LM Ericsson Telephone Co. (ERIC) Tuesday said it has initiated union negotiations to close down its telecom cables operation within business unit Networks.
The decision primarily impacts the operations in Hudiksvall and Stockholm. A notice of reduction of 318 positions in Hudiksvall has been given, while a dialog with the unions in Stockholm for how to close down 36 positions in Stockholm has been initiated.
According to the company, as the market for copper cable has declined and the market for fiber cable has grown over the last years, the production has shifted towards Asia, where the majority of the business volumes for fiber cable are found.
In Europe there is more production than demand for both copper and fiber cables, the Swedish telecom equipment firm added.
Net sales for telecom cables operations in 2012 amounted around 1 billion Swedish kronor. Ericsson now estimates that today's announcement will generate restructuring charges of about 0.5 billion kronor.
With the current time plan, around half will impact Networks' operating income in the second quarter of 2013. The rest will impact Networks' operating income in the third quarter of 2013.
Tomas Qvist, head of Special Products in business unit Networks, said, "The decision is based on the fact that Ericsson's production of telecom cables is small from a global perspective, and that we also have a small market share. There is overproduction on the cable market in Europe. Unfortunately, our production has not been operating at full capacity for a long time and has struggled with profitability."
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