one instance indicative of Kutaragi's heady business approach. At a board meeting a few weeks after the blue laser diode incident, Kutaragi made the unexpected suggestion of a PS3 price cut in the Japanese market before the machine even launched, much to Mr. Stringer's surprise:

"It wasn't financially one of my best moments," he says. "The budget implications were self-evident. [But] I agreed because I wanted the launch to be successful."

As the result of the massive costs to develop the PS3, Sony is forecasting losses in the range of $2 billion for the end of the fiscal year. Although it's unfortunate for Stringer that the losses will undermine the significant cutbacks and profit boosts engineered by Sony's other divisions, he still feels that SCEI will right the ship eventually.

"I think it's fair to say that any time you're aiming for the stars, you're running the risk of falling a bit short on your timetable," he says.

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