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Tokyo: Japan’s Asahi Glass plans to slash North American production capacity by 40%, closing three plants and suspending output at two others, hit hard by the U.S. housing market slump.
The move, to take place later this year, will result in 900 layoffs. The company also plans to sell off a processed glass business, but said details have yet to be worked out. Its shares rose 3% on the news.
“Their decision is quite positive since they’ve taken the sectors that were not making money at all and gotten out of them,” said Yusuke Ando, senior analyst at Daiwa Institute of Research.
“These areas were a downside risk that was really raising concern in the market. But they decided to take this drastic restructuring move extremely promptly for a Japanese firm.”
The company is now shifting resources to concentrate on profitable areas such as glass for solar batteries and cars.
Plants to be closed include one in California, one in Iowa and one in the Canadian province of Quebec. The other two, in California and Tennessee, will be halted indefinitely, with business resuming if the market revives.
“The U.S. housing market was slowing even before the subprime mortgage loan crisis began, but that certainly worsened the situation, and now there’s a tremendous oversupply,” said Asahi Glass spokesman Yoshihiko Saito.
Asahi Glass said that it would post a special loss of 13.5 billion yen ($133 million) this year but that this had already been factored into its estimates.
The company in February forecast net profit of 100 billion yen ($983 million) in the year ending in December, a rise of 43.6%, which compares with a consensus estimate of 107 billion yen from 15 economists polled by Reuters.