Sampo set to reorganize Grundig

Sampo Corp (聲寶), the nation's largest home-appliance maker has vowed to keep recently acquired Grundig AG intact, while fulfilling its commitment to reduce costs at the German company.

"Although Grundig has been acquired by Taiwan's Sampo, Grundig is still a European brand, keeping the same brand image, product design and pricing strategy," said Felix Chen (陳盛沺), chairman of Sampo.

The most obvious changes will be seen in Sampo's effort to reduce Grundig's manufacturing costs and to expand its product lines, he said.

"We plan to employ a dual-brand management policy ... Sampo products will still be positioned as entry-level items while Grundig's will be positioned as premium products," Chen said.

Last Wednesday, Sampo signed the deal to acquire majority control of the Nuremberg-based maker of TVs, stereos and car audio.

Under the terms of the contract, Sampo will take over the "direction" of Grundig, including home and car audio, office communications as well as research and development.

The company refused to elaborate on details of the deal saying the capital investment is less than the US$100 million speculated by Chinese media last week.

The key to the investment is the brand name, Chen said

"What Sampo is most interested in is Grundig's brand and channels," Chen said.

He said that most Taiwanese firms are strong in manufacturing while they lack the ability to create valuable brands.

"This results in thin margins ... while a product with the Grundig name can be priced even higher than its Japanese rival Sony," Chen said.

The average margin for Grundig products is about 30 percent, he said.

According to Sampo CEO Ho Heng-chun (何恆春), the company will begin selling Sampo-made plasma-display panels (PDP) TVs, refrigerators and washing machines under the Grundig brand name in Europe via the 56-year old company's 29,000-outlet distribution network.

"By joining with Grundig, Sampo will be able to become a leading brand worldwide," he said.

Ho said Sampo's task for the moment is to make Grundig profitable. Sampo has said in the agreement it plans to cut Grundig manufacturing costs by 10 percent ever year in the next three years, Ho said.

Sampo expects to boost Grundig sales to US$2 billion (NT$72 billion) within the next three to four years from US$1.3 billion (NT$45 billion) in sales last year, he said.

Grundig last year reported nearly US$100 million in debt and came close to filing for bankruptcy when creditor banks refused to extend credit until Sampo registered its interest.

More than half of Grundig's losses came from a television assembly plant in Vienna, Austria, Ho said. As part of the deal, Sampo demanded that Grundig sell the plant along with another money-losing factory in Hungary, Ho said.

The sale of the two factories will reduce Grundig's workforce of 5,000 to 2,000, with the company retaining 400 in research, 500 in management and 1,100 factory workers.