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Nokia to Shift Some Production Out of U.S.

Telecom: Firm says it will move handset manufacturing to low-cost factories in S. Korea, Mexico and cut 800 jobs.

February 03, 2001|From Reuters

HELSINKI, Finland — Nokia said Friday that it will achieve substantial savings by shifting some of its handset manufacturing from the United States to lower-cost facilities in South Korea and Mexico and cutting 800 U.S. jobs.

The move by the world's largest cell phone maker is part of a seismic industry shift of handset production from high-cost European and North American plants to low-cost factories in Eastern Europe, Mexico and Asia.

"As a result of this change, Nokia's employment in North Texas will decrease by approximately 800 full-time employees at its two Texas-based manufacturing facilities over the next five months," the Finnish group said.

The job cuts would reduce Nokia's Texas work force by almost a seventh from 5,500 employees, 3,000 of whom work at its main Alliance plant in the Dallas-Fort Worth area.

"The cost savings are substantial," Nokia Mobile Phones spokesman Tapio Hedman said, although he declined to quantify them.

The announcement about a half-hour before the Helsinki bourse closed had no big effect on Nokia's share price.

But Nokia's Wall Street-listed American depositary receipts fell amid tech stock weakness and closed down $1.77 at $32.60 on the New York Stock Exchange.

Nokia said that it recently had increased the capacity at its U.S. factories by installing newer machinery, and that it expected to achieve higher volumes than before with less labor.

The Texas operations will be consolidated in Alliance, and part of the production at Alliance will be shifted to facilities in Mexico and Korea, Hedman said. A second plant will close in Fort Worth, and Nokia will lease the space, the company said.

"In the past few years, we have invested significantly in new production technology and processes within these other facilities, and it is clearly more cost-efficient to produce the volumes there," Hedman said.

The move confirmed Nokia's remarks earlier this week that it would seek to move production to countries with lower labor costs.

Nokia managers also said earlier this week when reporting 2000 earnings that the company might seek to increase outsourcing of handset production to 20% from the current 10%.

Nokia's Swedish rival Ericsson, the world's No. 3 handset producer, last month said it would turn the bulk of its cell phone production over to contract manufacturer Flextronics, which plans to shift the work to low-cost countries.

Also last month, U.S.-based Motorola, the No. 2 wireless phone maker, announced plans to move its last U.S. handset manufacturing production plant to factories in Mexico and China.

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