BYD Mulls Large-Scale Layoffs

Date:2011-09-01     Source:hangmeilile  Text Size:

August 31 -- BYD (002594.SZ) may be mulling a large-scale layoff, with plans to close its auto sales and marketing departments, and reduce the size of its workforce from 2,600 to 800, reports

The large-scale layoff comes after BYD had recently suffered from its distrbutors qutting its sales network and the departure of senior company executives.

According to the report, BYD had initially achieved good results from the auto business when it sold 448,400 vehicles in 2009, and managed to attract investments by U.S. billionaire Warren Buffet.

The company's distributors in Zhejiang, Shandong, and Henan provinces began to quit its sales network from April 2010, and BYD did not publicly disclose the reasons behind the departures of many of its distributors.

In an auto exhibition held in Zhengzhou, Henan province, in August 2010, a local distributor made public its conflict with BYD, questioning the structure of BYD's sales network and commercial policies. It was reported that BYD had chosen sales volume and profitability over its relationships with distributors.

BYD chairman Wang Chuanfu subsequently announced measures such as reducing the number of distributors and improving the company's relationship with distributors.

According to a Shandong-based distributor, though joining BYD's network is hard, it is even more difficult to exit BYD’s sales network, with the economic losses to be solely borne by distributors.

A series of new auto models launched during the period failed to reverse falling sales, increasing the tension between the company and its distributors.

The resignation of Xia Zhibing, the former head of the company's sales division, earlier this month, may signal a change in BYD's strategy, according to the report. It is easier to restructure the division with his departure as Xia was involved in the building of the sales team and the implementation of sales policies from the very beginning.

For the first half of 2011, BYD had reported an 88.63 percent year-on-year fall in first half 2011 net profit to 275 million yuan.

Shares of BYD fell 3.65 percent to close at HK$24.78 today.


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