TCL to cut losses in Europe

By Liu Baijia (China Daily)
Updated: 2006-11-01 08:52

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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