LG to Shut Plant in Mexico After Tariff Removal

[2009-05-25 10:04:40]

LG Electronics, the world's third-largest mobile phone maker, yesterday said it would shut its handset manufacturing plant in Mexico next month after the country removed tariffs on imported handsets.

Mexico removed its 15 per cent tariff in February. "Tariffs in Mexico were removed so there is no merit in local production," the company said.

"Our Brazilian plant has enough capacity so we will make the most of it for the Mexican shipments," LG said.

The South Korean company aims to cut costs by 30 per cent this year by maximising productivity and efficiency.

LG's handset plant in Mexico, with about 200 employees, produces about 200,000 units a month. The company said it had yet to decide on what to do with its workers in Mexico.

The company has already cut jobs in some overseas production bases. LG has about 82,000 employees worldwide, with about 60 per cent of its production carried out overseas.

The company has production bases in Brazil, China and India.

Improving efficiency has become more important for LG as the world's leading mobile phone makers tackle falling sales due to the global economic slowdown.

LG last month reported a loss for the second successive quarter , hit by falling demand for handsets and flat-panel televisions.

The weaker won has provided a buffer for LG in the industry's worst downturn, while Japanese companies such as Sony are undertaking tough restructuring plans. However, the company has forecast a 20 per cent fall in sales this year.

LG's mobile division saw its unit sales hold up better than Nokia and Sony Ericsson in the first quarter. LG sold 22.6m mobiles, down 7 per cent compared with the same period last year.

LG is seeking to increase its global market share from 8.5 per cent in 2008 to 10 per cent this year.

The company plans to make aggressive inroads into emerging markets such as China, the Middle East, eastern Europe and south-east Asia.

LG shares closed down 0.9 per cent at Won113,000 yesterday in line with a 1 per cent fall in the broader market.

Some industry analysts expect LG to return to a net profit in the second quarter.

The company expects sales to rise 10 per cent in the second quarter compared with the first quarter, helped by seasonal demand for its air conditioners.
Source: FT.com
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