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2009-01-22 12:41:02
By YURI KAGEYAMA, AP Business Writer Yuri Kageyama, Ap Business Writer 19
mins ago
TOKYO Sony projected it would report its first annual net loss in 14 years
Thursday, and Chief Executive Howard Stringer vowed to turn around the company
with pay cuts, job reductions and trendier gadgets.
"The massive economic upheaval being experienced across the globe is sparing no
one in the consumer electronics world," Stringer said at a hastily called news
conference at Sony's Tokyo headquarters after it announced the earnings
revision.
Battered by slumping sales and a strong yen, the Japanese electronics and
entertainment company expects to sink into a 150 billion yen ($1.7 billion) net
loss for the fiscal year through March, a reversal from 369.4 billion yen
profit the previous year.
To cope with the slowdown, Sony Corp. said last month it would cut 8,000 of its
185,000 jobs around the world and shutter five or six plants about 10 percent
of its 57 factories. It would also trim 8,000 temporary workers who aren't
included in the global work force tally.
But Stringer said those steps were not enough. Now Sony plans to cut another
1,000 temporary workers in Japan and close one of two domestic TV plants.
Sony will also offer early retirement packages to its regular, full-time
workers in an effort to cut 30 percent of its personnel costs by March 2010. It
did not elaborate or give a specific head count.
Stringer also said he and two other top executives, including President Ryoji
Chubachi, will give up their entire bonus. Other executives and managers will
see lower pay.
Stringer said Sony needed to be more aggressive in cutting costs by avoiding
redundancies, streamline the supplier chain and anticipate the trends in
Internet-linking gadgets like the interactive TV set.
"There is still a lot of the old Sony, and not enough of the new Sony," he
said, acknowledging that Sony faces intense competition from growing rivals
like Samsung Electronics, Apple Inc. and Microsoft Corp.
Stringer said he was aware of the relatively protective lifetime employment
regulations in Japan for full-time workers, adding that the company would
"tread very, very carefully." Major Japanese companies have relied on a
temporary work force to adjust to production swings.
Sony, which makes the Walkman player and PlayStation 3 game machine, also
lowered its sales forecast. It predicts fiscal year sales to decline 13 percent
to 7.7 trillion yen. In October, it had expected 9 trillion yen in sales.
The efforts announced Thursday are expected to save Sony 250 billion yen for
the fiscal year ending March 31, 2010, but the restructuring measures will cost
170 billion yen, according to Sony.
Other measures include outsourcing software development in India, and signing
deals for making cheaper products in emerging markets, it said.
Like other Japanese exporters, Sony is taking a beating from the global slump
that crimped consumer spending during the critical year-end shopping season.
The yen's appreciation and a plunge in gadget prices have also taken a toll.
Sony is particularly vulnerable to the strong yen since about 80 percent of its
sales come from overseas. The dollar has dropped to below 90 yen recently from
as high as 117 yen last year, eroding with it Sony's foreign income.
The last and only time Sony reported a loss, for the fiscal year ending
March 1995, the red ink came from one-time losses in its movie division, marred
by box office flops and lax cost controls.
Some of Japan Inc.'s biggest names are getting hammered by the global slowdown.
Toyota Motor Corp., which last year dethroned General Motors Corp. as the
world's largest automaker, is forecasting its first operating loss in 70 years
although it says it will eke out a small net profit.
Trouble has been brewing at Sony for some time. In October, it lowered its
forecast to a 150 billion yen ($1.7 billion) profit, but it said conditions had
worsened since then.
Sony said the slowing global economy and price declines were wiping out 250
billion yen in operating profit, while the yen's appreciation took out another
40 billion yen. Restructuring charges cost 30 billion yen. Declining equity
value of its affiliates was an extra 20 billion yen loss, it said.
Profitability had worsened at its video game and movies units, as well as with
its financial businesses in Japan, including an insurer and Internet bank, it
said.
"We must move ahead with reforms, but my mission is to also nurture
innovation," Chubachi said. "We will become a strong Sony."
The company's stock fell 51 yen, or 2.6 percent, to 1,938 yen. The earnings
revision was announced after the market closed.