Suntech Laid Off 10%, Factories Running at 50%-60% Capacity

The Chinese solar panel maker refutes claims made by a news story reporting that the company has carried out a massive layoff.
by: Ucilia Wang
January 12, 2009

After a Chinese news report claimed Suntech Power Holdings (NYSE: STP) was planning a massive layoff, the solar panel maker on Monday said the report was inaccurate but disclosed that it did cut 10 percent of its workforce in the fourth quarter of 2008.

Economic downturn prompted the world's largest solar panel maker to chop roughly 800 people from the payrolls, said Steve Chadima, vice president of external affairs at Suntech.

The layoffs affected mostly contract factory workers, who were let go as the company reduced its production, Chadima added. Back in Novmber, Suntech trimmed its sales forecast for 2008, blaming the weak euro and credit crunch. The company has several factories in China, and the layoffs took place at the main factory near its headquarters in Wuxi.

"We were slowing down production because of this worldwide slow down in demand for modules," Chadima said.

Suntech's investor relation staff called major investors Monday trying to correct a news report by a business daily in China that appeared on Saturday and posted on Sina.com. A research firm, JLM Pacific Epoch translated the story into English and posted on its Website.

The original, Chinese version of the story, which cited a former Suntech employee, said Suntech started laying off employees in the last quarter, and the workforce reduction would reach 4,000 people, or 30 percent of the company's workforce, around now.

The story included comments from a Suntech spokesman, who didn't refute the numbers. The spokesman said the staff cut was seasonal because market demand is typically low during the winter.

But Suntech representatives said Monday the Chinese news report exaggerated the layoffs. Four thousand employees would've represented 50 percent of Suntech's workforce, Chadima said.

Suntech has no immediate plans to cut more staff, Chadima said. The company is putting off on its previous plan to hire more factory employees in 2009 until it can better determine market demand.

The Chinese news report also mentioned that some workers were asked to take a long holiday break without pay, and that the company cut executive salaries. Chadima, who initially told Greentech Media that some factory employees did take a two-week break -- instead of one-week -- without pay, called back to say that in fact the workers took paid vacation.

He added that the company didn't cut salaries for the executives. Instead, managers didn't take the year-end bonuses for 2008 "to deal with financial challenges in the next few months."

The company's factories are running at 50 percent to 60 percent capacity, which falls in line with the guidance the company has given to investors. The company recently celebrated reaching a 1-gigawatt production capacity for its solar cells and panels.

Suntech isn't alone in laying off employees. OptiSolar, based in Hayward, Calif., laid off 300 employees – or 50 percent of its staff. HelioVolt, which opened its first-ever solar panel factory last October in Austin, Texas, also has cut staff. SunEdison, a large solar power plant developer in Beltsville, Md., let go 50 to 60 people, a former SunEdison employee told Greentech Media.

Other solar companies, including Q-Cells in Germany and LDK Solar in China, have cut their 2009 sales and production forecast.