Tokyo: Sharp Corp, the maker of Aquos televisions, is considering offering workers buyouts as the company cuts 5,000 jobs after widening its full-year loss forecast by eight times amid slumping sales.
The company will announce details once a decision is made, Miyuki Nakayama, a spokeswoman for the electronics maker, said today by phone. Sharp will offer buyouts to about 3,000 of the workers as early as next month, the Nikkei newspaper said earlier, without saying where it got the information.
Sharp is shrinking its workforce and may sell off factories after increasing its annual loss forecast to 250 billion yen ($3.2 billion) amid lower TV demand and a strong yen, which is eroding overseas earnings at the Osaka-based company and rivals Sony Corp and Panasonic Corp The workforce reduction, Sharp’s first since 1950, is part of a plan to reduce fixed costs by 100 billion yen, it said August 2.
“It’s still unclear whether the company can generate profit even after carrying out restructuring,” said Hidetoshi Ohashi, who runs Japan Credit Advisory Co. in Tokyo. “There may be further credit-rating cuts for Sharp in the future.”
Sharp rose 0.6 per cent to 180 yen as of 1:34pm in Tokyo trading, trimming its loss to 73 per cent this year. The shares, the worst-performing this year in Japan’s benchmark Nikkei 225 Stock Average, fell to a 38-year low on August 15 after Deutsche Bank AG cut its rating on the stock, citing concerns Sharp’s cash flow won’t cover funding needs.
The job cuts come after Sharp unveiled a plan to spin off its TV panel unit and turned to Taiwan’s Foxconn Technology Group and founder Terry Gou for 133 billion yen in funding after forecasting its second straight annual loss.
Foxconn said earlier this month it plans to renegotiate the price of its proposed investment in Sharp from the 550 yen a share it agreed to in March, as the shares have since fallen. Negotiations between the two companies are continuing, Nakayama said.
Sharp will begin talks with its labour union shortly as it prepares to offer buyouts, the Nikkei newspaper reported today. It will reduce the number of workers at its headquarters to 1,000 from 1,500, the report said.
In addition to the 5,000 job cuts announced August 2, Sharp may shed more than 3,000 positions by selling plants in China and Mexico to Foxconn’s Taiwan flagship Hon Hai Precision Industry Co., the Yomiuri newspaper said yesterday, without citing anyone.
Sharp has offered to sell its TV plants in the two countries to Foxconn, the Taiwanese company said August 17. Sharp hasn’t decided on selling the factories, Nakayama said yesterday.
Sharp has hired consulting firms as it considers selling divisions including the copier and air-conditioning units, the Nikkei reported August 16. The Nikkei said Sharp may spin off its display plant in central Japan, and the Yomiuri newspaper reported the same day that Sharp is in talks with overseas makers about selling its solar-battery plant in western Japan.
Nakayama has denied those reports.
“There have been reports that Sharp will sell businesses, which gave an impression that the company may be selling everything it can to raise funds in the short run,” said Nobuo Kurahashi, an analyst at Mizuho Financial Group Inc in Tokyo. “Investors are concerned the company may be taken apart rather than being revived.”
Credit-Rating Cuts
Standard & Poor’s cut its long-term credit rating on Sharp by one level on August 3 to BBB, the second-lowest investment grade, citing “huge first quarter operating losses and net losses.” S&P said it may cut the rating further.
Fitch Ratings said the same day Sharp may be reduced to junk grade within six to 12 months. Fitch now rates Sharp’s long-term credit BBB-, the lowest investment grade.
Japan’s Rating and Investment Information cut the company’s short-term rating to a-2 from a-1 earlier this week and said it may reduce it further. R&I also lowered Sharp’s long-term rating.
The downgrades add to pressure on Sharp as it faces redemptions of short-term debt due within a year. The company had 362 billion yen in commercial paper and 337 billion yen in short-term borrowing as of June 30, according to its quarterly financial statement.
Sharp also had 190 billion yen in corporate bonds and 124 billion yen in long-term borrowing, according to the statement.
Sharp’s cash and near cash totalled 218 billion yen as of June 30, according to the statement.
