Aiwa slashes workforce in half
TOKYO, Japan -- Troubled Japanese consumer electronics maker Aiwa will slash its total workforce by half, blaming the U.S. slowdown for cutting deeply into sales.
Aiwa says it will cut 5,000 jobs, close eight plants and get a capital injection from major shareholder Sony, speeding up a restructuring plan that began last year.
Aiwa, facing its second straight year of losses, will issue $243 million in shares to shore up its capital. Sony, which owns 50.6 percent of the company, will get 50.6 percent of the stock.
Production line consolidation
In the latest restructuring since Aiwa began cutting jobs last July, the company says it will consolidate three production lines with nine separate factories -- in Japan's Iwate prefecture, Malaysia and Indonesia -- into one line with one factory.
As a result, its workforce would be halved to 5,000. The company hopes to turn a profit by the business year to March 2003.
Aiwa president Masayoshi Morimoto, transferred from Sony in January, says stiff price competition and a slowdown in the U.S. and Asian economies have cut deeply into sales, 80 percent of which come from its exports.
Analysts say Aiwa has been hit hard by weak demand for its stereo sets and is lagging in developing new digital appliances.
Although Aiwa has seen major change since October when its former president resigned to take responsibility for recent losses, Morimoto says more dramatic work needs to be done to turn the 50 year-old company around.
"We felt that we needed to do more," says Morimoto.
Aiwa's shares have under performed the broader Tokyo stock market since January, losing 2.3 percent in value compared to a 0.5 percent rise in the Nikkei stock average.
So far Aiwa has cut 900 jobs since reporting a loss in the year to March 2000.
The latest restructuring plan was announced after the market closed on Monday. Aiwa's shares opened Tuesday up bid-only at 905 yen after closing 9.62 percent up at 855. Sony on Monday had climbed for a fourth straight session, rising 3.22 percent to 9,290 yen.
Aiwa says 3,000 factory workers at one factory would remain from a current 7,500. It plans to announce more specific details of the restructuring when earnings are released on April 26.
Morimoto says Sony would send six executive officers to join Aiwa from April 1 to carry out responsibilities from managing production lines to marketing.
As part of an effort to focus on profitable products, Aiwa expects annual sales of 300 billion yen to be trimmed by 30 percent by the year to March 2003.
Sony, which is suffering from sagging profits due to a lackluster performance in its gaming division, said it had no plans to revise its earnings projections for the business year to March 31.
"We have had a request for a capital injection for 30 billion yen ($243 million), and we are considering about half of this, about equal to our shareholding (in Aiwa)," says a Sony spokesman.
Sony expects to post a full-year consolidated net profit of $40.8 million while Aiwa expects a group net loss of $303.5 million. Aiwa says it will strengthen tie-ups with Sony in product development to pare costs.
Analysts say renewed investor confidence in global high-tech shares was partly behind Monday's gains in Sony shares.
Reuters contributed to this report.
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