With a glut of solar panels in the market, it’s becoming tougher for solar manufacturers to compete. This was driven home this week as SunPower announced that it’s restructuring to remain competitive in changing market, resulting in cutting 2,500 jobs globally and closing one of its main manufacturing plants.
Earlier this year Chinese solar manufacturers produced an abundance of solar panels ahead of a tariff reduction there. After the tariff change struck there was an oversupply of panels left over, which has reverberated through the solar industry with lower prices everywhere, putting pressure on other manufacturers to significantly lower the prices of their solar panels as well. It’s great for installers and customers, but a different story for manufacturers.
"As we announced in our third quarter 2016 earnings release, given the current market dislocation, we have made the strategic decision to implement a broad restructuring program to position the company for sustained, long-term profitability," said Tom Werner, SunPower president and CEO. "We believe that our restructuring initiatives will enable us to successfully navigate through the current market transition and maximize cash flow while successfully positioning the company for the next phase of industry growth.”
The major moves the company is making include shuttering its Fab 2 manufacturing facility in the Philippines, where it produced about 700 megawatts of solar panels annually. That will about for roughly 75 percent of the jobs losses. It also was the company’s first large-scale manufacturing facility. The remaining jobs losses will be 600 corporate employees.
It also plans to reduce its 2017 operating expenses to less than $350 million, “decrease 2016 inventory to improve working capital and de-lever its balance sheet,” and reduce its 2017 capital to roughly $100 million—50 percent. It anticipated that the changes will include paying $225 million to $275 million by the end of 2017, 30 percent of which will be in cash.
With the changes, the company said it expected to generate positive cash flow through the end of fiscal-year 2017 with most of it coming from operations. It anticipated ending the year with approximately $300 million in cash. “The company believes that cash flow and liquidity are the key evaluation metrics for its investors,” SunPower stated.
Despite these changes, the company said it will continue to invest in next-generation cell and module technology as well as complete solutions. It currently offers some of the most efficient—if not the most efficient solar panels commercially and is one of the oldest manufacturers of solar panels.
"We believe these actions, which are fully supported by our board of directors, are important to position the company for sustained profitability through the current industry transition,” Werner stated. “We are committed to our diversified go to market strategy, continuing to invest in our industry leading technology and product solutions, reducing our operational and manufacturing cost structure and continuing to allocate resources to those areas that will improve our global competitive position. With solar at grid parity in many markets, we believe the long-term industry opportunity has never been greater," he added.Tweet