Jabil Circuit shifts jobs overseas
St. Petersburg Times; St. Petersburg, Fla.; Jan 24, 2003; JEFF HARRINGTON;
The setting for Jabil Circuit's annual meeting Thursday was in the company's headquarter city, but it could well have taken place in China, Mexico or even Brazil.
That, after all, is where most of Jabil's employees live these days.
Struggling through a lingering tech recession, the St. Petersburg maker of electronics components has systematically cut jobs in the United States and Europe, moving production to locales in Asia, Eastern Europe, Latin America and South America where labor is cheaper.
By the end of this year, it expects fully 70 percent of its manufacturing will be in low-cost countries compared to 30 percent in the U.S. and Western Europe. Three years ago, according to chief executive Tim Main, the ratio was just the opposite.
Of 24,500 employees in 34 sites, about 3,500 are in the United States. The company employs about 1,800 people in the Tampa Bay area, down from 3,000 just two years ago. It closed plants recently in Idaho and Texas, but acquired operations in Mexico, Brazil, China, Hungary, Poland and India, among other low-cost countries.
Over the last few years, Jabil executives have been reluctant to talk about shifting jobs and its impact on U.S. employees. At times, they had refused to say how many workers they still had in St. Petersburg.
But during and after Thursday's shareholders meeting, Main was frank about the strategy, defending it as not only standard in his industry but necessary for survival. "If we don't move the business, our customers will," he said.
Main said the process has been "extremely painful." It's difficult for American workers to understand why the company has more workers in Panyu, China, than its home town.
"It isn't fair" to local workers who have been laid off, he said. "They do a good job. They've done nothing wrong. It's something that's happening to them."
For example, 605 Jabil workers are losing their jobs with the closing of a plant in Meridian, Idaho, this month. The work is being relocated to Mexico.
Idaho's state unemployment agency has received $600,000 from a discretionary fund controlled by U.S. Secretary of Labor Elaine Chao to help both ex-Jabil employees and vendors affected by the closing, such as security guards.
Both pools of money are available case-by-case to pay for retraining, relocation to a job out of state or expenses associated with training such as transportation or even car repair. Because the jobs were lost to Mexico, Jabil workers are also eligible for unemployment compensation for an additional 26 weeks, doubling the normal time period.
The overseas shift is one prong of a survival strategy outlined by Main during an hourlong gathering at the Renaissance Vinoy Resort.
In 2002, the company made strides in diversifying from a reliance on telecom and computer customers such as Cisco Systems Inc. and Hewlett-Packard Co. It moved into the automotive electronics business, buying manufacturing operations from European car parts manufacturer Valeo SA. It is pushing into more medical and defense work.
More significantly, it catapulted heavily into consumer electronics last year through the acquisition of nine factories from Royal Philips Electronics NV. By year's end, Main said, about $1- billion of Jabil's $5-billion in annual revenues will be in consumer electronics.
The recession has taken its toll on Jabil, knocking its stock down about 30 percent since early 2001. Once trading around $60 a share, Jabil shares now hover closer to $16. Its stock closed Thursday at $17.14 a share, up 16 cents or 1 percent.
Still, Jabil has fared better than most of its competitors, maintaining a strong cash flow that gives it flexibility to invest in buyout opportunities.
In its last fiscal year, Jabil made $92-million, or 46 cents a share, on revenues of $3.6-billion, plummeting from $149-million in net income on $4.3-billion in revenues the prior year.
Analysts expect earnings of 71 cents a share in the current fiscal year, with revenues between $4.8-billion and $5-billion. Chief financial officer Chris Lewis said the company anticipates net income of 15 cents to 17 cents a share in the current quarter, up from 2 cents a share in the period last year.
Main also told about 100 shareholders and employees that:
The company's costly acquisition of assets of telephone equipment maker Marconi PLC "frankly was a disaster for us." Financially shattered, Marconi announced Thursday it was closing its plant in Coventry in Great Britain; earlier this year, it closed a facility in Liverpool. Main said Jabil has less than $100-million of exposure to Marconi on its balance sheet today.
Jabil's appetite for acquisitions "is sated for the moment."
The company will not start paying out a dividend any time soon, despite persistent pleas from some shareholders who spoke. Lewis, the chief financial officer, said the money is better spent on pursuing growth opportunities and he did not anticipate paying dividends for at least 10 years. |
