Sony Corp. said that it plans to slash the range of parts used in its products by about 90 percent by the end of 2005, in an effort to improve its low profit margin in its mainline electronics operations.
The Japanese consumer electronics company will seek to reduce the number of parts to 100,000 from 840,000 over the next 2 years or so. Sony will also select and database 20,000 of them as "Sony-defined standard parts" to promote company-wide use.
"The idea is to make product engineers, who designed the parts, put more resources into other important areas closely related to product strength," a Sony spokeswoman said.
Parts to be cut range from semiconductors and capacitors to steel sheet and screws. However, only about half of the 840,000 parts are currently in use, the spokeswoman said.
Combined with an ongoing attempt to trim the number of its parts suppliers from 4,700 to about 1,000, Sony said it will seek to drastically cut parts development and procurement costs.
The company is aiming to boost its profitability after it deteriorated sharply in the January-March quarter following a sales plunge in the U.S. and Japan.
As a key mid-term goal, Sony aims to lift its ratio of group operating profit to sales to more than 10 percent in the year ending March 2007, excluding its non-core financial operations. For the year ended March, based on Sony's results from all of its operations, the ratio was 2.5 percent.
To get back on its feet, Sony is now drawing up specific restructuring steps in the electronics business, which will likely include the consolidation of production bases and personnel cuts. The company plans to announce details by the end of this month. (Dow Jones)
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