Sanyo to cut 15% of workforce, close plants

Struggling Japanese electronics maker Sanyo Electric Co. Ltd said yesterday it would cut 15 per cent of its global workforce, shutter plants and halve debt in a sweeping restructuring to return to profit.

Sanyo tracks rival consumer electronics makers having to undergo major restructuring amid intense price competition for televisions and other digital products. Sony Corp. and Matsushita Electric Industrial Co. Ltd are also cutting jobs.

The overhaul comes after Japan's third-largest consumer electronics maker posted a big loss in fiscal 2004, hammered by earthquake damage to a chip factory and sluggish sales of core products such as digital cameras and mobile phones.

The formidable challenge of reorganising Sanyo's vast business interests falls on two executives, Chief Executive Tomoyo Nonaka and President Toshimasa Iue, who got their jobs in a reshuffle of top management approved by shareholders last week.

They billed the restructuring as the company's third birth following its founding in 1947 and a merger in 1986.

"We have to be ready to feel some pain under this new strategy, which marks the third start for Sanyo," Mr Nonaka told a news briefing in Osaka, monitored by reporters in Tokyo.

"There will be no sacred cows in this restructuring," Mr Iue said.

The executive team vowed to focus on rechargeable batteries, solar cells and other areas where it has strong technology and a competitive advantage, while pulling out of businesses unable to produce an operating profit margin of at least five per cent.

Sanyo said it will cut about 14,000 jobs, including 8,000 in Japan where salaries are typically much higher than overseas. The company plans to cut 3,800 employees in Japan in 2005/06, the first year of the three-year plan through March 2008.

It also vowed to close or sell the equivalent of 20 per cent of factory floor space in Japan, slash 70 billion yen in costs and cut 600 billion yen of its interest-bearing debt, which stood at a whopping 1.2 trillion yen as of March 31.

Shares in Sanyo, which have lost about one-third of their value in the past one year, ended up 0.34 per cent at 297 yen yesterday after having risen five per cent since a newspaper reported on Friday the company was planning for heavy job cuts.

Sanyo's semiconductor operations were hit hard when a major earthquake last October damaged a domestic factory. It is struggling to return its home appliances division to profit, and slowing growth in the digital camera market has also hurt.

The company posted a net loss of 171.54 billion yen in the year ended March 31 and is forecasting a net loss of 92 billion yen this year.

"With its market share in decline, it is becoming less and less clear the reason for Sanyo's existence in the marketplace," Credit Suisse First Boston analyst Koya Tabata said. "We still can't see its vision for future earnings growth."

The Osaka-based company has earmarked 90 billion yen for restructuring in the current business year, including 56 billion yen to reorganise its business portfolio, 24 billion yen for personnel-related costs and 10 billion yen to slim down assets.

Sanyo aims to achieve a group operating profit margin of five per cent in 2007/08, compared with less than two per cent last year.