EMI TO KEEP MAKING CDS

EMI has shelved its plans to outsource the manufacturing of CDs after disappointing offers from potential bidders, according to the Financial Times.

The plan was originally introduced by ousted EMI Recorded Music chief Ken Berry and followed up by his successor, Alain Levy.

The move was to have yielded $14.3 million in annual cost savings under a restructuring plan initiated in September at the time of the company's first profits warning. But the company has opted to keep manufacturing in-house for the time being, according to published reports.

The tender offers for the business are understood to have been lower than anticipated. Based on bids on the table, the effect of doing a deal would have been "broadly neutral" compared with retaining profits from the operations, one executive told the Financial Times. "It is not going to happen in this wave [of restructuring]," he said.

EMI makes about 350 million CDs a year and owns factories in the U.K., the U.S. and continental Europe.

Among the bidders for the business were Thomas Middelhoff's Bertelsmann Music Group and Disctronics, the largest independent CD and DVD replicator in the U.K.

The move was part of EMI's target of 65m in annual cost savings announced when Berry was still running the recorded music division. But since the arrival of Levy last October, the restructuring plans have stepped up a gear. It is believed they will be more substantial than Berry was proposing.

Levy is finding savings by merging back office and marketing functions, paring back management roles and cutting unprofitable recording contracts.