After record 1Q loss, LG to halt work on old panel line

LG Electronics Inc., the world’s second-largest plasma display maker, plans to halt production at its oldest panel-manufacturing line after the display division reported a record loss in the first quarter.
LG will stop production at the A1 plant in Gumi, southeast of Seoul, during the first half to increase efficiency in the plasma business, the Seoul-based company said in a statement yesterday.
Halting production at A1, which began operation in 2001 with a monthly capacity of 70,000 plasma panels, will save 20 billion won ($21 million) to 30 billion won annually, LG said.
LG’s display division posted a record 194 billion won loss in the first quarter after competition from Japan's Matsushita Electric Industrial Co., the world’s largest plasma TV maker, and the rising popularity of rival liquid-crystal display technology forced the company to cut prices. The display division sells plasma panels as well as TVs using both types of technologies.
“LG boosted capacity too quickly trying to get the upper hand, rather than matching its pace with industry growth,” said Lee Seung-jun, who manages about $640 million, including LG shares, at CJ Asset Management Co, in Seoul. Shutting down the line will be “good for the company as it will cut costs.”
Shares of LG gained 1.3 percent to close at 69,000 won in Seoul. The benchmark Kospi index declined 0.2 percent.
Plasma prices probably fell faster than LCDs in the first quarter, according to James Kim, an analyst at Lehman Brothers Holdings Inc. Oversupply of plasma displays in the industry may extend throughout this year, according to analysts Steve Oh and D.J. Yook at Deutsche Bank AG in Seoul.
LG said it will maintain production at its three other plasma production lines, which have a combined monthly capacity of 360,000 screens.