When a 6.8-magnitude earthquake jarred Sanyo Electric Co's chip-making plant in northern Japan last October, reversing the company's profit forecast to a massive loss, it was a crowning blow to an electronics giant already rattled by plunging prices and sinking stock.
Osaka-based Sanyo, founded in 1947 as a maker of bicycle lamps and now a world leader in digital cameras and mobile phones, has since installed new management to rekindle the company, turning heads with the rare appointment of a female chief executive. And on July 5, the company made an equally bold move -- announcing a plan to revive earnings by cutting 14,000 jobs, or 15 percent of its global work force.
But the overhaul, which calls for factory closures and the halving of debt over three years, fell short on many details, analysts say, and some doubt whether it will be enough to save Sanyo in a market increasingly crowded by overseas rivals and more nimble domestic competitors.
"We are not convinced that the completion of the planned restructuring will lead to the restoration of competitiveness and profit growth," Lehman Brothers analyst Yuki Sugi wrote in a report after the announcement.
She rated Sanyo "under-weight," meaning the company is still expected to perform worse than the industry average, and warned of a "confidence crisis" at the manufacturer.
The Oct. 23 earthquake in Niigata prefecture, which killed 40 people and injured nearly 3,000 others, caused US$378 million in damage at Sanyo's semiconductor plant there. It forced Sanyo to scrap an earlier forecast for profit of US$125 million in the year ended March, and contributed to the company's net loss of US$1.53 billion.
The company's share price, already in a downward spiral, continued its fall and has now lost half its value in the past year and a half.
Yet even before the quake, Sanyo's profits were being squeezed by falling prices for its three main products -- mobile phone handsets, digital cameras and rechargeable batteries for phones and computers. Those businesses account for about half of Sanyo's operating profit and suffered price declines of between 5 percent and 15 percent last year, according to Koya Tabata, an analyst at Credit Suisse First Boston in Tokyo.
Surging raw material costs further ate into the profit margin of the company's battery business, while global competition heated up. Asian rivals such as South Korea's Samsung Electronics Co. continued churning out inexpensive components to grab global market share, while domestic electronics rival Matsushita Electric Industrial Co. returned to profit after cutting 13,000 of its own workers in 2001.
President Toshimasa Iue, grandson of Sanyo's founder, was appointed April 8 along with chief executive Tomoyo Nonaka, a former television newscaster who joined the company's board in 2002.
The new team hasn't decided which businesses to pull out of, but Iue said the company will focus on compressors, solar batteries and other environmentally friendly batteries for electronics and vehicles. Just short of half Sanyo's sales are generated overseas.
"We will no longer conduct operations that don't produce profits," he said.
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