LG to cut costs by $2.2B, handsets appear to be spared

LG said it would cut costs by 30 percent, or $2.2 billion, in 2009, and may cut jobs as it restructures amid the economic recession. Though it appears the company's handset division will be spared major cuts, the changes could put increased pressure on the mobile devices division. 

"The current environment is difficult for any global player," LG CEO Nam Young said. "But there will not be any job cuts for the time being, although there may be layoffs in the process of optimising overseas manufacturing plants."

Nam said he expects sales company-wide to fall 20 percent in 2009. LG's handset market share is 8.3 percent, according to BAI Research, stronger than Sony Ericsson and Motorola, but weaker than Samsung. Samsung said recently that it, too, was undergoing a restructuring of its business amid strong economic headwinds. 

As a whole, LG swung to a net loss of $488.3 million in the fourth quarter, its first quarterly loss since 2007, compared to a net profit of $452 million in the fourth quarter last year. The company shipped 25.7 million units in the fourth quarter, up from 23 million in third quarter 2008 and up 8 percent from 23.7 million in fourth quarter 2007.

The company will not increase capital expenditures in 2009, but could spend more on marketing, research and development. LG's plasma display business is suffering in particular, and a drop in net profit in other sectors will put pressure on the handset business to beat expectations amid a handset market that is expected to shrink in 2009.

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