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LG Electronics wields the axe

LG Electronics Inc, the world's third-largest maker of mobile phones, plans to reduce costs by 3 trillion won (US$2.2 billion) this year as the company faces falling revenue and profitability amid the global recession.

The company will cut manufacturing costs at its headquarters in Seoul and 82 overseas subsidiaries, LG said in a statement yesterday.

"Inevitably, there may be layoffs as we try to optimize the overseas manufacturing plants but there won't be any job cuts for the time being," Chief Executive Nam Yong toldreporters in Seoul yesterday.

LG last month unexpectedly posted a record quarterly loss of 671.3 billion won after the global recession damped demand for handsets and televisions.

LG shares fell 2.4 percent to close at 76,100 won on the Korea Exchange while the benchmark Kospi index lost only 0.6 percent.

Last month the company, which makes more than 70 percent of its revenue overseas, said this year's sales will be less than last year's and profitability will drop because of weaker demand and more competition.

The global handset industry is forecast to shrink for the first time in eight years, with JPMorgan predicting an 11-percent decline in volume shipments because of weaker demand. Nokia Oyj, the world's biggest mobile-phone maker, cut its industry outlook twice in less than a month late last year and said last month that industry sales will slide 10 percent this year.

Nokia had 38.4 percent of the global mobile-phone market in the fourth quarter, followed by Samsung Electronics Co with 17.9 percent, according to researcher Strategy Analytics. LG Electronics had an 8.7 percent share.

Nam said that LG is interested in acquiring other companies to maintain competitiveness in its main businesses but would not name targets.

The company may increase spending on production facilities and research and development for its solar cell business, he said.



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