Gateway plans 850 additional manufacturing layoffs

Gateway Inc. will cut 850 manufacturing jobs in addition to the 450 announced at the beginning of September, and further layoffs will come later this year, the firm recently announced.

The 850 employees work at manufacturing facilities in South Dakota and Kansas City, said Bob Sherbin, a Gateway spokesperson. About 650 employees will lose their jobs in Sioux Falls, S.D., and about 200 employees in North Sioux City, S.D., and Kansas City, he said.

Most of the employees work in customer service or warranty support positions, Sherbin said.

In its last layoff announcement, Gateway said it would outsource most of its manufacturing work to outside companies to implement a new order fulfillment model. The Poway, Calif. company has been struggling to return to profitability, and has sought to reduce its expenses by hundreds of millions of dollars over the past year.

The 1,300 total job cuts exceeds the 1,100 that The Wall Street Journal recently reported Gateway was planning to cut. Gateway previously announced it would close its Hampton, Va. manufacturing plant and that it planned to reveal the numbers of additional layoffs this week.

Gateway plans to work with a number of outsourcing firms to handle its manufacturing and service needs, but Sherbin declined to reveal the identity of Gateway’s outsourcing partners. Those firms are “multinational corporations” that will assign the work to regions of the world where they feel it makes the most sense, Sherbin said.

More layoffs will follow later this year, but the company is still making decisions as to how many employees and what locations will be affected, Sherbin said.

“We are continuing to look to do things more efficiently, and there will be more layoffs. But we have said manufacturing is something we intend to do in the forseeable future, and we do not intend to get out of manufacturing altogether,” he said.

At the end of 2002, Gateway had 11,000 employees. After all of the recent manufacturing cuts are completed, the company will be down to about 7,200 employees, Sherbin said.

Gateway has rolled out several new products this year, including digital cameras and storage devices, as it attempts to brand itself as a company that sells more than just PCs. The PC market, however, appears to be on an upswing, according to research from IDC.