Celestica Inc. announced that it will cut up to 6,000 employees from its workforce of 40,000 due to continued sagging sales worldwide. The Toronto-based electronics manufacturer blames lack of demand for its products by computer and telecom equipment-making customers for the cuts.
Celestica made the announcement while releasing its second quarter earnings on Tuesday after the stock markets closed.
The cuts will reduce the manufacturing capacity in an effort to increase operating efficiency, said Eugene Polistuk, chairman and CEO of Celestica, during a teleconference call with financial analysts yesterday. The company will take a charge of between US$300 million to US$375 million for the restructuring. It is not yet known where the job cuts will come.
“We think it will be implemented over the course of the next year…so it will be in phases, given the amount of migrations and programs, executions, and customer sensitivities,” Polistuk said. “Over the last 15 months we have re-balanced our manufacturing footprint and have been focused on driving greater efficiency from our operations. We made significant progress on these initiatives, resulting in stable profitability, and as a result we believe that we can undertake this action without compromising our growth opportunities or limiting our customers’ potential growth needs.”
The job reduction announcement was not a surprise to Elroy Jopling, Toronto-based telecom analyst with Gartner Dataquest.
“Effectively they are in the food chain, so when the carriers themselves begin to cut back, and the vendors cut back, then it’s not surprising to see a supplier like them cut back also,” Jopling said. “I think today most businesses are trying to take as conservative an approach as possible, so it’s easier to take the blow now and plan around better efficiencies, so you’re not in a situation that you have to do the same thing a month or two down the road.”
Jopling believes that Celestica was not sleeping at the switch when it came to forecasting the current market downturn.
“I think that everyone has been surprised at the market (and) at the depth of the carriers’ woes; as a result, (there have been) reduced orders from the Nortels, and on down the line,” he said.