Ericsson announces 2600 job cuts

(Telephony) The economy might be slow, but companies are moving quickly to find ways to keep their businesses afloat. Ericsson introduced cost-cutting measures--a recruitment freeze, reduction of consultants and job cuts--designed to reduce its operating expenses by about $2 billion per year, beginning in 2002.

This announcement follows the company lowering its guidance for its first fiscal quarter of 2001. The company said it expects sales for the quarter to be lower than in the first quarter of 2000, as opposed to its original forecast of a 15% increase.

“We have to be careful,” an Ericsson spokeswoman said. “The downturn of the economy is happening faster…and we are focused on efficiency.”

The company expects 2600 employees to be affected as the company adjusts its manufacturing capacity. The work force in Ericsson’s Sweden locations will be reduced from 3200 to 1700 employees. However, some of the employees will be outsourced to Ericsson’s contracting firm Flextronics, which has assumed production and delivery of the company’s mobile phones.

“By getting out of manufacturing and getting together with Flextronics, we have been able to take our resources and focus on R&D,” the spokeswoman said. “We can realize savings by reducing the number of employees we have because of redundancy.”

The company expects an additional 600 positions in Sweden to be eliminated because of redundancies, the spokeswoman said.

Outside Sweden, two of the company’s plants in the United Kingdom will stop production by the third quarter, which will affect 1100 employees.

“What happened [yesterday] did not affect our business in the United States,” the spokeswoman said.

Motorola, another handset manufacturer, has announced plans during the last four months to reduce its work force by 22,000 people.