Nokia to lay off 1,500 in North Texas
Job cuts reflect slowing economy
02/03/2001
By Vikas Bajaj and Michael A. Lindenberger / The Dallas Morning News
Nokia Oyj said Friday that it would lay off about 1,500 workers in North Texas over the next five months as it moves cell phone manufacturing from a Fort Worth factory to Mexico and South Korea.
The Finnish firm with U.S. headquarters in Irving said the move was designed to cut costs and didn't change its commitment to the region. Officials declined to quantify the savings but said they would be significant.
Nokia joins a growing list of companies that have announced layoffs in the past few months. The cuts offer proof to many workers that the American economy is slowing.
Nokia will shutter its factory at CentrePort business park, just south of Dallas/Fort Worth International Airport, and lay off 800 full-time and 700 part-time workers. The cuts will come from its Alliance Gateway Business Park and CentrePort facilities, both in Fort Worth.
The remaining staff will be consolidated at Alliance. The move will have no significant effect on the Irving corporate campus. Nokia employs about 5,500 people in North Texas.
"During the next four weeks, we will get more information on what impact it will have on individual operations," said Kari-Pekka Wilska, president of Nokia Americas in Irving. "Our commitment to Alliance is: We will be there for a long time."
Mr. Wilska said the laid-off workers would be given priority over outsiders for open positions.
Workers optimistic
Workers at the CentrePort facility were reasonably upbeat about their prospects.
"I have faith things are going to work out," receptionist Jeanetta Roberts said. "I love working here. They are going to have to drag me out."
Nokia employees, who fondly refer to themselves as "Nokians," say they take great pride in the company's financial success and egalitarian culture. They were informed about the layoffs at a companywide meeting Friday morning.
Kantesh Doss, a senior engineer, said most of his colleagues were confident they would find jobs at Alliance.
"People here are concerned about losing their jobs," Mr. Doss said. "But we think most of us – everyone, maybe, but 5 or 10 percent – will be moving to the Alliance factory."
The economic slowdown has hit the high-tech industry particularly hard. Some once contended that the industry had created a New Economy impervious to slumps.
"High-tech industries go through cycles," said Bernard Weinstein, director of the Center for Economic Development and Research at the University of North Texas. "High-tech regions like Silicon Valley and D-FW are very susceptible on the upside and downside."
Top 3 making changes
Dogged by slower growth prospects, the top three mobile phone makers have announced substantial changes in their manufacturing in the past two months.
Ericsson Inc. said last week that it would farm out phone manufacturing in an effort to reduce costs. And Motorola is shifting production from the United States to Mexico, eliminating more than 5,370 jobs in Illinois.
Mobile phones have become easier to produce, allowing companies to ship the work to countries with lower land, labor and other costs.
'Basic technology'
"Cell phones have become commodities," Dr. Weinstein said. "We may have considered them sophisticated 10 years ago, but it's basic technology."
But Nokia says that it's important to note that it farms out only 10 percent of its production, and that labor costs are not its only concern.
The firm will continue to manufacture phones at Alliance.
"We have looked at the unit cost of manufacturing a product that we design ... and we haven't found a contract manufacturer who could beat us or in fact get close to us," Nokia chief executive Jorma Ollila said in a conference call with analysts Tuesday, when earnings were announced.
Nokia, which has 31 percent of the market and is the No. 1 phone maker , estimates the industry will sell 500 million to 550 million handsets this year, up 25 percent from 2000 but slower than the 45 percent growth last year. Motorola is second with less than half of Nokia's share and Ericsson is third with 10 percent.
In a slower growing market, companies must find other ways to increase profits, analysts say.
Bullish on Nokia
"If you can't make it up in the top line, you got to take it out of somewhere else – that's in expenses," said Todd Bernier, an analyst with Morningstar.com.
Most analysts are bullish on Nokia's prospects because it has solid finances and continues to introduce stylish phones that consumers can't seem to get enough of.
"Nokia's perceived as a survivor," Dallas business analyst David Johnson said. "You can't say that about some of the other cellular phone manufacturers. There is a sense that when the cycle returns, Nokia is probably going to be on the leading edge, and some others are probably going to disappear."
BEST WISHES
BILL |
