Ericsson on Tuesday initiated union negotiations to close down its telecom cables operation within business unit Networks.
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.
Tomas Qvist, head of Special Products in business unit Networks, and head of Human Resources for Ericsson in Sweden, says: "It is a tough message to bring to our colleagues in the telecom cable operations in Hudiksvall and Stockholm today. 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."
The announcement primarily impacts the operations in Hudiksvall and Stockholm. A notice of reduction of 318 positions in Hudiksvall is given, and a dialog with the unions in Stockholm for how to close down 36 positions in Stockholm is initiated.
Ericsson estimates that closing the cable manufacturing sites will generate restructuring charges of about SEK 0.5 billion. With the current time plan, approximately half will impact of business unit Networks' operating income in the second quarter 2013. The rest will impact Networks' operating income in the third quarter 2013.
Ericsson said that today's announcement would not impact the process for the divestment of the power cables operations to NKT Cables announced by th ecompany earlier this month.