More than 11,000 employees of Swedish telecommunications equipment giant L.M. Ericsson Telephone Co. will lose their jobs over the next two years as the company struggles to streamline its worldwide operations, the company announced today.
Last month, Ericsson warned that lower-than-expected earnings for 1998 would mean layoffs, but did not specify how many people would lose their jobs.
Ericsson cited rapid changes in the communications technology market and new work methods as the key causes for the job cuts, the company said in a statement issued this afternoon. Production methods used to produce newer products are less labor-intensive, Ericsson said. For example, an installation of a certain communications system once required 12 weeks of work, but can now be completed in a week, with half the number of personnel, Ericsson said.
With a total of 104,000 employees worldwide, Ericsson will be laying off over 10 percent of its entire workforce. The layoffs are part of an overall restructuring plan -- including the discontinuation of non-profitable operations and a new focus on mobile systems and Internet-based technologies -- that Ericsson hopes will help bring it back to sustained growth and profitability.
Ericsson will lay off 5,000 people in 1999, and a further 6,000 in 2000, the company said.
Hit hardest will be the Network Operators business, which supplies systems to fixed-line phone providers and which has struggled amid a slowing market for its products. In this division, 8,500 out of 68,000 employees will be handed pink slips, according to Ericsson.
However, 1,300 employees out of 11,500 will also lose their jobs in the Enterprise Solutions division, while 500 jobs will be eliminated in the Consumer Products division. Meanwhile, the General Administrative division will shave 1,300 jobs.
Of the job losses, 3,300 will be in Sweden. Ericsson said it is working with labor unions there to "ease the effects of the cutbacks." The company's CEO Sven-Christer Nilsson met with trade union officials this morning.
The cut backs in Sweden include a complete shut-down of a production plant in Norrköping, which currently employs 600 people. In general, the majority of the layoffs will occur in the "supply and installation" operations throughout the company, but some product development, customer service and sales staff will also lose their jobs.
Ericsson, in Stockholm, can be reached at +46-8-719-00-00 or on the World Wide Web at http://www.ericsson.com/.