In a bid to cut costs by $1.1 billion a year, Japanese consumer electronic giant, Sony Corp., is slashing 8000 jobs, or 4 percent of its global work force.
Blaming the rapid deterioration in the global economic outlook and the strength of the Japanese yen, Sony, which currently employs 160,000 worldwide, has announced the closing of several plants, a cut in investments of electronics, as well as plans to outsource work.
According to Sony, these moves will deliver more than $1.1 billion in savings a year by March 2010.
These measures highlight the plight of the Asian economy, which began last year with the economic crisis in the United States. Sony's announcement comes amid similar news from other Japanese manufacturers, which face plunging demand at home and abroad, as well as falling gadget prices and currency fluctuations.
"Now we are all facing a recession together," said Kazuharu Miura, electronics analyst at Daiwa Institute of Research in Tokyo. "It is impossible to predict how much longer the situation will last."
Sony — maker of the Walkman portable player and PlayStation 3 game console — is particularly vulnerable to the strong yen since about 80 percent of its sales come from overseas. The dollar has dropped to about 93 yen from 117 yen last year, eroding with it Sony's foreign income.
According to reports, roughly 10 percent of the company’s 57 plants, including two overseas sites, will be shut, and expansion of a site in Slovakia where LCD televisions for the European market are assembled has been delayed.
Sony has said it will trim spending in semiconductors and will outsource a part of the production it had planned for image sensors for cell phones.
“Based on such measures, Sony is planning to reduce investment in the electronics business by approximately 30 percent in the fiscal year ending March 31, 2010,” the company said in a statement.
Sony has adjusted production and lowered inventories, but tough times demand more drastic efforts. (See: statement from Sony)
The cost-cutting plan includes postponing an investment to boost production of liquid crystal display TVs in Slovakia because of a plunge in European demand for flat-panel TVs.
"These initiatives are in response to the sudden and rapid changes in the global economic environment," Sony said. The cost of the job cuts and plant shutdowns will be disclosed next year when the company updates its forecast for the fiscal year.
Apart from the 8,000 electronics job losses, Sony would cut at least 8,000 temporary jobs in the same sector by the end of March 2010, said Naofumi Hara, senior vice president of Sony, adding that temporary workers are not counted in the tally of Sony's global work force.
Sony recently slashed its full-year earnings projection, citing weaker consumer demand and a stronger yen. For the fiscal year through March 2009, it is expecting a $1.5 billion (150 billion yen) profit, down 59 percent from the previous year.
Still, many analysts say that Sony’s downsizing will not be enough to offset a global economic downturn.
Hara said it was unclear whether a further revision will be needed for the current fiscal year.
The announcement of the layoffs was made after the Tokyo market closed; Sony shares closed up 3.9 percent.
For more information, visit: www.sony.net