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 to save more than 100 billion yen ($1.1 billion) a year, the company said today. The cuts include 8,000 full-time employees, or 5 percent of the company’s electronics workforce, and another 8,000 part-time and seasonal workers, Sony 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 measures and the company may revise its profit targets.
“I can’t see how the company will regain its charm with consumers,” said Hiroshi 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 boost earnings. In 2005, when the company projected its first annual loss in more than a decade, the Welsh-born U.S. citizen announced plans to eliminate 10,000 workers.
Sony said it will announce the financial effect of the measures in January when it reports fiscal third-quarter results.
The job reductions beyond full-time employees will affect subcontractors, seasonal workers and people hired on a daily, weekly or monthly basis, said Mami Imada, a Sony spokeswoman. Temporary workers typically don’t get the same benefits Sony’s full-time workers receive, she said.
“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 said on Oct. 23 that 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 effect of the reorganization and revise its current-year and mid-term profit targets if needed, Hara said. Sony faces no problem with cash flow, he said.
Panasonic Corp., the world’s biggest consumer-electronics maker, cut its full-year profit 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 spokesman at Panasonic in Tokyo, 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.
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.
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, hurting Sony’s overseas earnings.
Sony shares traded at the equivalent of 1,906 yen as of 2:11 p.m. in Frankfurt, up 0.5 percent from the Tokyo closing price.
Sony said it will invest 30 percent less in its electronics business than planned under its mid-term strategy, without giving figures.
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.
