Loss-making Sony to slash suppliers, consolidate units

Japan's Sony Corp, facing a second year of losses, said on Thursday that it would cut its number of suppliers by more than half to reduce procurement costs by $5.3 billion a year.

The electronics and entertainment giant, which recently announced its first annual loss in 14 years, will keep about 1,200 suppliers from the current network of 2,500, company spokeswoman Mami Imada said.

She added, "We plan to purchase parts and supplies as 'Sony group', rather than individual business groups making separate orders. By reducing the number of suppliers, orders to individual suppliers should increase. This should allow us to negotiate lower prices." In the past, Sony's units have each worked out contracts with different suppliers.

Chief executive Howard Stringer is under pressure to turn around the company as it heads for its first back-to-back annual losses since it was listed on the stock market in 1958. Sony logged a net loss of 98.9 billion yen ($1 billion) in the fiscal year to March and expects to end this year 120 billion yen in the red.

Sony - whose businesses span video games, camcorders and flat-panel TVs as well as movies and music - has been restructuring under Stringer, a Welsh-born American who became the first foreigner to head Sony in 2005.

The company aims to cut procurement cost by 500 billion yen, or about 20 per cent, in the current fiscal year amid fierce price competition. "If the prices of the final products fall, we must also find ways to reduce production cost," Imada said.