Haier to lay off 10,000 this year

CEO says company will further downsize to keep up with industry

Zhang Ruimin, CEO of Chinese home appliance maker Haier Group, recently said the company will lay off 10,000 employees in 2014 after downsizing last year, a decision which experts said is a reaction to the changing market.

Zhang said in a public speech that Haier cut 16,000 employees in 2013 and plans to lay off 10,000 staff this year, most of whom are mid-level employees, news portal sina.com reported Saturday.

A public relations staff member of Haier who declined to be named confirmed the job cut plan Monday when contacted by the Global Times but refused to reveal more details.

Zhang explained that the downsizing is being done to catch up with the new market environment in the Internet era, the report said.

He said that the Internet era signifies an overturn of traditional enterprise management theory and there is no distance between manufacturers and customers, according to the report.

Therefore, mid-level staff who barely know or interact with customers are not needed any more, he said.

Meanwhile, with enterprises undergoing automatizing, some work positions will be made redundant, Zhang said.

"China is still at the very beginning of the Internet era but the new era requires reallocation of human resources," Luo Qingqi, a director at Pale Consulting, told the Global Times Monday.

In the new era, products designing, producing and selling should all be decided around customers' needs, according to Luo.

Zhang stressed in his speech that Haier is striving to be customer-centric and the company requires employees to know their customers and design their products and service according to what customers need.

According to an interview reported on June 12 by iceo.com.cn, website of China Entrepreneur magazine, Zhang said Haier had 20 percent profit growth last year with the large-scale downsizing.

The company now requires employees to form small groups and be responsible for their own markets, he said in the interview, noting it is a way of encouraging innovation rather than the old pattern of following leaders' orders.

Haier even encourages employees to start up their own business and to be Haier's suppliers or cooperators, according to the report.

However, there are also doubts about the large-scale downsizing and the ambitious business model change.

The most valuable asset of a manufacturing enterprise is the product and no fancy business model concept can surpass the significance of products, Liang Zhenpeng, a Beijing-based home appliance industry analyst, told the Global Times Monday.

Haier is faced with a dropping market share, Liang said, noting the factor cannot be overlooked in its downsizing.

According to statistics from China Market Monitor Co, Haier suffered an overall year-on-year market share decline in sales of TVs, refrigerators, washers and air conditioners, Liang said.

At the same time, new smart TV brand LeTV and Gree, a traditional air conditioner brand, both gained market share increases in the past year, Liang said, noting in the home appliance market, products are what customers are most concerned about.

The sluggish home appliance industry may also put more pressure on Haier, according to Liang.

China's home appliance market has been lackluster in recent years so the head count in the whole industry will be negatively impacted, he said.