Panasonic, one of the world’s largest electronics companies, on Wednesday said that business conditions are getting worse and that it will lose Y380bn ($4.2bn) in the year to March 2009.
Citing “severe circumstances”, the company said that it would close 27 factories - 13 of them in Japan - and cut 15,000 jobs.
Panasonic’s forecasts imply that the fourth quarter from January to March will be disastrous, with sales down by more than 30 per cent on last year, and a net loss of Y445bn in that quarter alone.
Although much of the red ink is due to restructuring costs, the extent of the fall in sales at Panasonic, an industrial bellwether, will add to fears of losses at many Japanese manufacturers next year.
“Because of further market deterioration, the continued rise in the yen, and additional restructuring costs, we have had to revise our forecasts,” said Makoto Uenoyama, Panasonic’s finance director.
Sony, Toshiba, NEC and Hitachi have all said that they expect to lose hundreds of billions of yen this year, and Sharp is expected to follow when it posts results on Friday.
The companies are now racing to cut jobs, which is expected to weigh on domestic demand in Japan, and to restructure, especially in their badly affected semiconductor operations.
Panasonic’s 15,000 job losses include both contract and permanent employees, and amount to about 5 per cent of its workforce of more than 300,000 worldwide.
The initial 27 factory closures, out of 230 worldwide, include plants in Malaysia, the Philippines and two in Japan, mainly making electronic components. Panasonic expects the measures to cut costs by Y100bn compared to the current financial year.
The company’s basic principle is to close any business, factory or product line that has lost money for the past three years.
Sales of components were particularly hard hit, but sales were down across Panasonic’s business, and the core consumer electronics division made an operating loss in the Christmas quarter. Sales of digital cameras were down by 11 per cent compared to the first nine months of last year.
Panasonic said that the board would take pay cuts of 10-20 per cent, while every manager would see their pay fall by 5 per cent from February.
The company said that its Y807bn takeover of rival Sanyo Electric is on course despite the downturn. Sanyo Electric, which reports its third quarter results on Thursday, said in January that it did not expect to make a profit this year.
Panasonic wants Sanyo’s growth businesses in lithium-ion batteries and solar panels, but the downturn may force it to restructure its target’s electronics, components and home appliance divisions more aggressively.
The acquisition of Sanyo is expected to use up all of Panasonic’s net cash of Y344bn and leave the company with net debt.
Panasonic shares closed up 1 per cent at Y1,092 before the announcement.
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