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Last updated: September 28, 2005 4:26 pm

Sanyo plans big overhaul and forecasts more losses

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Sanyo Electric, Japan's indebted consumer electronics maker, on Wednesday unveiled a sweeping restructuring as it forecast a widening of losses to Y140bn ($1.2bn) for the year.

The plan, which involves heavy and immediate job losses and the ditching of several non-core businesses, shows the extent to which many Japanese electronics companies are struggling to compete in the face of intense global competition and spiralling prices of commodity consumer items.

The restructuring by Japan’s third-largest electronics company, among the most far-reaching corporate overhaul in recent years, demonstrated Japanese companies could bite the bullet when needed, analysts said.

The plan contrasted with the more timid offering from Sony unveiled last week, which preserved more jobs and shied away from axing sensitive businesses. Sir Howard Stringer, Sony’s first foreign chief executive, said it was not possible to restructure as savagely in Japan as it was in the US. 

Carlos Dimas, electronics analyst at CLSA in Tokyo, said: “This restructuring has a lot more meat than Sony, though the level of urgency is different at Sanyo.” Unlike Sony, Sanyo was weighed down by huge debts, he said.

The Osaka-based company, which in July appointed Tomoyo Nonaka, a former TV presenter, as chairwoman and chief executive, will speed up job cuts, losing 10,000 within four months. It will eventually axe 14,000 jobs, 15 per cent of its workforce, with 8,000 losses coming in Japan. Sony is cutting 7 per cent of its workforce, the bulk outside Japan.

Sanyo said it would leave several businesses altogether, including DVD players and recorders and VCRs. It will close two chip factories in Japan and shrink its low-margin white goods business, concentrating on high-end products.

The company said it would realise savings of Y170bn within three years and take a Y90bn restructuring charge this year. Net losses are expected to widen from a forecast Y92bn to Y140bn.

Sanyo also said it was in talks to sell its 52 per cent stake in Sanyo Electric Credit, its finance arm, to help reduce its Y1,200bn debt. The company plans to sell or securitise several buildings, including its Osaka headquarters. Mr Dimas said: “Finally the company understands its position is deteriorating rapidly and it has to move a lot faster in its restructuring. This really is a significant change in attitude.”

Standard & Poor's placed its BBB rating for Sanyo on Credit Watch with negative implications, citing concerns over a delay in the resumption of profits.

Analysts said Sanyo was right to concentrate on fewer products such as rechargeable batteries and air-conditioning, where it was competitive, and to get out of areas where it could not compete. Some said they would have preferred Sanyo to exit white goods altogether.

Sanyo has also pledged to improve its little-known brand image, a task that analysts said would be easier than Sony's efforts to regain the prestige of its world-renowned brand. [opt cut]

Sanyo, which was hit by rapidly falling prices and a damaging earthquake at one of its factories last year, made a record loss of Y171.54bn in the 12 months ended March 31. Shares fell 1.95 per cent on Wednesday to Y301 ahead of the announcement, which came after trading closed.

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