SHANGHAI, China Chinese consumer electronics company TCL Group will exit the European TV market, hoping to staunch losses in the region. The decision will cost it 45 million euros in restructuring charges.
Last month, TCL, which owns the RCA brand, said the multimedia division responsible for TV sales in Europe had lost a total of 203 million euros through the first 9 months of the year, accounting for much of the parent company's losses.
Pulling out of Europe is a big move for the company, and an indicator of how tough it is for Chinese brands to turnaround the ailing assets of Western companies. TCL Group created a joint venture with European consumer brand Thomson in 2004 to expand its presence in the TV and DVD player business. The deal gave TCL RCA brand and made it the largest TV maker in the world.
But the joint venture soon began to experience troubles, which analysts chalked up to slow integration because of striking cultural differences between the companies. TCL has already taken radical steps to reinvigorate its ailing mobile division, much of which is comprised of the assets of Alcatel's former handset unit.
TCL said its European branch will halt TV sales in early November, but continue sales of other OEM items, such as DVD players. It also plans to condense its R&D and supply chain in Europe, but did not give details.
TCL believes revenues from its European business will drop by half in 2007, but hopes the reduced costs will push it into profitability in the region. The company's third quarter earnings showed that it made a profit for the first time after taking over the TV joint venture with Thomson, but the momentum was credited to stronger sales of cellular phones.
TV sales drops by 14 percent to 5.52 million units, among which 3.5 million were exported. Although the group suffered big losses in Europe, it did ring up a profit in North America for the first time on stronger sales of digital TVs.