Suntech Power Holdings Co. Ltd.
) will halt two of the three production shifts at its Goodyear,
Arizona, solar panel manufacturing facility. Moreover, the
company will also lower its workforce at the facility. The need
comes in the light of global oversupply and higher production
costs related to the recent import tariffs imposed by the U.S.
The Goodyear, Arizona, manufacturing facility has a
highly-automated manufacturing and product testing equipment and
currently produces 300-watt solar panels for commercial and
utility-scale electricity generation.
With the halt in production, the annual production throughput of
the facility will decline from 45 megawatt ("MW") to 15MW, which
will also result in elimination of approximately 50 positions.
A few days back, the U.S. International Trade Commission made
unilateral tariffs of 35.97% mandatory on Suntech solar cells
produced in China. Solar cells are a key component used at
Suntech's Goodyear production facility. Rise in costs of solar
cells increase the manufacturing costs of solar panels in the
U.S. Apart from this, the U.S Government had also imposed tariff
on aluminum frames in 2011, which is also a key input for the
production of solar panels.
To overcome the imbalance between demand and supply and improve
trade protectionism, the company is following a restructuring
plan. As per the plan, Suntech Power had closed a portion of its
solar cell production capacity in Wuxi, China for the time being,
in September. As a result of the initiative, the company's
operational solar cell capacity will be temporarily reduced to
Later in October, the company announced its intention to improve
operations and solidify its global industry leadership. It
indicated that to achieve its goal it will have to invest in
profitable and sustainable customer relationships, right-size
production capacity, cut production cost, streamline operating
structure and improve its financial position.
As per its plan, the company aims at reducing its module
non-silicon cost structure 30% year over year. Moreover, the
company is on track to achieve a 20.0% year-over-year reduction
in annualized operating expenses (excluding non-recurring items).
Also, the company is committed to extend maturity of credit
facilities and continue to reduce total debt and related interest
expenses. Above all, the current decision of lowering down the
production shifts is in line with the company's targets.
Overall, the solar industry is facing oversupply and tariff
headwind. In order to survive, one of the company's peers,
) has planned to restructure its Philippines manufacturing
operations, which also includes reduction of its employees.
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Suntech Power is one of the largest producers of crystalline
solar cells and modules, serving geographically-diversified
customers. The company is prudently expanding its revenue base to
divergent markets around the globe, while increasing megawatts
shipped. However, the positives are currently overshadowed by
tepid module demand in Europe, rising competition, tariff
imposition, the volatile euro and the financial stability of its
The company presently retains a short-term Zacks #3 Rank (Hold)
that corresponds with our long-term Neutral recommendation on the
The company mainly competes with
First Solar Inc.
Yingli Green Energy Holding Co. Ltd.