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| SANYO Evolution Project Progress Report |
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Tokyo, November 24, 2006 --- SANYO Electric Co.,
Ltd. announces the update of the 3-year structural transformation
plan the SANYO Evolution Project which began in July 2005. |
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In the first half of 2006, despite difficult business circumstances
including of the high price of raw materials, price depreciation on
account of fierce competition, among other factors, the results in
terms of profit exceeded expectations. Furthermore, steady progress
has been made in both the strategic focus on core businesses which
has been pushed forward since last fiscal year and in businesses selected
for restructuring. In addition, financial strength is steadily improving
through ongoing efforts to liquidate fixed assets and reduce interest-bearing
debt.
On account of vast improvement compared to the last financial year,
SANYO expects the company to achieve an operating income, expectations
for the return to profit of such businesses as the semiconductor business
and to the high profits of the past in the solar cell business, for
the full fiscal year. However, primarily due to the declining income
and expenditures resulting from the changing climate in cell phone
and digital camera businesses, total sales and operating income are
forecast to fall short of expectations.
Amid these circumstances, SANYO aims to bring a visible turnaround
starting from the next period. SANYO will further accelerate structural
transformation by adding supplementary policies to those originally
assumed in the midterm management plan in the Semiconductor, Home
Appliance and AV businesses, as well as the core businesses, and bring
the restructuring process to a close during this fiscal year. By adding
these restructuring costs accompanying these supplementary efforts,
the full year results are expected to fall short of earlier projections,
however, SANYO will build a concrete profit-making structure from
the next period.
The following outlines the structural transformation progress for
SANYO thus far and the main efforts henceforth. |
| I. Progress in structural transformation
of the main business |
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1. Television business
SANYO has transferred the headquarters of the television business
to SANYO Television International in North America, which is the main
focus of the global television business, in order to build a structure
centered on major customers.
In addition, SANYO established a new company in October with Taiwan’s
Quanta Computer for design and materials procurement and has started
domestic sales of jointly-developed LCD televisions.
Furthermore, in order to improve profitability, SANYO has withdrawn
domestic manufacturing (July) and the manufacturing of CRTs in the
United Kingdom (October).
2. Home-use Refrigerator Business
With a view to maximizing cost competitiveness through contract manufacturing,
and optimizing the synergy effect by exploiting the strengths of both
companies in the global market place, SANYO and Haier have made a
basic agreement to form a global strategic alliance for sales and
manufacturing, and have established a new joint venture for the design
and development of home-use refrigerators with Haier Group China.
3. Washing Machine Business
Aiming to maximize the synergy effect combining the ‘Aqua’-related
(environment and water purification) and commercial technology, and
optimize cost and benefits, SANYO decided to move the washing machine
business from the Gunma factory to the Tokyo plant.
4. Semiconductor Business
In order to improve response capabilities to the changing market,
strengthen product
competitiveness and development, diversify methods of procuring funds,
and in order to increase autonomy as an independent company, SANYO
spun-off the semiconductor business and established SANYO Semiconductor
Co., Ltd. in July. |
| II. Primary Efforts Henceforth |
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(1) Efforts toward Structural Transformation
Accomplishing the structural transformation through supplementary
policies
1. Fundamental Review of the Personal Mobile Business
Regarding the cell phone and digital camera businesses, SANYO will
make an effort to reform the current cost structure through reviewing
the production structure including factory locations. The ratio
of production abroad will be expanded in the mobile phone business.
There are also plans to create high value-added products through
strengthening relations with partners. As for the digital camera
business, along with planning to solidify cooperation with OEM partners,
plans will be made to convert to high value-added products such
as SANYO-branded Silicon Movie cameras capable of high-vision.
2. Strengthening of Sales and Service Functions
As a reform to the domestic sales system, a general headquarters
for domestic sales was established in July this year and the Consumer
and Commercial sales functions were merged. Starting from the next
term, SANYO aims to drastically consolidate sales expenses, and
will continue to press forward with specific reforms regarding such
things as the sales organization structure as well as activating
regional sales channels.
The service department has also combined the consumer and commercial
departments, combining reform efforts with the sales department
aiming to become a Solutions Provider.
3. Personnel Measures
Along with the optimization of these structural reforms and administrative
divisions, a reduction of the workforce, approximately 2,200 people
(about 1,500 domestically, and 700 overseas), will be implemented
this fiscal year. Particularly within Japan, after finishing the
personnel measures accompanying structural transformations this
fiscal year, SANYO will abolish the outplacement support system
by the end of next March. As a transitional measure for the abolishment
of this system, personnel over 50 years of age who apply between
Dec 4 and Dec 18 for retirement on January 20, irrespective of whether
they have transferred or not, will still be eligible for the outplacement
support system. This will apply to employees of SANYO Electric Co.,
Ltd., SANYO Tokyo Manufacturing Co., Ltd., and SANYO Semiconductor
Manufacturing Co., Ltd. |
Table listing the expenses (40 billion yen) of additional structural
reform
| Items |
Structural
transformation
expenses |
Value Starting from Next Term |
Home Appliance
Business Reforms |
Approx. ¥10 billion |
Restore profitability to refrigerator
business, the creation of high
value-added washing machines |
Semiconductor
Business Reforms |
Approx ¥10 billion |
Magnifying profitability from
transformation |
Television
Business Reforms |
Approx ¥10 billion |
Return to profitability through
consolidation |
Cellular Phone, Digital Camera
Business Reforms |
Approx ¥5 billion |
Ensuring profitability through cost
transformation |
Personnel Measures and Related Results
Total of Personnel Measure
Expenses including the above |
Approx ¥21 billion |
Starting from next term, Approx. ¥170
billion/year |
(2) Thorough Global Management
In addition to vastly strengthening the management of affiliated companies,
in order to reduce management costs and improve efficiency through
merging businesses, SANYO will reduce in the number of affiliated
companies globally. In concrete terms, SANYO aims to reduce the current
amount of approximately 300 affiliated company number by 100 over
the next three years.
(3) In-depth focus on Core Businesses
1. Power Solutions Business
Using the world-leading compact rechargeable battery business as a
nucleus, SANYO aims to establish an overwhelming position in the existing
marketplace and along with focusing on investments, will accelerate
the expansion of the ‘eneloop’ battery worldwide. Additionally,
as a growth strategy for the automotive business, with regards to
car navigation and HEV-use rechargeable generation battery, SANYO
will continue to strengthen relationships with automobile makers.
2. HVAC/R and Commercial Businesses
SANYO aims to vastly increase sales abroad, and will continue to strengthen
global competitiveness by expanding foreign markets by developing
an regionally-based strategy focusing primarily on Europe and China.
The commercial business secondary headquarters is located in China,
and Dalian SANYO Compressor Co., Ltd. and Dalian SANYO Refrigeration
Co., Ltd. have been established. In addition, a technical service
center for commercial-grade heating and cooling equipment has been
established to strengthen the European market. As for the solar business,
based on the “HIT Solar Cell Next Generation Program”
(Investing over ¥40 billion by the end of FY2010, and aiming for
a ¥180 billion business entity), SANYO aims to enlarge its global
market share to enter the top three companies for solar cells by continuing
concentrated investment in strengthening production capacity in cell
production at SANYO’s Nishikinohama Plant and Shimane SANYO
Electric Co., Ltd.
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