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SDK Takes Additional Cost Reduction Measures

December 13, 2001

Showa Denko K.K. (SDK) has decided to take additional measures to reduce total labor cost to cope with the drastic changes in the economic conditions.

DK is proceeding with the implementation of its medium-term consolidated business plan "Cheetah Project" that aims to eliminate the consolidated accumulated deficit, reduce debt and total labor cost, and restructure its business portfolio. In particular, personnel on a consolidated basis has been reduced by approximately 4,000 from the level at the end of 1998, already surpassing the goal of 2,500 set forth in the Cheetah Project.

Nevertheless, the Japanese economy is undergoing drastic changes with the progress of deflation, further slowdown, and shift of manufacturing operations to foreign countries.

Under the circumstances, SDK has decided to take additional measures as follows to reduce total labor cost:

1. Additional labor cost reduction (¥10 billion for 2002; ¥12 billion in annualized cost)

  • 1)Special measures (To be implemented in January 2002)
    • * Reduction of ¥8 billion
    • * Personnel reduction of around 1,000 through changes in business structure, shift of production to foreign countries, streamlining of overlapped administrative staff, etc.
    • * Implementation of an early retirement system with payment of extra severance pay
  • 2) Reduction in remuneration for directors as well as in salaries for managers and union member workers
    • * Reduction of ¥2 billion
    • * For directors and corporate officers, the reduction rates are to be expanded to 33% maximum. (Reduction already started in October 2001.)
    • * For employees in managerial positions: A 10% reduction in annual income
    • * For union member workers: A 5% reduction in annual income

2. Extraordinary loss

In its financial statements for 2002 (ending December), SDK will post an extraordinary loss of approximately ¥10 billion for the payment of extra severance pay following the special measure in 1. 1) above.

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