Sony warns markets of ¥260 billion loss, opts to shut TV plant

by Hiroko Nakata

Sony Corp. said Thursday that it expects to report a record ¥260 billion group operating loss for the business year ending March 31 as plummeting global demand and the yen’s surge against the dollar wreaked havoc on sales.

The forecast, which is much bigger than the ¥100 billion loss it was reportedly expecting last week, turns the electronics giant’s ¥200 billion profit estimate from October on its head.

Sony Chairman and Chief Executive Officer Howard Stringer said the consumer electronics industry is being hammered by “the massive economic upheaval.”

“Without structural refocusing on our core competencies, it will be very difficult to return to appropriate profitability,” Stringer told a news conference in Tokyo.

To accelerate restructuring, Sony said it will slash production and other costs by ¥250 billion compared with the previous year throughout the business year ending in March 2010.

That’s larger than what Sony announced in December, when it said it was preparing to reduce costs by more than ¥100 billion by that time.

Sony, which logged a ¥475.3 billion operating profit in fiscal 2007, said it expects the electronics sector’s slump to slash profits ¥250 billion from its October forecast amid a global recession and harsh price competition.

In addition, the yen’s strength will cut profits in the sector by ¥40 billion, while additional restructuring costs will steal a further ¥30 billion. Also, struggling group companies are expected to trim profits by ¥20 billion.

In the gaming sector, the strong yen will eat up ¥15 billion in profits, while lower sales will cost it another ¥15 billion, Sony said.

As a step toward improving its balance sheet, Sony said it planned to take a number of steps, including the closure of one of two TV plants in Aichi Prefecture. This will entail the loss of 1,000 jobs, mostly nonregular positions.

But it doesn’t stop there. Sony’s liquid crystal panel TV business will jettison 30 percent of its designers and related support staff. Sony declined to give specific numbers. It will also outsource part of its software development to other countries, including India.

The company said it will also launch an early retirement program in the near future.

The moves are part of a global 16,000-job restructuring plan Sony announced last month. Along with factory closures, half of the job cuts will come from full-time employees, it said.

The electronics industry, which was recently buffeted by a price war in flat-panel TVs, now must deal with sagging consumer demand at a time when a muscle-bound yen is eroding profits from abroad.

President and Electronics CEO Ryoji Chubachi admitted that the lack of profitability in LCD TVs is being caused mostly by high fixed costs, including personnel and the cost of buying the panels.

As for the TV factory restructuring plan, Sony in June will terminate production at its plant in Ichinomiya, which makes LCD panels, projectors and industrial monitors.

The firm will then shift the production to a TV assembly plant in Inazawa, Aichi Prefecture, to improve productivity.

The Ichinomiya plant currently has about 1,300 workers, mostly nonregular employees.

Sony plans to shift regular workers from Ichinomiya to the Inazawa plant and reduce nonregular employees by not renewing their contracts when they expire.