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Toshiba Laying Off 500 in Irvine, With Jobs Moving to Asia

Technology: Orange County's biggest computer maker, it calls the move a consolidation not directly tied to recent market softening.

February 06, 2001|KAREN ALEXANDER | TIMES STAFF WRITER

Toshiba America Inc. said Monday that it will eliminate 500 assembly and engineering jobs at its computer manufacturing operations in Irvine, shifting much of that work to plants in Asia.

The layoffs, to be completed in 60 days, amount to about 25% of the work force at Toshiba America Information Systems Inc., an independent unit of Toshiba America. Nearly all the cuts will come from the 800-person manufacturing and engineering staff, leaving the marketing and corporate functions intact.

Toshiba, the largest computer maker in Orange County, is the latest to announce cutbacks in the region's electronics manufacturing industry. Last month San Diego-based Gateway Inc. said it would eliminate 140 assembly-line jobs in Lake Forest along with cuts elsewhere, to consolidate operations in a weakening economy.

Toshiba officials said plans to consolidate their own operations have been in the works for about 18 months and are not directly related to the softening market for personal computers, which has triggered layoffs in other companies.

"It's just a question of where things are assembled, where they are glued together," said Joe Formichelli, executive vice president of the company's Computer Systems Group in Irvine. He said the move is intended to have assembly closer to parts suppliers in Asia.

In Tokyo, meantime, parent company Toshiba Corp. will likely lower its annual profit forecast by about 27%, according to news reports. The company is expected to report net income of 100 billion yen ($870 million) for the year ending March 31, down from the previous forecast of 137 billion yen. Shares of the world's second-biggest chip maker fell as much as 4.3% on the news in early trading.

The Irvine facility, which opened in 1987, assembles desktop and portable computers and data servers for the U.S. and Latin American markets. That work will now be done at plants in the Philippines and Japan.

Under the restructuring, the Irvine facility will focus on supplying customized computers for medium-sized and large companies.

Toshiba America operates a smaller unit in Irvine that focuses on electronics components.

Toshiba's layoffs come during record low unemployment in Orange County. Still, the cutbacks at Toshiba and other manufacturers will take a bite out of income growth and consumer spending in the region, said Esmael Adibi, director of the Anderson Center for Economic Research at Chapman University.

Salary figures at Toshiba were not immediately available, but Adibi said assembly workers in Orange County earned on average $11 an hour in 1999.

"These are jobs that have more or less been leaving the area," Adibi said. "Considering the cost of living in Orange County, and the cost of labor being so high, most businesses over time have tried to transfer jobs that don't require quite a bit of skills and education out of the area. This is a trend that to some extent is unavoidable."

Like much of the nation, the manufacturing industry in Orange County has shown signs of weakening in recent months. The latest survey by Chapman University, released last month, showed declining growth in factory production and employment in the last three months of 2000.

The Toshiba workers who will be laid off will receive severance pay, extended health benefits and outplacement services, the company said.

"The positive side of this is that in spite of the doom and gloom about the economy, our economy in Orange County is strong," Adibi said. "Unemployment is still low, and hopefully the economy will be able to absorb these people and they will find new jobs."

Bloomberg News in Tokyo was used in compiling this report.

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