Japanese electronics maker Sharp said Tuesday that it is pushing ahead with the latest effort to cut costs -- by doubling cuts in management pay to ten percent, effective next month.
The firm said that the cuts will be in place until September 2013, but considering the company's financial situation, this remains to be seen. In addition, the year-end bonuses of management has been slashed by 50 percent -- in comparison to a 30 percent cut in summer bonuses.
Sharp has the authority to cut its management's pay packet, but that's not the end of the story. Labor unions have received requests from the company asking them to accept a further pay cut for the general work force. In May, Sharp enforced a 2 percent pay cut for standard workers, but is now in talks with unions -- aiming to increase this to 7 percent.
The electronics giant said that if the cuts go ahead, it will result in savings of 14 billion yen ($179 million) by the end of the fiscal year. However, it may not be enough for Sharp to stay in business.
The ailing firm was recently downgraded to "junk status" by ratings agency Standard & Poor's, after Sharp announced it lost roughly $1.76 billion in the April to June quarter. In addition, the firm has mortgaged almost all of its domestic properties and offices -- offered up as collateral to secure loans from Mizuho Financial Group and Mitsubishi UFJ Financial Group simply to keep afloat.
Sharp is waiting for 150 billion yen of credit for the properties, which include the flagship Kameyama plant in western Japan which produces iPhone screens. The firm is also waiting for financial assistance from Hon Hai Precision Industry, and has recently launched a new voluntary retirement scheme which would cut 2,000 jobs through its main Japan-based subsidiaries.
The TV maker plans to cut a tenth of its workforce, 5,000 jobs, which includes the retirement scheme. The employee massacre is the first the firm has had to enforce in over 60 years.
Furthermore, the company is considering reducing the price of its stake to be sold to contract manufacturer Foxconn. The negotiations are still taking place, but reports have suggested that the original price agreed in March was $7 a share -- a total of $800 million -- and now the value is closer to $2.37 a share.
Finally, reports circulated that suggested Sharp was having trouble producing its allotment of screens for Apple due to high costs and manufacturing difficulties. If screen output delays Apple, then it is unlikely other firms will look at Sharp with favorable eyes in the future.