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Sony leverages Aiwa to compete against Chinese suppliers

Posted: 08 Mar 2002 ?? ?Print Version ?Bookmark and Share

Keywords:sony? aiwa? audio? video?

Sony Corp. will finally make Aiwa Co. Ltd a wholly owned subsidiary and use its brands to compete with price-sensitive products produced mainly in China.

Though Sony owned half of Aiwa, the smaller audio and video maker competed with the consumer giant as an independent subsidiary. But Aiwa was buffeted by severe price erosion in a matured audio and video market and has been in financial difficulty for three years.

Sony dispatched Masayoshi Morimoto to take the helm as president of Aiwa last January, and the larger company also provided financial support. Nevertheless, Aiwa's loss for the fiscal year ending March 31 will be worse than expected, coming in at about $303 million.

"We judged that even if Aiwa gets out of [the] current difficulty, it is impossible to survive independently with its technology," said Kunitake Ando, president and chief operating officer of Sony.

After the financial aid, Sony owned 61 percent of Aiwa. Under the new takeover, Aiwa will exchange its stocks Oct. 1 with Sony's at a ratio of Sony 1:Aiwa 0.049.

Sony said it will use the Aiwa brand to cover areas in which the Sony brand is not strong. "Outside of Europe and North America, Chinese and Korean brands are quite strong and are a threat to us," said Ando. "They are strong in the price zone that Sony does not carry products. In such markets, we can develop products with Aiwa brand making full use of Sony's Engineering, Manufacturing and Customer Services System (EMCS)."

Sony feels strong pressure from the emerging manufacturing power of China. "Unless we take a drastic measure," said Ando, "we will be hit and sunk by countries like China and Korea."

Nobuyuki Idei, chairman and chief executive officer of Sony, said the company "spent a lot of time" studying how to turn Aiwa's financial pinch to Sony's advantage. "We will take this chance to establish a new business model in which we can compete with products made by China's inexpensive production power," he said.

Aiwa has already halved its payroll, going from about 10,000 employees last year to 5,000. Before it becomes a Sony's fully owned subsidiary, further job cuts are expected to bring the head count below 3,500. Aiwa headquarters now has about 1,200 people, of whom about 400 will be cut. The remaining staff will become a product planning and development group in Sony.

Aiwa, established in 1951, has been listed on the Tokyo stock exchange since 1961. It has factories in Malaysia, Indonesia and Shenzhen, China, with 3,000 employees. These factories will be integrated into Sony's EMCS.

? Yoshiko Hara

EE Times





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