Alcatel outlines plans to move out of manufacturing

Joining a trend among telecommunication equipment makers, Alcatel SA is unveiling plans to effectively abandon the manufacturing business. The company will sell off all but a handful of its factories by the end of 2002, a company spokeswoman said Wednesday.

Following collapsed merger talks with Lucent Technologies, the Paris-based company has put forward restructuring plans in the light of worse-than-expected results for its second quarter. "This is a tendency of the market, and this is also the tendency Alcatel will adopt:outsourcing the production," the spokeswoman said.

Alcatel will reduce the number of manufacturing facilities it operates from 120 now to a dozen or fewer, Chairman and Chief Executive Officer (CEO) Serge Tchuruk said in an interview published in Wednesday's edition of The Wall Street Journal.

"We are going to be a fab-less company pretty soon," he told the newspaper.

The company has already begun outsourcing its mobile telecommunication manufacturing facilities, the spokeswoman said, referring to plans made public in April to transfer the European manufacture of GSM (Global System for Mobile communications) handsets to Singapore-based contract electronic equipment maker Flextronics International Ltd. Under the terms of that deal, Flextronics is to take over Alcatel's manufacturing plant in Laval, France, and 830 Alcatel employees. Alcatel also announced plans in April to convert its GSM Mobile Terminals manufacturing plant in Illkirch, France, into a factory for optical interface and amplifier subsystems, retraining its 830 employees.

"For the moment, we've avoided job cuts," the spokeswoman said. But she declined to say whether the next round of outsourcing can be accomplished without layoffs.

Tchuruk said the company is negotiating staffing cuts with its employees, according to the newspaper report. Earlier this month, Alcatel announced plans to close three U.S. facilities and lay off 900 employees, or about 6 percent of its U.S. workforce. The latest news from Alcatel comes a day after another major European player, Koninklijke Philips Electronics NV, announced plans to cease manufacturing mobile phones, outsourcing the production to joint venture partner China Electronic Corp.

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