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 per cent 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.
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