Sony Will Cut 16,000 Jobs as Recession Curbs Demand
Dec. 9 (Bloomberg) -- Sony Corp., the world’s second-biggest consumer-electronics maker, plans to eliminate 16,000 jobs in the largest reduction announced by a Japanese company since the credit crunch drove the world into recession.
Sony will curb investments, outsource production and move away from unprofitable businesses by March 2010 as part of plans to save more than 100 billion yen ($1.1 billion) a year, the company said today. The job eliminations include 8,000 permanent positions, or 5 percent of the company’s electronics workforce, and 8,000 temporary workers, it said.
The reductions highlight the severity of the slump in consumer spending at a time when companies typically focus on the peak Christmas shopping season. Tokyo-based Sony, led by Chief Executive Officer Howard Stringer, said a “much larger” than anticipated deterioration in the economy spurred the cuts and the company may revise its profit targets.
“I can’t see how the company will regain its charm with consumers,” saidHiroshi Sato, chief investment officer of Tokyo-based GCSAM Co., who sold his Sony holdings. “The company might suffer from a bigger earnings decline in the second half, or even losses, if it doesn’t take any measures.”
It’s the second time Stringer, 66, is turning to major job cuts to cope with earnings shortfalls. In 2005, when the company was projecting its first annual loss in more than a decade, the Welsh-born U.S. citizen announced plans to eliminate 10,000 workers.
The electronics maker said it will announce the financial impact of the measures in January, when reporting fiscal third- quarter results.
Much Larger Deterioration
“The reason for this move is the deterioration of the economy, which was much larger than we expected,” Senior Vice President Naofumi Hara said.
Sony on Oct. 23 said net income will probably drop 59 percent in the year ending March 31, reducing the outlook by 38 percent as the stronger yen and slumping demand undermine sales of its electronics including Bravia televisions.
The company will review the impact of the reorganization steps and revise its current-year and mid-term profit targets if needed, Hara said, without elaborating. Sony faces no problem with cash flow, he said.
Panasonic Corp., the world’s biggest consumer-electronics maker, cut its full-year net income outlook by 90 percent Nov. 27.
“We are working on reorganizing our global operations, reducing costs and speeding up structural changes to weather this crisis,” Akira Kadota, a Tokyo-based spokesman at Panasonic, said today. He declined to comment on the possibility of job cuts.
All reductions will take place by March 31, 2010, Sony said. Hara declined to provide the number of people on contract.
Weak Spending
Faltering consumer spending led companies including AT&T Inc. and DuPont Co. to announce more than 15,000 job cuts this month. The number of people on jobless benefit rolls in the U.S., one of the biggest markets for Asian exporters including Sony and Panasonic, climbed to a 26-year high in the week ended Nov. 22.
Sony will invest 30 percent less in its electronics business than planned under its mid-term strategy, the company said, without giving figures.
The Bravia-brand TV maker said it will “adjust” pricing to cope with the stronger yen, two weeks after saying it didn’t have plans for “massive cuts” in prices in the U.S.
The yen has surged 21 percent against the dollar and 38 percent versus the euro this year, damping the value of Sony’s earnings from overseas.
Sony shares traded at the equivalent of 1,877 yen as of 12:42 p.m. in Frankfurt, down 1 percent from their close on the Tokyo Stock Exchange.
Fewer Production Sites
The company will also cut the number of manufacturing sites by 10 percent by the end of next fiscal year, from 57 currently.
Sony will postpone investment plans at its Nitra plant in Slovakia that assembles liquid-crystal-display televisions for the European market. The electronics maker plans to end production at two overseas manufacturing sites, including one in France that produces tape and other recording media.
“These initiatives are in response to the sudden and rapid changes in the global economic environment,” Sony said.
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