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Layoffs loom at Sharp as Foxconn vows to turn company around

Posted: 16 May 2016 ?? ?Print Version ?Bookmark and Share

Keywords:acquisition? Foxconn? layoffs? Sharp? profit-sharing?

Foxconn's vow to turn around display maker Sharp comes with several caveats, including layoffs starting at the board level.

The Taiwanese company, which is now pushing through with the on-again-off-again acquisition, said 12 of the 13 membersincluding Sharp CEO Kozo Takahashiwill step down from the board as soon as the takeover is complete, according to a Wall Street Journal report.

The news outlet quoted sources familiar with the matter who said, "The Sharp board will shrink to nine members, with six of them to be appointed by Foxconn. The changes are expected to be official in June."

Foxconn founder Terry Gou confirmed that there are bound to be layoffs at the Japanese company, but promised to see to it "that wages would rise and profit-sharing would again be the norm," Reuters reported.

In an open letter to Sharp staff, a copy of which seen by Reuters, Gou said turning the company around "can only take place if there is a reduction in costs," which "comes with a very regrettable need to reduce Sharp's workforce."

A person familiar with the matter told the news agency that an estimated 3,000 jobs in Japan alone are on the chopping block, and that number is expected to rise "when Sharp's global operations are included."

Foxconn said the letter was a "personal note" from Gou and newly-appointed Sharp CEO Tai Jeng-wu, who will replace Kozo Takahashi. The Foxconn veteran, whose 30-year career includes running the company's Shenzhen operations, is the first outsider to take over the reins of the Japanese company.

Takahashi said last week that Tai will be one of the new Sharp board members when the stake sale is finalized by the end of June.

Gou, meanwhile, is guaranteeing "the buyback of ?25 billion ($23 million) worth of preferred shares" that the Japanese electronics maker issued last year "to speed up a merit-based stock reward program for Sharp employees."

Gou reportedly assured Sharp staff that "the wage cuts and reductions in year-end bonuses are a thing of the past."

Gou believes profit-sharing is key to retaining talent, said a person familiar with his thinking.

"I can also assure you that the wage cuts and reductions in year-end bonuses are a thing of the past," Gou wrote to Sharp staff, saying pay and annual bonuses would return to their original levels as of this month.

Last week, Sharp reported a net loss of ?256 billion ($2.36 billion) for the fiscal year that ended in March, up from a loss of ?222 billion in the previous year.

Outgoing CEO Takahashi chalked up the net loss partly to the over-reliance on smartphones, saying the company "failed to move fast enough" and shift its focus to larger panels.

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