Sony to Cut 8,000 Jobs Worldwide

Sony said today it would cut 8,000 jobs worldwide and close several factories to try to save $1.1bn (?745m) a year as new figures showed Japan's economy heading for its longest slump since the war.

The Japanese corporate giant, the latest to be forced into taking crisis measures amid a dramatic decline in global sales, also said it would stop employing another 8,000 contractors, taking the total cut to 16,000 positions.

It said the job losses, the biggest announced by an Asian firm so far in the current crisis, will come in its core electronics division, but did not offer a country breakdown of the cuts.

About 160,000 of Sony's global workforce of 185,000 are employed in the division, which has been hardest hit by plummeting consumer demand for flat-screen televisions, personal audio players and digital cameras.

Sony said the redundancies would be completed by the end of March 2010 along with a 10% reduction of global manufacturing sites from the current total of 57. The firm also plans to slash investment in electronics operations by 30% from its mid-term plan.

The job cuts announced today comprise about 5% of the company's electronics division, the driving force behind Sony's once-dominant position in consumer electronics.

Sony has already lowered inventories and cut production, in line with other Japanese exporters hit by weak demand from the US and Europe, and the strength of the yen against all other major currencies.

It recently said it would end production at a factory in France that makes tape and other recording media, and would shift more electronics production to lower-cost areas.

"These initiatives are in response to the sudden and rapid changes in the global economic environment," Sony said in a statement.

The measures are a blow to attempts by Sir Howard Stringer, the firm's first foreign chief executive officer, to reverse its waning fortunes after the first Sony shock of 2003, when poor earnings results wiped 27% off its share price.

Though Sony executives are reportedly evaluating manufacturing operations around the world before deciding where the job cuts will be made, sources refused to rule out redundancies among employees in the UK.

Sony's 1,750 employees in the UK, including about 600 staff at the Sony UK Technology Centre, a digital camcorder assembly plant in Pencoed, south Wales, now face an anxious wait about their future.

Some analysts doubted if the measures would be enough to improve Sony's balance sheet. It recently suffered a 90% drop in quarterly profits, and warned full-year profits would be down 58% from the previous year.

"The number sounds big, but this staff reduction won't be enough," Katsuhiko Mori at Daiwa SB Investments told Reuters. "Sony doesn't have any core businesses that generate stable profits. After the workforce reduction, the next thing we want to see is what is going to be the business that will drive the company."

With Japanese electronics firms resigned to a miserable Christmas shopping season - usually their most lucrative period - others said Sony had no choice but to act.

"Like automakers, Sony and rival consumer electronics makers are suffering a disastrous October-December period, including the Christmas shopping season," said Fujio Ando, senior managing director at Chibagin Asset Management. "The outlook for the global economy suggests that things would become tougher for Sony next year, and it cannot expect a recovery without these restructuring measures."

Today's Sony thunderbolt came on the same day as government figures showing that Japan's economy shrank faster than expected during the third quarter, raising the spectre of a deep and prolonged recession in the world's second biggest economy.GDP contracted at an annual rate of 1.8% in the three months up to the end of September, far worse than the initially estimated 0.4%, according to the cabinet office.

The grim figures have all but dashed hopes that Japan, whose economy is heavily dependent on exports to the US, China and Europe, will emerge from the financial crisis relatively unscathed.

A further expected contraction in the first quarter of next year would mark four straight quarters of decline for the first time since the end of the second world war.