Published: January 27, 2006
Filed at 7:19 a.m. ET
Skip to next paragraph LONDON (Reuters) - LG.Philips Displays, the world's biggest TV and monitors picture tube maker, said on Friday it had filed for creditor protection for its European holding company due to large debts it can no longer honor.
The Hong Kong-based venture, which is jointly owned by Philips (PHG.AS) and LG Electronics (066570.KS), said it had also asked for creditor protection for its Dutch and Czech units and its German affiliate, while the French unit may follow next week after talks with employee representatives on Monday.
Subsidiaries in Mexico, the United States and Slovakia, which fall under the European holding, will also have to assess their financial situation as the company struggles with falling demand in rich nations for bulky tubes, the firm said.
``(LG.Philips Displays Holding BV) has said it can no longer support loss-leading subsidiaries, because it cannot acquire long-term financing,'' it said in a statement issued in the Netherlands.
``The European holding has had to pay for large restructurings and acquired large debts. And no money is coming in anymore,'' said a spokesman for the firm.
He declined to give details about the debt burden.
LG.Philips Displays booked an operating loss of around 10 million euros ($12.24 million) in the fourth quarter.
Units in Poland, Brazil, China, Indonesia and South Korea will continue manufacturing, while units in the United Kingdom and two in the Netherlands should also be able to pull through, it added. Together they represent about 85 percent of production.
The future of most European units will be in the hands of the administrator who took control of the company's management on Friday. LG.Philips Displays expected ``negative effects'' for a total of 750 employees in the Netherlands and Germany.
LG.Philips Displays produces one in four picture tubes sold around the world.
Labor unions were enraged that the company had decided to pull the plug on Dutch units only weeks after it had agreed a social plan for 300 staff who were already due to be laid off.
``The social plan doesn't mean anything anymore. We'll point Philips at its responsibility as a good employer,'' said Ron Peters, a negotiator at the biggest Dutch union FNV.
The two parent companies, Philips and LG, wrote off their stakes in the troubled venture late last year as it struggled with falling demand for cathode ray tubes due to the popularity of flat panel displays.
Philips took 416 million euros of impairment charges for the unit as well as a 42-million-euro charge for liabilities under a guarantee provided to banks.
Philips, which had to refinance the tubes venture with several hundred millions of euros as recently as two years ago, has said LG.Philips Displays will no longer affect its financial results.
``We regret what's going on, but we're a shareholder and not managing the company. We'll examine what's going on,'' said a Philips spokesman, reiterating that Philips shareholders were no longer exposed to any bad news from LG.Philips Displays.
Philips shares fell 0.5 percent at 27.49 euros by 1130 GMT, underperforming a 0.7 percent higher DJ Stoxx index of European technical stocks (.SX8P).
LG and Philips have a separate venture for flat panel displays, LG Philips LCD (034220.KS), which produces one in every five LCD plat panel displays sold around the world and is very profitable.
``Although demand for cathode ray tubes has fallen sharply in mature markets, the global demand for these products remains strong, especially in emerging markets,'' the firm said.