What links the election of Barack Obama to the United States presidency with a deal by the world’s largest maker of consumer electronics to acquire a struggling rival?

The answer is climate change. Panasonic wants to get its hands on Sanyo Electric’s production of solar panels and electric car batteries, two technologies essential to realising Obama’s dream of a greener America. Notable among the president-elect’s campaign pledges is an 80 percent cut in carbon dioxide emissions by 2050, and putting “one million plug-in hybrid cars—cars that can get 150 miles per gallon—on the road by 2015”.

Until a few years ago, the only hybrid car on the road was the Toyota Prius, favorite of Hollywood celebrities and politicians keen to sport their green credentials. Since then, even though gasoline and diesel have come down sharply in cost, the painful rises earlier in 2008 set off a worldwide scramble to develop fuel-efficient vehicles.

Sanyo is the world’s No. 1 producer of rechargeable lithium-ion batteries used in mobile phones, iPods and personal computers. The global market for these batteries is worth US$6 billion of which Sanyo supplies about one-third. Now they are being adapted for use in a new generation of electric cars with names like the Honda Insight, the Chevrolet Volt and the Mitsubishi Miev. Sanyo is already signed up to produce lithium-ion batteries for Volkswagen and Honda. Warren Buffett recently paid US$230 million for a stake in a Chinese battery maker that plans to sell electric cars in the United States.

The manufacture of lithium-ion batteries is a tricky process. Any impurity in the lithium cell and it is liable to overheat. Laptops powered by Sony lithium-ion batteries have had a nasty habit of exploding. Photographs of flames shooting from a Dell laptop during a business conference in Japan circulated on the Internet, worsening a public relations nightmare for Sony, the second-biggest maker of lithium-batteries. More than 9 million Sony battery packs had to be recalled in 2006; another 100,000 are being recalled this month. Competitors Sanyo, Panasonic, and Samsung must be rubbing their hands in glee.

The see-sawing price of oil, growing concern about global warming, and generous tax incentives have created a global boom not just for hybrid cars but for harnessing the sun’s power to generate electricity.

With hardly any fossil fuels of its own, Japan’s economy was especially vulnerable to the twin oil shocks of the 1970s. Sanyo was a pioneer in developing photovoltaic cells, and a long-time champion of solar energy. As a sign of its sun worship, Sanyo built a huge solar generator in Gifu, central Japan. The Solar Ark is 315 metres wide and 37 metres tall, and can be seen from the Tokaido bullet train that hurtles alongside. Inside the Ark are a museum to solar energy, and a shrine-like display about the founder of Sanyo, Toshio Iue.

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Sanyo now ranks seventh in global production of solar-energy panels. Why Sanyo let slip an early lead in this nascent industry, allowing itself to be wrong-footed by aggressive newcomers in China, Europe, and the United States, is a mystery.

This writer recalls two things from an interview with the then president of Sanyo, Kaoru Iue, in the early 1980s. One was the unnerving intensity of his gaze through rounded spectacle lenses as thick as jam-jar bottoms, and an unfaltering smile. The other was his passionate commitment to solar energy, which even his subordinates confessed to finding eccentric, as lessons from the energy crisis of the Seventies lost their urgent appeal.

Did the Land of the Rising Sun miss the surge in global demand for solar power through lack of imagination or complacency? The failure to dominate in either laptops or cell phones, or to anticipate an entirely new world market created by the Apple iPod, lends support to this view. Contrarians can cite Japan’s triumph with high-definition television. In the 1990s, following the collapse of Japan’s bubble economy, it became fashionable to ridicule the decades of research and vast sums of money invested by Japanese electronics companies and NHK, the nation’s equivalent of the BBC, on developing and perfecting HDTV. The taunts have now backfired, as electrical shops around the world are filled with HDTV sets, the latest objects of consumer desire.

The lowly origins of Panasonic and Sanyo made them exemplars of Japan’s economic miracle. Toshio Iue left school at the age of fourteen to live with his sister and her husband Konosuke Matsushita, the founder of Panasonic, in a rented tenement house in Osaka. The three of them were the original employees of Matsushita Electric, established in 1918, which 90 years later would count 305,828 employees and global sales of A$136 billion.[US$ US$89.9 billion.] (Matsushita Electric only discarded its name last month in favor of Panasonic.)

Iue worked for Matsushita for almost three decades. “I lived with Toshio longer than anyone else,” Konosuke Matsushita later said. “Everything Matsushita is today is the result of Toshio’s hard work when he was with the company.”

After World War II, Konosuke Matsushita was purged by the U.S.-led Allied Occupation as a suspected militarist. Although not a zaibatsu conglomerate like Mitsubishi, Mitsui or Sumitomo, Matsushita Electric was initially targeted for dissolution for aiding the Japanese war effort by producing munitions, and was only saved by a petition signed by 15,000 of its union workers and their families. In an attempt to project an emollient image to Japan’s occupiers, Konosuke Matsushita in 1946 established a PHP (for ‘Peace and Happiness through Prosperity’) Institute that published books and magazines in several languages.

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Iue resigned as a director of Matsushita Electric. His brother-in-law ‘lent’ him a disused Matsushita factory on the outskirts of Osaka where he began producing dynamo lamps for bicycles. Iue called the new business Sanyo, meaning ‘three oceans,’ a token of his global ambition. A legacy of Sanyo’s humble beginning is that its global headquarters is close to that of Panasonic.

Sanyo prospered by making components and cheap electrical goods. By the 1980s, it had the largest foreign output of any Japanese manufacturer, churning out refrigerators in Kenya, portable stereos in Zimbabwe, and televisions in Argentina’s desolate tip, Tierra del Fuego.

During the ‘video wars’ of that decade, Sanyo was weakened by the decision of Kaoru Iue to back Sony Corporation’s Betamax against the VHS format developed by JVC, a Matsushita subsidiary. Victory would go to the Matsushita camp, as VHS eventually swept the world.

Another weakness was that Sanyo has always seemed to be downmarket. One consequence is that Sanyo makes far less profit on its ‘white goods’ and consumer electronics than Panasonic.

“They never had a good image,” says Ed Merner, a veteran Japan fund manager. “Generally what they produced was second rate.”

In recent years, Sanyo has lurched from crisis to crisis. In 2006, it was rescued by Goldman Sachs, Sumitomo Mitsui, and Daiwa Securities SMBC. Following an accounting scandal, in which the company was accused of inflating profits, Toshimasa Iue, the grandson of founder Toshio, resigned as president, along with a newly appointed chairwoman. Toshimasa’s father, Satoshi Iue, a former president and chairman, also stepped down as senior adviser.

With bankers now calling the shots, Sanyo has been trying to trim its bloated structure, and this year sold its money-losing cellphone business to Kyocera.

Merner thinks Panasonic is still mad to want to buy Sanyo. “If I held shares in them I would be selling them. It’s a real mess. All those liabilities, all those businesses that have to be closed down, all those people who will have to leave. They have a very poor image, very poor management, and poor financials.”

Panasonic has no presence in solar energy, and for Merner this is the only clear merit in buying Sanyo. What appeared an unfashionable obsession in the early 1980s now looks like prescience, though Kaoru Iue would spin in his grave at Sanyo losing its independence, as the parent prepares to gobble its own child.