French telecommunication and electronics manufacturer Alcatel SA is to cut a quarter of the 1,805 jobs at its optronics manufacturing division by the end of the year, resulting in the closure of factories in France and Canada.
The Paris company is reinforcing cost-cutting measures first introduced at the optronics division a year ago, including capital expenditure reduction, staffing cuts and inventory control, it said in a statement Wednesday. The cuts are necessary because of the continuing downturn in the market for telecommunication equipment, and will result in a one-time charge of about 60 million (US$56 million) in the second quarter, it said.
Alcatel Optronics makes components for optical fiber networks. A year ago, such products were still in high demand by young telecommunication carriers building their networks. Now those networks are starting to come unravelled as earlier business plans prove overly optimistic, and the failure of carriers like Hoofddorp, Netherlands, company KPNQwest NV is casting a shadow over manufacturers such as Alcatel. In France, Alcatel Optronics will transfer fiber amplifier assembly to its main active components plant at Nozay, resulting in the closure of a factory at Illkirch, which began manufacturing the amplifiers only last year. At Nozay and another plant, Lannion, the company will cut working hours through part-time employment, early retirement and prolonged leave, it said.
The company's attempts to convert factories to new purposes have already failed once. Illkirch began optical fiber amplifier production in April 2001 to soak up excess mobile phone manufacturing capacity there at a time when demand for phones was falling, and that for optical components still looked bright, the company said. But with the general downturn in telecommunication markets, there is nothing else to take the place of optical components.
The 780 manufacturing employees at Illkirch will continue to produce mobile phones while Alcatel explores ways to turn the plant into a contract-manufacturing facility, doing work for companies out side the group, it said.
The Lannion factory too may be converted to a contract-manufacturing facility if agreement can be reached with representatives of the 320 employees, and a suitable partner found, the company said.
Alcatel Optronics is cutting activities in Canada, too. It will retain its research and development facility in Kanata, Ontario, but a factory in Gatineau, Quebec, making optical filters will close. Manufacture of the filters will switch to a plant in Livingston, Scotland, which makes passive planar lightwave circuits. By collocating manufacture of these two passive optical components, Alcatel hopes to cut costs, it said.
A Plano, Texas, circuit board assembly plant will continue operation, but with fewer staff.
A management buy-out will take the company's Netherlands micro-electro-mechanical systems and planar design software activities off its hands; the planar design team will remain under exclusive contract to Alcatel Optronics for at least a year, the company said.