I'm not sure about the authenticity of the following, but the reason I was given is as follows.
As you suggest in your post, the Technics Musical Instrument Division of Panasonic was only a very small part of the giant Matsushita Corporation, which owns - amongst others - Panasonic and Technics, and as such, probably didn't contribute a great deal of profit to the overall organisation.
The Technics M.I.D. was headed by a Japanese gentleman, who was a long standing member of the company. It was 'His Baby' and was kept alive by his continual efforts.
However, when he left the company (either retired or died) there was no one with the same enthusiasm as the former head of the Division and since it was regarded by the 'bean counters' as basically 'small fry' in the overall organisation, the decision wqas made to close the Division - A very sad day.................
As far as I am aware, the only really significant Technics products still being manufactured are the excellent SL Turntables and Headphones.