Sony braces up for recession; cuts jobs, closes factories
21 January 2009
Sony Corp, the Japanese electronics giant is expected to post its first loss in 14 years as the global recession coupled with a strong yen force it to revise its forecasts downwards.
The company will probably abandon its 150 billion yen ($1.7 billion) profit forecast and project a net loss amounting 74 billion yen year ending March 31 according to leading analysts. Meanwhile, an announcement of its reorganisation plans and latest projections is expected next week.
Howard Stringer, chief executive officer plans to slash 16000 jobs worldwide. He also plans to close factories, cut investment as the recession in Europe, Japan and US forces consumers to cut spending. Sales of many electronic goods like flat-panel televisions, cameras and mobile phones are forecast to fall this year, according to studies conducted by a leading Tokyo based institute.
According to analysts at the institute the forecast cut in not unique to Sony but is related to trends across the industry. Sony needs to something more than the introducing the usual cost cutting measures like job cuts and shutting factories they say.
While the restructuring plan is awaited, the job cut plan Stringer announced in December is being opposed by certain managers at its electronics business according to reports in the media. But there has been no official comment on this from the company.
According to analysts and industry insiders, the dispute concerns products such as televisions that have become commodities according to the ceo. This would require Sony to cut production costs and rely more on sales of software built into the products.
Analysts point out that Sony is not in a position to halt all domestic production but at the same time it needs to take drastic steps. They add that if it plans to move production overseas while retaining planning and development in Japan that would be positive.
More than three quarters of Sony's revenues come from outside Japan. The yen surged 24 and 30 percent against the dollar and euro last year reducing the value of repatriated overseas earnings.
Sony has announced that it plans to close factories in U.S. and France in its bid to 100 billion yen ($1.1 billion) in annual operating costs.