As the Japanese economy sinks into recession Sony is the first of the consumer electronics Companies to announce the mass retrenchment of over 8,000 jobs with 10% being made at their manufacturing sites.
At this stage it is not known whether any of the cuts will be made in Australia with local MD Carl Rose set to make an announcement early tomorrow (Wednesday).
It is expected that Panasonic, Pioneer, Canon and Toshiba could soon follow Sony and cut staff numbers. Sony said the jobs would be cut by April 2010 but did not say in which countries the staff would go.
Sony said it had been trying to reduce production because of the downturn but warned it still had to do more.
The news came as Japan said its economy had shrunk between July and September by much more than initially estimated. The Cabinet Office said the economy had shrunk at an annual rate of 1.8% in the quarter, compared with its original estimate of 0.4%. Investment cut Sony aims to generate cost savings of about $1.1 billion by the end of the next financial year.
It will cut its investment in electronic operations by 30% and shut down about 10% of its 57 production facilities.
“The number sounds big, but this staff reduction won’t be enough,” said Katsuhiko Mori, a fund manager at Daiwa SB Investments. Sony doesn’t have any core businesses that generate stable profits – the next thing we want to see is what is going to be the business that will drive the company.”
According to the latest market figures coming out of Japan the economy shrank 1.8pc on an annualised basis, steeper than the 0.4 percent the government had predicted, with the blame pinned on drastically reduced capital expenditure and reduced inventories. “When GDP drops by five times more than you were expecting, that will set the alarm bells ringing,” said Martin Schulz, senior economist at the Fujitsu Research Institute.
“We are now seeing the downturn affecting the real economy and there are big problems, although not as bad as we see in Europe,” he said.
Japanese companies are earning less from their overseas operations, but domestic demand has not “nose-dived,” as it has in Europe, because employees here are confident their companies will ride out the economic storm. Household spending rose a marginal 0.3pc from the previous quarter, one of the few bright spots in the data.