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Sony may shut TV plant in Japan

Sony said it may halt production at one Japanese TV plant,as it grapples with slide in demand.

Written by Reuters | Tokyo | Published: January 22, 2009 10:09:15 am

Sony Corp said it may halt production at one Japanese TV plant,as it grapples with a slide in demand and a stronger yen that are widely expected to force the company to project its first operating loss in 14 years on Thursday.

Reeling from the global recession,the maker of Bravia LCD TVs and PlayStation game consoles is set to book an annual operating loss of about $1.1 billion,a person with knowledge of the matter said this month.

Sony is looking at consolidating TV assembly and parts production into one of its two TV factories in Japan and using the other for distribution and other purposes,spokeswoman Mami Imada said,a move that would reportedly axe 3 per cent of its domestic workforce.

It would be part of measures outlined last month,which included curbing investment,closing five to six plants and cutting a total of 16,000 regular and contract jobs globally to save $1.1 billion a year in costs.

But analysts say the electronic and entertainment conglomerate,which generates two-thirds of its revenue outside Japan,needs to take more drastic steps. “Its business model and operational issues account for 80-90 per cent of Sony’s poor earnings. Domestic production costs are a concern but this move is not something that would bring it back to the black or cut losses in half,” said Nomura Securities senior analyst Eiichi Katayama.

“Sony has to consider ways to lower fixed costs not only for its TV business but for the whole company,” he added. “It will have to start cutting development costs in addition to production costs.”

Sony’s shares fell 2.5 per cent,underperforming a 0.4 per cent rise in the benchmark Nikkei average.

Illustrating the problems Sony faces,Japanese exports plunged 35 per cent in December from a year earlier,with electronics sales to China and other parts of Asia among the worst affected as Western orders from Asian assembly plants dry up.

The yen rallied nearly 20 per cent against the dollar last year and it hit a 13-year high of 87.10 yen on Wednesday.

Rival Samsung Electronics this month reorganised itself into two major groups in response to the global downturn,while Panasonic Corp has also cut its outlook and stepped up restructuring measures.

The Nikkei business daily reported Sony will cut more than 2,000 full-time jobs as it moves manufacturing bases,and that it will make the announcement along with a downward revision to its earnings outlook on Thursday.

The Nikkei also said Sony plans to slash executive and managerial-level bonuses to cut costs.

Sony’s Imada declined to further comment on details of the restructuring and the possibility of a cut to the company’s earnings outlook.

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