In an unusually bold move for corporate Japan, Sanyo Electric Co. announced a sweeping restructuring plan that includes cutting its global workforce by 15 percent, closing factories and paring debt, with the aim of returning the consumer electronics company to profitability.
The Osaka-based company, which has been buffeted by falling prices of digital cameras and cell phones, said 8,000 of the 14,000 job cuts will be made within Japan. Sanyo didn't say whether these cuts will occur from layoffs or early retirements.
The company will close or sell a fifth of its domestic factory space and take a charge of $807 million in the year ending March 2006 to cover costs of the initiative.
Domestic rivals such as Matsushita Electric Industrial Co. have been quicker to reorganize and trim staff.
Still, Sanyo's aggressive plan is striking in Japan, where most downsizing has taken place gradually.
Carrying out layoffs in small, unobtrusive steps makes them palatable to a nation used to lifetime employment and low rates of joblessness.
Sanyo's move, however, comes at a time when the Japanese may be more willing to accept severe moves.
"The general public has seen enough restructuring that they're used to it," said Kirby Daley, a strategist at Societe Generale Securities' Fimat division in Tokyo. "The environment is right for them to be able to handle something like this."
Sanyo's new president, Toshimasa Iue, who took over after shareholders approved his posting last week, said the company will attempt to trim its sprawling product line as it endeavors to turn itself around.
"We will no longer conduct operations that don't produce profits," Iue said in a news conference.
Iue said Sanyo will focus on compressors, solar batteries and other batteries for electronics and vehicles. He added that the new management team hasn't decided what businesses to withdraw from. Sanyo will give more details on those plans later this fiscal year, he said.
Times have gotten tougher for Japan's electronics industry, with Korean manufacturers, including Samsung Electronics Co., gaining global market share and makers in China and Taiwan churning out inexpensive components and finished products.
Sanyo also will halve its interest-bearing debt by $5.38 billion.
It expects to cut costs by $628 million in three years by streamlining its logistics, procurement and manufacturing operations. By implementing the restructuring steps, the company said it will target an operating-profit-to-sales ratio of 5 percent by the year ending in March 2008.
The goal could prove challenging. Falling prices of consumer electronics, such as digital cameras Sanyo makes for other companies that sell them under their own brand names, have cut deeply into profits. Heavy damage to a factory by a big earthquake last year in northern Japan dealt a blow to its semiconductor operations.
Sanyo lost $1.6 billion in the year ended in March, and it forecasts a $823 million loss for this fiscal year.
The company has annual sales of about $22.3 billion.
Sanyo's shares, which have lost about half their value over the past year and a half as the company's problems mounted, barely budged Tuesday after the announcement. Traders said they want to see concrete signs of progress before betting heavily on Sanyo's revival. Sanyo ended at $2.66, up about a penny.