Aiwa, facing its second straight year of losses, will issue 30 billion yen ($243 million) in shares to shore up its capital. Sony, which owns 50.6 per cent of the company, will get 50.6 per cent of the stock. The rest goes to other shareholders.

In the latest restructuring since Aiwa began cutting jobs last July, it said it would consolidate three production lines with nine separate factories - in Japan's Iwate prefecture, Malaysia and Indonesia - into into one line with one factory. As a result, its workforce would be halved to 5,000, it said, adding that it hoped to turn a profit by the business year to March 2003 and that the restructuring would cost 20 billion yen. Aiwa President Masayoshi Morimoto, transferred from Sony in January, said stiff price competition and a slowdown in the US and Asian economies had cut deeply into sales, 80 per cent of which come from its exports.

Analysts said Aiwa had been hit hard by weak demand for its stereo sets and lagged in developing new digital appliances.

Although Aiwa has seen major change since October when its former president resigned to take responsibility for recent losses, Mr Morimoto said more dramatic work needed to be done to turn the 50 year-old Tokyo company around."We felt that we needed to do more," he said.

Aiwa, whose shares have underperformed the broader Tokyo stock market since January, losing 2.3 per cent in value compared to a 0.5 per cent rise in the Nikkei stock average, had so far cut 900 jobs since reporting a loss in the year March 2000. The plan was announced after the market had closed. Aiwa's shares finished up 9.62 per cent at 855, while Sony climbed for a fourth straight session.