The Japanese electronics giant Sony is to axe 16,000 jobs and slash costs by more than $1bn (£670m) as it tries to tackle plunging profits at the group in the wake of the credit crunch.
The news is the latest blow for Japan's faltering economy, which last month slid into recession for the first time in seven years. Sony recently joined Toyota and Panasonic in predicting a huge decline in profits this year.
The Tokyo-based group announced yesterday it had "embarked on a series of measures to strengthen its corporate structure and bolster profitability" as sales of its electronic goods, especially flat-screen televisions and digital cameras, have suffered.
It added that the moves were "in response to the sudden and rapid changes in the global economic environment". The management is hoping the strategy can deliver cost savings of Y100bn (£731m) by March 2010. Sony admitted it was to "realign" its manufacturing sites in Japan and overseas. The overhaul includes moving its workforce and a plan to reduce headcount.
Employees across the group were on tenterhooks yesterday as Sony revealed that 8,000 from the 160,000-strong electronics business would lose their jobs. There was no further detail given on divisions or locations for the cuts. Sony will also wield the axe in its seasonal and temporary workforces, cutting a further 8,000. This is the largest job cull announced by an Asian business since the onset of the financial crisis.
The group is reviewing all of its businesses and a spokeswoman for the group refused to rule out redundancies at the UK operations. The firm employs 1,750 people in Britain.
The company outlined its plans to overcome short-term pressures. "Sony intends to adjust product pricing to mitigate the impact of the appreciation of the yen, curtail or delay part of its investment plans, and downsize or withdraw from unprofitable or non-core businesses," it said.
The yen has soared against the dollar and the euro this year, which dented its export business. The yen's strength against the pound forced Sony to announce a hike in its prices in the UK just two weeks ago.
Sony also aims to reduce its 57 manufacturing plants by about 10 per cent in the next 18 months, and will cease production at its French plant altogether. It will further update the market on the measures, and their related expenses, in its third-quarter earnings announcement next month.
The moves are a direct response from the chief executive Howard Stringer to the stark reality facing the electronics group. The company announced in October that operating profits were likely to be 57 per cent lower than forecast for the full year. This followed a profit warning from Toyota last month, which predicted a 70 per cent drop in profits this year. Shortly after, Panasonic said net profits would be 90 per cent lower than last year.
While Japan is less exposed to the toxic debt that has brought companies and countries to their knees across the globe, it remains heavily dependent on exports. Demand from two of its biggest customers, the US and China, has declined this year, contributing to the government cutting interest rates and introducing an economic stimulus package. It was not enough to stop the country officially slipping into recession in November, bringing to an end its longest run of growth since the Second World War. At the time, the Economy minister Kaoru Yosano warned that Japan's economic state "could worsen further" with predictions from the IMF that the Japanese economy will contract by 0.2 per cent next year.Reuse content