Ericsson Plans To Reduce Costs By $2 Billion, Work Force By 3,300

By Jeff Malester On Apr 2 2001 - 6:00am

STOCKHOLM, SWEDEN -Communications supplier Ericsson has launched a cost-cutting campaign designed to save the Swedish company $2 billion in annual operating costs by the end of 2001. The savings are to be realized in 2002, on a going-forward basis.

Ericsson, the third largest supplier of mobile phone handsets, behind Nokia and Motorola, is reducing its work force in Sweden and the United Kingdom by about 3,300 jobs. This includes stopping production in two mobile phone plants in Britain, which the company intends to sell.

This is the second time this year Ericsson has announced a cost-cutting measure, stating in January it would cut jobs in its mobile phone business and outsource production beginning in April.

Last year, Ericsson's mobile phone division lost about $2.4 billion, and the company said it did not expect phones to show a profitable quarter again until the second half of this year.

In mid-March, Ericsson said it would show a $400 million to $500 million loss in the first quarter, rather than break even, blaming the drop on a global economic slowdown that has affected both its handset division and its profitable networks division. (See TWICE, March 19, p. 4.)

Costs savings, according to the company, will be achieved predominantly outside of the manufacturing area through a fundamental review of all areas, including administration, marketing and sales, supply management, and research and development.

The program, which ultimately will affect Ericsson employees worldwide, has been attributed to a slower-than-expected growth in the economy, the telecommunications industry and especially the mobile phone business.

Additional measures and a full program will be outlined on April 20, the day Ericsson releases its first-quarter financial results.