Sanyo has dealt a shattering blow to hundreds of workers by announcing that its two North-East plants are facing closure.

The Newton Aycliffe factory in County Durham, which makes microwave ovens, and its sister plant at Thornaby, Teesside, are both set to shut, subject to a consultation process.

The Japanese electronics company says it has been hit hard by cheap exports from South Korea and China, making its loss-making North-East operation no longer "commercially viable".

The news comes only weeks after pharmaceuticals multi-national GlaxoSmithKline announced that 400 workers were to go at its plant just a few miles away in Barnard Castle.

A total of 284 staff is employed at Sanyo's Aycliffe site, which is in Prime Minister Tony Blair's Sedgefield constituency, and 31 at Thornaby where magnetron components are made for microwaves.

They were told yesterday morning that there would be a 90-day consultation process on the future of the two sites, and were then sent home early for the day.

Sanyo had been carrying out a global review of its operations and workers had already chosen voluntarily to accept a temporary cut in their hours earlier this year.

Both its North-East sites are making losses, with a deficit of £21m being recorded at the Aycliffe plant in its March statement of accounts.

Last night, David Simpson, general manager of Sanyo Electric Manufacturing UK, said: "It was a very subdued and sad workforce who accepted what we had to say with dignity.

"Sanyo's position is that it is not commercially viable to continue in the North-East.

"We will now go into a consultation process looking at all the options available to us."

If the plants cannot be saved, workers who lose their jobs would be given an "enhanced" redundancy package, said Mr Simpson.

A job shop would also be set up with the aim of finding 90 per cent of staff alternative work within six months of closure.

Electronics company Samsung, which employs more than 800 people at its Wynyard site, moved quickly to reassure its staff. Samsung also manufactures microwave ovens, but said it had "no plans" to drop production.

The Sanyo news was greeted with dismay by unions and council chiefs.

Sir Ken Jackson, general secretary of the Amalgamated Engineering and Electrical Union (AEEU), said: "This is extremely disappointing news and we are in discussion with Sanyo.

"It is clear that increased competition from China, where labour is very cheap, has undercut the Aycliffe factory."

Mark Lloyd, director of economic development and planning at Durham County Council, said: "This is bad news for Newton Aycliffe and the local economy which is only just recovering from the loss of 600 jobs following the closure of the Fujitsu plant two years ago.

"Our immediate task is to help Sanyo explore any options that might keep the North-East operations open and, if necessary, to help the workforce find alternative jobs or training."

Councillor Bill Waters, Sedgefield Borough Council's lead member for regeneration, said: "The loss of yet another major employer in the area would be devastating."

World prices for microwave ovens have fallen substantially over recent years while variations in the exchange rate have also affected Sanyo, which moved into Newton Aycliffe 13 years ago.

Microelectronics expert Dr David Wood, of Durham University, said: "Huge multi-nationals - like any company - cannot operate in a market that is losing money and they have to move on."

The consultation process at Sanyo, which will begin on Monday, will involve officials from the AEEU and the European Works Council.

Local development agencies will also be brought in to explore alternative uses for Sanyo's two manufacturing facilities.

Sanyo employs about 700 staff at sites elsewhere in the UK.