By Robin Harding in Tokyo
Published: January 22 2009 06:42 | Last updated: January 22 2009 06:42
Sony, the Japanese consumer electronics group, said on Thursday that it would plunge to a Y260bn ($2.9bn) operating loss in the year to March 2009 as the global downturn and strong yen wreaked havoc on sales.
The group was expecting an operating profit of Y200bn only last October but Sony made an operating loss during the peak Christmas trading period and slashed its sales forecast by 14 per cent to Y7,700bn.
The depth of the expected loss – far worse than even the most pessimistic forecasts – will raise questions about whether Sony has enough cash to get through the downturn without drastic restructuring.
Sony said that Y340bn of the fall in operating profit was due to its electronics division, with Y250bn of that due to price competition and the weak economy. There will be further losses of Y65bn on securities held by the company’s insurance arm.
Every business was hit by the strength of the yen and Sony announced additional restructuring provisions in the electronics, music and movie divisions as it gears up to announce the end of production at one of its most famous Japanese factories later on Thursday.
Sony confirmed that it may move all TV production in Japan to one plant, which would mean the closure of either its Ichinomiya or Inazawa factory, as the company seeks to stem losses in its electronics business by cutting 16,000 jobs
The two neighbouring plants, from which Sony exported Trinitron TVs to the world in the 1970s and 1980s, are icons within the company and a closure would show that Sony is willing to tackle its high costs in Japan.
Sony’s shares closed down 2.6 per cent at Y1,938 in the run-up to the announcement on restructuring by Sir Howard Stringer, chief executive, which is scheduled to take place in Tokyo on Thursday evening.
“It depends on whether this is the package or this is the start of the sacred cows being dismantled,” said Pelham Smithers, an analyst at Pali International in Singapore.
The Ichinomiya factory is considered most at risk because staff there say Sony was already planning to move the manufacture of projectors to another plant.
Sony declined to comment on a report in the Nikkei business newspaper that more than 2,000 full-time jobs will go in Japan through natural attrition and incentives for early retirement.
If that were the full extent of job losses in Japan, however, it would imply deeper cuts abroad.
Sony has said it will cut 8,000 full time jobs in total and shut five or six factories. So far it has announced the closure of one factory in France, with the loss of 312 jobs, and one in the US, with the loss of 560 jobs.
Sacking staff in Japan is sensitive, because many were implicitly promised a ‘job for life’, but sparing them would risk angering Sony’s foreign employees.
Managers in the company have told the Financial Times that the restructuring plans have met resistance from executives in Sony’s traditional manufacturing business.
But the extent of the downturn means that most analysts, and a number of Sony managers, say that there will have to be further cuts even after the current plan is completed.
Copyright The Financial Times Limited 2009
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