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TCL acts to tackle European losses

By Liu Baijia (China Daily)
Updated: 2006-09-12 08:34
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Electronics firm TCL is expected to release a restructuring plan for its European business next month, aiming to turn around the unit's heavy losses.

Chairman and CEO Li Dongsheng said that TCL Multimedia Technology Holding Ltd (TMT), the TCL group's TV arm which includes the Thomson and RCA brands, will reveal the restructuring plan in early October.

"With heavy losses, we must carry out a full-scale restructuring of our European business," said Li.

In 2004, TCL acquired the TV unit of French electronics firm Thomson, which uses the Thomson brand in Europe and RCA in North America. TCL grouped all its TV businesses under TMT.

However, in the first half of this year, European business landed the company with 763 million yuan (US$95 million) in losses, dragging the group's performance down to a net loss of 736 million yuan (US$92 million).

Li said one reason for the huge losses was a lack of attention to European business.

When TCL bought the Thomson units, RCA was a bigger problem, generating US$140 million in losses across North America, while losses in the European market were only a few million dollars.

In response TCL put a lot of effort into restructuring its business in North America, which is expected to become profitable this year.

Another reason for the European losses was that TMT failed to keep pace with the emergence of digital TVs in Europe.

While TCL focused on traditional products, the proportion of flat panel TV sales rose from 20 per cent in 2003 to 75 per cent of the market in the first half of this year.

To turn around the loss-making businesses in Europe and North America, Li personally took over the role of TMT CEO, trying to use his personal authority to push an aggressive restructuring programme, called Total Operating Performance.

The programme is designed to reform the organization, push the shift to flat panel products, reduce costs by cutting unnecessary links and speed up innovation.

It may mean that the world's largest TV maker with 11 per cent of the market according to research firm iSuppli will reorganize its factories in Europe, laying off some workers.

In North America TMT has merged its three Mexican factories, cutting the number of employees from 4,200 to 2,500.

Li expects the restructuring to take one year and by then TMT's European business will be back in the black.

Besides cutting costs and increasing efficiency, product innovation is another key area to turn around.

On Friday, the TV giant, which is expected to sell 22.3 million TV sets this year, released two of its award-winning LCD TV sets the H61 and E64, both of which won awards at IFA, a global electronics show honouring innovative designs.

(China Daily 09/12/2006 page10)