Dow Jones Newswires
Nortel Unveils Details Of 3-Yr Global Ops
Strategy
Dow Jones Newswires
TORONTO -- Nortel Networks Corp. (NT) unveiled details of the
three-year global operations strategy it announced in January.
In a news release, the company said a key element of its plan is "the move
from being a telecom manufacturer to being an industry leader in its ability to
focus on customers' requirements for software technology and high-value
network solutions."
Nortel said that, starting this year, it will transfer to contract manufacturers all
but its most complex printed-circuit-board assembly, most of its
electromechanical subsystems manufacturing, and a significant part of its
repair business. It said it will establish strategic supplier relationships with
these contract manufacturers "while retaining all customer interfaces."
It noted that, "By leveraging this external expertise, we'll be able to direct our
internal resources to those specialized manufacturing skills that continue to
offer us competitive advantage and that are not easily found outside the
company."
Nortel Networks Corp. (NT) said a key to implementing its strategy are the
seven global "systems houses" it has identified. Two of these seven systems
houses are in Canada, in St. Laurent, Que. and in Calgary, while two are in
the U.S., in Raleigh, N.C., and Billerica, Mass.
The others are Monkstown in Northern Ireland, Galway in Ireland, and
Chateaudun in France, it said.
Work now being done in several locations around the world will be realigned
with this network of systems houses, it added.
Nortel said these systems houses are "cornerstones" of its new manufacturing
operations framework, which shifts focus and resources from vertically
integrated manufacturing, where products and systems are largely made
in-house, to a virtually integrated supply chain.
Systems houses will link customers, design centers, internal manufacturing,
suppliers, contract manufacturers, and other parts of the supply chain to
establish a flexible structure. These systems houses will also be responsible for
overall quality, customer delivery and new product introduction, the company
said.
Nortel Networks Corp. (NT) said the following operations around the world
will be affected as its manufacturing operations strategy is implemented:
In Canada, identified for divestiture are manufacturing and repair operations in
the Ontario cities of Brockville, North York, and Mississauga, and the
electromechanical assembly operations in Calgary and St. Laurent, Que. In
Vancouver, Nortel is continuing its product development, customer service
and marketing activities but exploring alternatives for the sale or outsourcing
of its manufacturing operations.
The company said that, in Belleville, Ont., it's continuing its research and
development and customer technical support, but intends to transfer its
printed circuit board manufacturing and move the remaining manufacturing
operations to other Nortel locations.
The company said that, in the U.S., repair operations in Nashville,
Richardson, Texas, and Sunnyvale, Calif., have been identified for divestiture.
In Santa Clara, Calif., it will change its focus from volume manufacturing to
new-product development and introduction.
Nortel said that, in Europe, electromechanical operations in Chateaudun,
France, and Monkstown, Nothern Ireland, are being offered for divestiture.
Fixed wireless manufacturing has been transferred from Paignton, U.K., with
systems assembly now in Calgary and the residential units assembled in
Monterrey, Mexico, and Cwmcarn, Wales.
Nortel said that, if it can't find suitable buyers for the operations identified for
divestiture, it will explore other business options, including possible closure of
some sites.
Nortel Networks Corp. (NT) said its plan will affect about 4,000 employees
globally, or about half of the employees it indicated in January would be
affected by the overall three-year operations strategy.
It said that, of the estimated 4,000 employees, about 3,000 are part of
operations identified for divestiture. The company expects that most will
become employees of contract manufacturers as part of the divestiture
agreements.
The other 1,000 jobs are expected to be eliminated; but the number of
employees affected is expected to be minimized as a result of normal attrition,
retirement and relocation to other Nortel facilities, the company said.
Nortel confirmed that it expects annual savings in the range of $250 million to
$300 million when the operations strategy is completed within the previously
announced period of 18 to 36 months.
It said it's on target for achieving results in line with the guidance for 1999,
and the actions announced Thursday "will have no significant impact on 1999
financial performance from ongoing operations."
Nortel, Brampton, Ont., is a communications-networking company.
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