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Sony to Ax 10,000 Jobs, Shut 11 Plants to Get Back on Track

Posted on: Thursday, 22 September 2005, 12:00 CDT

Sep. 22--TOKYO -- Sony Corp. said Thursday it will cut 10,000 jobs worldwide, sell off 120 billion yen worth of assets and close 11 of its production bases in a desperate bid to resurrect its famed consumer electronics business.

By the end of fiscal 2007, Sony will slash 6,000 jobs overseas and 4,000 in Japan, including those at subsidiaries. The planned reduction accounts for 7 percent of its current global workforce of 150,000.

"We need to focus selectively and aggressively for being the No. 1 consumer electronics and entertainment company on the planet," said Chairman and Chief Executive Officer Howard Stringer, the first foreigner ever to take the helm in Sony's 59-year history.

Speaking at a news conference in Tokyo, Stringer, a Welsh-born U.S. citizen, vowed to get the company's business back on the right track by reforming its complicated corporate structure.

Sony will abolish the existing in-house company system and instead establish a centralized decision-making system for key product areas to let Stringer and President Ryoji Chubachi lead the company more strongly and effectively.

"We are achieving our goals by breaking down the preexisting silo walls and eliminating the highly decentralized structure that we maintained in the past," Stringer said.

The much-awaited three-year restructuring plan, which will help Sony cut costs by 200 billion yen by March 2008, was released three months after Stringer took the helm of the struggling consumer electronics giant.

Stringer, Chubachi and Chief Financial Officer Nobuyuki Oneda, who attended the same news conference, said it has given top priority to reviving its consumer electronics business, which accounts for about 70 percent of its annual sales.

The Tokyo-based company plans to reduce the number of its product models by 20 percent compared with the current business year, and it has identified operations of 15 business categories it needs to streamline in the near future.

Chubachi -- who declined to comment on which 15 business areas Sony is considering disposing of or slimming down -- said the company will focus its resources particularly on televisions.

"Without the revival of the television segment, there will be no revival for Sony," Chubachi said.

To catch up with rivals such as Matsushita Electric Industrial Co. and Sharp Corp., Sony introduced its new Bravia-brand liquid crystal display televisions last week.

With its ambitious restructuring efforts, Sony is seeking to achieve group sales of more than 8 trillion yen and bring the ratio of operating profits to sales to 5 percent by the end of March 2008.

"We feel this is a challenging target but we also believe this is achievable," said Chubachi.

Sony, founded in 1946, has enjoyed a worldwide reputation over the last half-century with its innovative products, including transistor radios, Walkman music players and PlayStation game consoles.

But the company has lost its strength to appeal to consumers in recent years, lagging its rivals in fierce price competition and in introducing cutting-edge electronics products, including flat-panel televisions and MP3 music players.

With the closure of 11 production bases, Sony will have 54 manufacturing outlets worldwide.

Sony plans to spend a total of 210 billion yen on restructuring in the two years through March 2007.

As a result, Sony projects it will see a group operating loss of 20 billion yen, down from an initially targeted profit of 30 billion yen, and a group net loss of 10 billion yen, down from a net profit of 10 billion yen, in the current business year ending next March.

The company did not revise its forecasts of 7,250 billion yen in sales and operating revenue for the current year, announced in July.

Under the new business scheme, Sony also said it will delay until after fiscal 2007 the planned listing of Sony Financial Holdings Inc., a wholly owned subsidiary supervising the group's financial operations, from the previously targeted fiscal 2006.

But Oneda denied in the same press conference a recent media report that Sony will gradually sell off the financial unit.

He also said the company does not plan to sell its 12.5 percent equity stake in Sky Perfect Communications Inc., a communications satellite broadcaster.

SONY PLAN

The following is the gist of Sony Corp's restructuring plan, released Thursday.

Sony plans to:

--cut 10,000 jobs worldwide by the end of fiscal 2007

--reduce the number of global manufacturing sites to 54 from 65

--pare the number of product models by 20 percent

--save 200 billion yen in costs by the end of fiscal 2007

--sell 120 billion yen worth of real estate and other assets

--reorganize the current corporate structure

--spend 210 billion yen for these structural reforms

--seek group sales of 8 trillion yen by the end of fiscal 2007

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Copyright (c) 2005, Kyodo News International, Tokyo

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Source: Kyodo News International, Tokyo

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