Panasonic recently built a solar panel plant in Malaysia for 45 billion yen ($564 million), upping capacity by one-third to 900 megawatts. Plans to further ramp up production to 1.5 gigawatts may be scaled back, however, because of weak demand, particularly in Europe, the sources said on condition they were not identified.

Panasonic's new president, Kazuhiro Tsuga, has promised a new revival plan for the Japanese company by the end of the current business year next March 31. He has said he will weed out loss-making or low-profitability units.

The firm's business in small lithium batteries has been hurt by price competition from Korean and Chinese competitors. Falling into the red last year, it was aiming to return to profit this year by shifting production to China, where costs are lower, but may post a loss instead, the sources said.

As a result of the squeeze on expanded output of solar panels and batteries, Panasonic's energy unit may struggle to reach a target of raising sales to more than 1 trillion yen, or 10 percent of overall sales, and operating margin to at least 10 percent by March 2016, the sources said.

The unit retains 202 billion yen of goodwill following the acquisition of Sanyo in 2010. Analysts estimate that two-thirds of that is related to solar panels and small lithium batteries.

Shares of Panasonic, which releases its results on Wednesday for the quarter ended September 30, rose 3 percent in morning trading in Tokyo to 507 yen. ($1 = 79.8150 Japanese yen) (Writing by Tim Kelly; Editing by Michael Watson)

• A Permanent Economic Emergency