They aren't struggling, they are performing than ever in total revenue, total profit, hardware revenue, software revenue, first party games revenue, accesories revenue, game subs revenue, off PS 1st party revenue, console brand MAU etc. in many cases being all time records for any console maker, not only Sony.
But in recent couple of years their profitability, even if good has been impacted because of the rise of hardare component and shipment costs, inflation, or costs related to recent acquisitions they made.
Some of these things may worsen in the future, so they had to cut some fat to improve profitability. They highly increased their workforce in recent years, this time they reduced it much smaller percent (8%) cancelling a game (nothing bad or rare, common stuff in gaming) that didn't hype the people and shutted down their studio, who didn't release a hit or something that hyped people since decades ago.
Regarding Twistead Metal, according to Jason Shredder it wasn't still greenlighted to go into full production, so it was only some prototypes, some concept art and a powerpoint. Again, to reject pitches or cancel games -specially in early stages- is part of the normal game development.
So SIE is in a great shape (they just released a big hit, Helldivers 2), and they will be better after cutting some weak links. We also have to understand that part of these fired people aren't from their gamedev studios, but other SIE areas instead.