The troubled UK telecoms sector took a further battering this week, with Marconi axing 1,500 staff and heavy job losses expected at Motorola.
Marconi plans to cut 3,000 jobs worldwide, with 1,500 in the UK, while speculation is mounting that Motorola will close its Bathgate plant near Edinburgh, with the loss of up to 3,200 jobs.
In a sign of the government’s increasing concern over job losses in the run up to the general election, Tony Blair personally telephoned Motorola’s chief executive, Christopher Galvin, to ask if anything could be done to influence the company’s decision. In a 15 minute conversation on Tuesday, Galvin said Motorola would be happy to keep talking to the government before making its decision within the next week.
Danny Carrigan, AEEU national officer, said the union was ‘grateful’ the prime minister had intervened directly in the case, and that the Scottish Executive was also trying to persuade Motorola to save the plant. But he criticised Motorola’s handling of the crisis. ‘The tragedy is that while Ericsson has been prepared to sit down and discuss ways to avoid compulsory redundancies, Motorola has shown extreme reluctance to talk.’
Just last month Motorola slashed 7,000 jobs worldwide, including up to 700 at its UK site at Swindon, and speculation had been mounting that its Bathgate plant was under threat.
The growth of the electronics sector in Scotland’s ‘Silicon Glen’ had been seen as a major success story. But the potential closure of the Bathgate plant, coming on top of Marconi’s announcement, will lead to fresh fears over the strength of the troubled telecoms sector. ‘We are worried about the situation, but we are also looking at practical steps to deal with short-term market problems ,’ said Carrigan.
Carrigan, who is also chairman of the Marconi trade unions, was due to meet with Marconi last Thursday to discuss the planned losses. The company plans to make the job cuts as part of a major restructuring programme. A spokesman for Marconi could not say where in the UK the 1,500 jobs would be lost, as consultation with the workforce is still at an early stage. ‘The company is being reorganised, and as a result will need less logistics, IT and back-room staff,’ he said.
The job cuts will take place over the next twelve months, and it is hoped a large number will be made through early retirement and voluntary redundancies.
Sanjeev Doshi, telecoms analyst at Dresdner Kleinwort Wasserstein, said Motorola and Marconi are joining a long line of telecommunications companies forced into job cuts and profit warnings. Equipment manufacturers Nortel Networks, Cisco Systems, Bookham Technology and Alcatel have all recently issued warnings as phone makers reduce their spending on network infrastructure. Handset manufacturer Ericsson has also announced job cuts, while Siemens said this week it would cut 2,000 staff from its three mobile phone plants in Germany.
Telecoms companies are suffering because financial markets are no longer willing to invest money in companies where they do not see a decent return, he said, and the slump is not likely to end soon. ‘I can’t see an end to it. The telecoms companies will have to prove they are viable concerns, and that is going to take time. Then they’ll look to consolidate, so we should see a lot of merger and acquisition activity.’
Despite the gloom, Marconi’s share price rose by 31p on Tuesday to close at 341p, as the company predicted its operating profits would be around £800m for the year to the end of March 2001. Russ Mould, telecoms analyst at UBS Warburg said: ‘If Marconi can achieve the growth plans it has set for the year, then the company’s shares will start to look undervalued.’