NEC unlikely to take on Renesas workers

After axing own ranks by 10,000, CFO 'negative' on any rehiring

Bloomberg

NEC Corp., which cut 10,000 jobs this year, will probably reject workers from ailing affiliate Renesas Electronics Corp. while a consortium negotiates a bailout package.

“I’m negative” on accepting Renesas employees, Chief Financial Officer Isamu Kawashima said in an interview at NEC’s headquarters in Tokyo this week.

He declined to elaborate on plans for the unprofitable chip-maker, which is 35 percent owned by NEC, saying no decisions have been made.

Innovation Network Corp. of Japan, a government-affiliated fund, is reportedly preparing a rescue plan for Renesas that may include as many as 5,000 job cuts. The company may get an investment of more than ¥180 billion from the fund, a source with knowledge of the plan said this week.

Mitsubishi Electric Corp., which owns 25 percent of Renesas, will accept a few hundred workers from the Kawasaki-based chip-maker, the Nikkei newspaper reported Monday.

NEC, Japan’s largest maker of wireless stations, has cut its workforce, reduced salaries and sold patents to return to profit this fiscal year after back-to-back losses. The company forecasts net income of ¥20 billion for the year ending March 31, compared with a loss of ¥110.3 billion a year earlier. NEC may earn ¥29.3 billion, according to the average of 10 analyst estimates.

“There’s room to beat our forecast,” Kawashima said in the interview. NEC is maintaining its net income forecast amid concerns about the economy in Europe getting worse and natural disasters, he said.

NEC is considering acquiring companies in emerging markets, Kawashima said. It got 17 percent of its sales outside Japan last quarter, according to the company.

NEC shares have fallen 7.1 percent this year, compared with a 11 percent gain by the Nikkei 225 stock average.

Renesas, a supplier to Apple Inc. and Nintendo Co., is cutting jobs and considering closing or selling plants to recover from losses as demand drops for its system LSI chips, used for functions including processing TV images.

Innovation Network Corp. is preparing to buy a two-thirds stake in Renesas, the source familiar with the plan said. Eight companies, including Toyota Motor Corp., would invest more than ¥10 billion combined for minority stakes under the proposal, which may still change, the source said.

NEC and Hitachi Ltd., which owns about 31 percent of Renesas, will each pay about ¥1 billion to the chip-maker to fund an early retirement plan, the Nikkei said Monday. The three shareholders and lenders provided ¥97 billion in loans to Renesas in October.

Renesas is a key supplier to automakers as the world’s largest maker of microcontrollers, with a 27 percent market share last year. It has lost ¥177.6 billion since it was formed in 2010 through the merger of money-losing chip-makers Renesas Technology Corp., a venture between Hitachi and Mitsubishi Electric, and NEC Electronics Corp.

NEC sold its LCD-related patents to Taiwan’s Hon Hai Precision Industry Co. for ¥9.45 billion last quarter.