SunPower Corporation (NASDAQ:SPWR) is laying off 2,500 employees, or 25% of its existing workforce. While the company expects the staff cut and other restructuring measures to save it $350 million next year, completing the restructuring will first come at a steep cost to the company. SunPower expects to incur restructuring charges of up to $275 million by the end of 2017.
What’s the problem?
Prices of solar systems have dropped 31% this year amid oversupply as solar systems makers have recently expanded their capacity. The oversupply situation has eroded prices, leaving SunPower and its peers reeling in pain.
Fears of a Trump administration not fully supporting measures to curb climate change as the outgoing Obama administration has done can also be seen rattling the renewable energy sector.
Business leaders like Elon Musk of Tesla Motors Inc (NASDAQ:TSLA) expressed concern ahead of the November 8 election that Donald Trump was not the best man to have in the White House given his public comments being skeptical of human-caused climate change. Tesla is acquiring sister company SolarCity, a solar panel manufacturer and installer. The acquisition will increase Tesla’s exposure to the clean energy market, which may need taxpayer support to continue in business.
But in what could further rattle the renewable energy sector, Trump has appointed a well-known climate change skeptic, Scott Pruitt, to head the Environmental Protection Agency (EPA).
Other restructuring measures
On top of retrenching staff, SunPower also announced several other measures aimed at cutting costs and keeping it afloat in the face of a slump in solar market. Those extra cost-cutting measures include closure of a factory in the Philippines that is capable of producing ~700 megawatts a year. The company further announced plans to lower its 2017 capex by more than 50%.
For the future, the company intends to invest in the development of more advanced solar cell technology, hoping to differentiate its products from the competition and driving sales.
“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,” said SunPower CEO Tom Werner.
SunPower stock jumped 14.2% to close at $7.95 in the last session. But the stock has declined more than 73% since the beginning of 2016.