Nortel Networks will make 500 staff redundant as a result of selling and outsourcing some of its manufacturing and repair operations to five manufacturing services companies.
The manufacturing services companies will take on between 2,300-3000 current Nortel employees, however, and 200 other affected staff will remain with Nortel.
The move is part of a three year restructuring plan announced by the Canadian network equipment supplier earlier this year (see VNU Newswire, 13 January, 1999), when it said it would slash about 8,000 jobs or 10 per cent of its workforce and shut down factories in Burnaby, British Columbia, and Belleville, Ontario.
Nortel said at the time that rationalisation was necessary to become more agile as it shifted from providing hardware for lengthy telecoms projects to supplying software for the fast moving Internet and data networking markets.
Chahram Bolouri, Nortel's vice president of global operations, said: "We realise that what we are announcing today will be difficult for those employees whose positions will be eliminated. We are committed to supporting them in their transition to new opportunities."
But he continued: "We have achieved a key milestone in moving Nortel from being a vertically integrated company, where we manufactured almost everything inhouse to a virtually integrated company, where we will complement out internal strengths with the expertise of these manufacturing and repair services companies."
He added that the move would enable the firm to concentrate on introducing new products, systems testing and providing systems and network integration to its customers.
Nortel hopes to make $400 million from the sales and expects the total value of its outsourcing contracts to be worth more than $1 billion in the first year. It also anticipates making savings of $250-300 million per year when its restructuring is complete, but said the current deal would have no impact on its fiscal 1999 figures, which were still in line with previous guidance.
The manufacturing services companies involved in the move are SCI Systems in Huntsville, Alabama, which will purchase Brock Telecom and its electronics manufacturing operations in Ontario and two surface mount lines in Quebec. SCI will supply printed circuit board assemblies to Nortel, but 370 staff will lose their jobs as a result of the deal.
C-Mac Industries in Montreal will acquire the assets of Nortel's carrier electromechanical subsystem design and manufacturing operations in Monkstown, Northern Ireland, and outsource a similar facility in Quebec, while Sanmina in San Jose, California, will acquire similar assets from Nortel's wireless business in Calgary, Alberta, and Chateaudun, France.
Communications Test Design in West Chester, Pennsylvania, will purchase a number of Nortel's repair and repair logistics operations in Ontario, Tennessee, California and Texas. A voluntary redundancy scheme will be introduced in Ontario.
Finally, United Tri-Tech in Cornwall, Ontario, will buy Nortel's manufacturing operations in British Columbia and 140 jobs will be lost as a result. All of the companies involved will continue supply deals with Nortel.
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