August 30, 2011 / 7:21 AM / 7 years ago

UPDATE 2-BYD plans to cut sales staff by 70 pct -media

(Adds comments by BYD executives, background, context)

* BYD did not confirm details, but calls it normal reshuffle

* BYD sales plunge, lags market and rivals

By Fang Yan and Ken Wills

BEIJING, Aug 30 (Reuters) - BYD Co Ltd , a Chinese carmaker backed by U.S. billionaire Warren Buffett, plans to cut its sales force by about 70 percent, a Chinese website said on Tuesday, after the company reported a nearly 90 percent drop in first-half earnings.

About 1,000 people in BYD’s sales arm will be asked to resign, with the ultimate goal of cutting the headcount to 800 from 2,600, eeo.com.cn said on Tuesday, citing unnamed BYD employees.

A mid-level executive at BYD told Reuters the initial layoff target was as much as 1,600 people, but the timing of the planned cuts was not clear.

BYD did not confirm details of the layoff plan.

However, Li Yunfei, assistant to BYD’s general manager, said on his personal microblog posted on Sina.com that the move was a normal personnel transfer for the company’s sales arm.

“The sales division has not dissolved or (been) eliminated. The personnel reshuffle is aimed at improving our sales service, raising the efficiency internally and externally,” he said, without elaborating.

The layoffs represent a small amount of the overall global staff of 120,000 at BYD, which also makes cellphones and batteries. Further layoffs in other departments were possible, the website report said.

FALLING SALES

BYD has been a shining star since it received an investment of $230 million from Buffet in 2009. Its F3 sedan was China’s best-selling car in 2009 and 2010, but it has been unable to build on its initial success.

A lack of competitive new models makes it particularly vulnerable after the government stripped away tax incentives for small cars at the end of last year.

BYD, percent-owned by Berkshire Hathaway Inc (BRKa.N), reported a first-half net profit of 275.36 million yuan ($42 million), down 89 percent from a year earlier. Geely Automobile Holdings , meanwhile, managed to grow its net income by 17 percent in the first half, while larger SAIC Motor Corp reported a 46 percent jump in earnings.

Xia Zhibin, head of the BYD’s sales unit, resigned earlier in August, citing personal reasons. Analysts said slumping sales were likely to have played a part in the move.

BUFFET’S INVESTMENT

Plunging sales, a failure to deliver its promised green car plan and delays in the U.S. launch of its e6 electric sedan have led some to question the wisdom of Buffet’s investment in the company.

Wang said the company continued to maintain a good relationship with Buffett, but declined to comment on whether the U.S. investor would sell any BYD shares.

At investor meetings in April and July, Berkshire’s vice chairman, Charlie Munger, said he intended to stick with the BYD stake, which some took as a signal that Buffett would as well.

BYD’s H shares, traded in Hong Kong, closed down 0.9 percent at HK$15.48, lagging a 1.71 percent gain in the Hang Seng Index (Additional reporting by Alison Leung in Hong Kong and Li Ran in Beijing; Editing by Matt Driskill)

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