Japanese electronics conglomerate, Sony Corporation announced yesterday that it has embarked on a series of measures to strengthen its corporate structure and bolster profitability by slashing 16,000 jobs in its electronics business, shutting down several manufacturing sites and cutting cost to the tune of $1.1 billion a year in response to the sudden and rapid changes in the global economic environment.
Of the 16,000 jobs to be eliminated, 8,000 would be regular workers, or roughly 5 per cent of its workforce of 185,800, and an equal number or more temporary and contract staff.
Sony has become the first Asian company to take such harsh measures as it faces the grim reality of low consumer demand which has been compounded by the recent surge in yen against the dollar and the euro, which makes it uncompetitive in the US and European market.
Sony, which has been most affected in its consumer electronics business, will undertake certain short-term measures, including adjusting production, lowering inventory levels, and reducing operational expenses.
Sony plans to reduce employee headcount in the electronics business worldwide by approximately 8,000, out of approximately 185,000 as of 30 September 30 2008 and an equal number of its seasonal and temporary workforces.
It also 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 and plans to realign domestic and overseas manufacturing sites, reallocate its workforce and reduce headcount.
As per its investment plan outlined in its mid-term corporate strategy update, which aims to focus on growth, the company will reduce or postpone planned investments, specifically in the semiconductor business.
It intends to cut investment expenditures this fiscal year by outsourcing a portion of its planned increase in manufacturing of CMOS image sensors for use in mobile phones to third parties.
Due to the rapid decline in demand in the television markets, Sony has decided to postpone recently considered plans to invest in production expansion at the Nitra plant in Slovakia, which is one of its sites assembling LCD televisions for the European market thereby reducing investment in the electronics business by approximately 30 per cent in the fiscal year ending March 31, 2010.
By the end of the current fiscal year, Sony plans to cease production at two overseas manufacturing sites, including Sony Dax Technology Center in France, which manufactures tape and other recording media.
By further advancing initiatives including rationalizing its manufacturing operations, shifting and aggregating manufacturing to low-cost areas, and utilizing OEM and ODM partners, Sony plans to reduce the total number of manufacturing sites by approximately 10 per cent from the current total of 57, by March 31, 2010.
With Japan in recession, the domestic market for electronic goods has also declined and its stock has nose dived by nearly 70 per cent this year and it has cut its annual profit forecast for the fiscal year by 58 per cent in October.