TCL Multimedia Technology Holdings Limited, the biggest TV maker
in the world, said yesterday it would restructure its loss-making
European business, cutting jobs and selling off some assets.
The company announced it would stop all sales and marketing
activities in Europe other than its OEM (original equipment
manufacturing) business. It said the majority of its employees in
Europe will be involved in the restructuring, but would not say how
many people will be laid off. TTE Europe will also sell some of its
assets and inventories.
TCL will not make any changes to its only factory in Poland.
"There are some options for us to restructure this loss-making
business, but finally we chose a transformation of the business
model," said Li Dongsheng, chairman of TCL Multimedia
Technology.
TCL Multimedia will become a contract manufacturer and reduce
focus on the Thomson brand.
Trading in TCL Multimedia Technology's shares in Hong Kong was
scheduled to resume yesterday, but is still suspended pending an
announcement.
Aiming to become a strong global player, TCL and Thomson formed
a joint venture called TTE in November 2003, which included TCL's
businesses in China and emerging markets as well as Thomson's units
in Europe and North America, as Thomson wanted to get out of the
highly competitive but low-profit cathode ray tube (CRT) TV
market.
But its CRT assets were not advantageous for TCL as flat-panel
TV sets have become the trend in the market. Too many legacy assets
and a traditional distribution channel in the CRT business
prevented TCL from keeping up with market change.
In the first nine months of this year, TTE Europe posted revenue
of 328 million euros (US$417 million), about 15 percent of TCL
Multimedia's global total, but its net losses in the period were
159 million euros (US$202 million), dragging the group company's
total net loss in the period to HK$1.519 billion (US$195
million).
"The market has been anticipating this decision for a long time
and it is not too late to cut your wrist to save your life," said
Gu Qing, an analyst with Shanghai-based Haitong Securities.
TCL Multimedia said the cost of the restructuring will be about
45 million euros (US$57 million), including payments to laid-off
employees and termination of services. TCL Multimedia will
contribute 24 million euros (US$30 million) and the rest will come
from Thomson Group and sales of assets and inventories.
The company estimated that its European business will decline
this year, but will rebound in 2008.
(China Daily November 1, 2006)