As posted by: Wall Street JournalTOKYO -- Faced with deteriorating prices of televisions and a slowdown in consumer spending, Sony Corp. plans to cut 5% of its global electronics work force and shutter up to six factories.
Sony said Tuesday it aimed to reduce the electronics division's annual costs by more than 100 billion yen ($1 billion) by the end of its fiscal year ending March 2010, embarking on one of the most aggressive belt-tightening measures among major electronics companies.
It plans to cut 8,000 of the roughly 160,000 jobs at its electronics division by March, while also targeting at least as many reductions in temporary and seasonal workers.
Like its rivals, Sony is grappling with a global economic slowdown that is sapping demand for new TVs and digital cameras during the crucial holiday shopping season. It is also hurt by the sharp rise in the yen against major currencies, which has cut into profits by reducing its overseas revenue when converted back into the Japanese currency.
The holiday shopping season is providing a critical test for electronics makers, which must not only provide an appealing lineup, but must also entice cash-strapped consumers with major mark-downs on their products. Sony and others lowered prices of some flat-panel TVs by as much as 30% at major U.S. retailers in recent weeks to keep pace with discount brands like U.S.-based Vizio Inc.
Japanese rival Panasonic Corp. last month lowered its earnings forecasts for the fiscal year and slashed capital spending plans in an attempt to weather the downturn. South Korea's Samsung Electronics Co. said Monday that demand was weak across all of its major businesses in the December quarter and that it could cut spending by as much as 30% next year to seven trillion won ($4.8 billion).
Sony already cut its fiscal-year net profit forecast by nearly 40% to 150 billion yen in October, citing weakness at its electronics business and the strong yen. Sony said it will announce the financial impact of its latest cost-cutting plan when it next reports quarterly earnings results in January.
Sony said it plans to close up to six of its 57 manufacturing sites by March 2010. Sony wouldn't disclose specifically where the job cuts would come from, but said they would include Japan.
The company's steps call into question the sustainability of its electronics-business turnaround engineered by Welsh-born American Chief Executive Howard Stringer. Under Mr. Stringer, the first non-Japanese to head the Tokyo-based company, Sony posted a record net profit for the fiscal year ended March 31.
"Even though we were able to improve our own standing with the restructuring plans, the market conditions have worsened to the point that it overtook those improvements," said Naofumi Hara, a senior vice president at Sony. "The No. 1 factor is that the economic environment has gotten far worse than we expected."
Mr. Stringer has pushed the company's electronics division, which accounts for almost 70% of Sony's total sales, to be bold and deliver innovative products like it once did with its iconic Walkman. In recent years, as Sony has restructured, it has seen Apple Inc. wrest control of the portable-music-player industry that it once ruled and has seen Samsung overtake it in TV sales.
Sony said it plans to reduce investment in the electronics business by about 30% in the year ending March 31, 2010. It will also outsource some of the production of certain chips and postpone an investment to expand an LCD television assembly factory in Slovakia.
To combat the yen's rise against the euro, Sony said it would start in January to raise prices on certain products sold in Europe. The company said it also will look to scale back or withdraw from unprofitable or noncore businesses.
