China's
TCL Multimedia plans to shut its loss-making European TV operation,
TTE, which was set up as a joint venture with France's Thomson and has
incurred big losses.
According to Xinhua, TCL Multimedia wants TTE to become a contract manufacturer and reduce its focus on the Thomson brand, although it has the right to use it for the next two years.
The company, part of the giant TCL electronics group, will stop all sales and marketing activities in Europe other than its OEM business. TTE accounts for around 15 percent of TCL Multimedia's total turnover.
According to Thomson's announcement (French), TCL has committed to maintain production at its French factory, which is leased from Thomson , until 2008. An unspecified number of workers will be laid off in Europe, but the Chinese company says it does not expect its TV operations in North America and China to be affected by the restructuring.
The announcement was hardly unexpected, as the writing has been on on the wall for TTE, which makes TV and DVD players, ever since the JV was formed in 2003.
The JV was established mainly with assets for the production and sale of traditional CRT TVs at a time when consumers demand was already switching to flat-panel LCD sets -- see this EngagingChina story .
According to Reuters, the straw that broke the camel's back was TCL Multimedia's latest results which reveal an accumulated investment loss of €203m in Europe as of the end of September.
At the opening ceremony for TTE in 2003, the aptly-named Tomson Li, chairman of TCL and TTE, said: "We want to be the undisputed leader of the industry."
The chosen strategy was to sell TTE products under regionally well-known brand names, such as Thomson in Europe and RCA in North America. In China and other new Asian markets, products would be sold mainly under the TCL brand.
The idea of a Chinese firm using a multi-brand sales strategy to expand internationally was novel but also risky, not least because it acquired not just western brands but also western workforces and plants. The deep-seated problems in the latter have forced TCL Multimedia to come up with a different strategy.
More on the overseas ambitions of TCL and other Chinese electronics firms in this article in Appliance Magazine.
Thomson no longer participates in TTE . Last year, it converted its 33% stake in the JV into shares in TCL Multimedia. TCL and Thomson are thus the two largest shareholders in TCL Multimedia.
This is the latest in the growing list of European electronics companies bailing out of loss-making JVs with up-and-coming Asian competitors. Philips, Alcatel and Siemens have all done the same -- see this EngagingChina story.
