TCL's losses continue at European TV unit

PUBLISHED : Wednesday, 13 December, 2006, 12:00am
UPDATED : Wednesday, 13 December, 2006, 12:00am

Firm says US TV, European phone operations will post profits

TCL Group, the world's biggest television maker, will again register losses at its European TV operations this year, chairman and president Li Dongsheng said yesterday.

But the firm's United States TV and European mobile-phone units will report their first profits this year since TCL's pioneering acquisitions of France's Thomson and Britain's Alcatel in 2004, Mr Li said.

'In the second half of this year I think our Thomson unit will begin to make profits in North America so in that region our acquisition has been successful. But the main problem is in the European market,' he said. He blamed the losses on TCL's slow response to consumers switching from cathode-ray tube TV sets to flat-screen TVs and the high costs associated with restructuring the European business.

'The costs of firing the work force and restructuring are legislated in Europe and are much more complicated than we imagined,' Mr Li said. 'Also, in a short space of time flat-screen TV sets have come to account for 85 per cent of total European sales volume and we were not really prepared for this.'

When TCL first acquired Thomson, the French company was losing money in the US market but breaking even in Europe so the firm concentrated on first reviving the US business and kept the status quo in its home market.

Thomson lost US$90 million through its US operations in 2003 and US$120 million in 2004 but after its restructuring TCL managed to reduce losses to US$45 million last year and US$11 million in the first half of this year.

Mr Li said an expected US$10 million profit in Europe last year actually manifested as losses of more than US$76 million and in the first half of this year alone the company lost more than US$90 million through its Thomson European operations.

'Chinese companies are not very capable of expanding internationally because they have operated for too long in an environment with insufficient rule of law,' Shao Ning, vice-chairman of the State-owned Assets Supervision and Administration Commission, said yesterday. 'They should be very careful about acquiring large international companies.'

TCL's Hong Kong-listed TV unit, TCL Multimedia Technology Holdings, reported losses of US$195 million in the first nine months of this year, a significant deterioration from US$35 million of losses in the same period a year earlier.

Its mobile-phone unit, TCL Communication Technology Holdings, posted US$1.6 billion in losses last year but Mr Li said the business will be in the black this year.