FT.com / Companies / Telecoms - Nokia to shift 2,300 German jobs to Romania

FT.com / Companies / Telecoms - Nokia to shift 2,300 German jobs to Romania

Nokia to shift 2,300 German jobs to Romania
By Robert Anderson in Stockholm and Hugh Williamson in Berlin

Published: January 15 2008 10:49 | Last updated: January 16 2008 01:47

Nokia, the world’s largest manufacturer of mobile phone handsets, is to close its German plant with the loss of up to 2,300 jobs and move production to Romania in one of the biggest one-off shifts of jobs from western to eastern Europe.

“Due to market changes and increasing requirements for cost-effectiveness, production of mobile devices in Germany is no longer feasible for Nokia,” said Veli Sundbäck, executive vice-president.

The closure of Bochum in North Rhine-Westphalia, planned for the middle of this year, demonstrates the cost pressures Nokia is under to hold operating margins as handset prices fall.

Nokia said last month that it would try to achieve operating margins in its new devices and services division of 20 per cent over the next one to two years.

In the first three quarters of last year Nokia, headed by chief executive Olli-Pekka Kallasvuo, achieved an operating margin of 19 in the comparable units, even though the average selling price of its handsets fell to €82 ($122) in the third quarter from €90 in the second quarter.

Bochum’s closure illustrates the shift of manufacturing from western Europe to lower-cost countries in central and eastern Europe. Outside Finland – where Nokia makes high-end E-series and N-series handsets at Salo – the company will now only produce handsets in Europe in Komarom in Hungary and Cluj in Romania, where wages are one-tenth of those in Germany.

Mr Sundbäck said on Tuesday that Nokia had tried to reduce costs sufficiently to keep the plant open but had failed. “We are the last (mobile phone) producer to use Germany as a production base,” he said.

German trade unions said that they would fight the closure. Oliver Burkhard, regional head of the IG Metall engineering union, said that Bochum was being closed “not because it is making losses but because Nokia’s thirst for profits is not quenched”.

Christa Thoben, economics minister of North Rhine-Westphalia, said that Nokia had received €88m in subsidies for its Bochum plant and research projects and that the state would “hold Nokia responsible for the financial costs” of retraining and job-search programmes.

Nokia – which has been expanding production in emerging markets to cope with soaring demand there – said that Bochum required additional investments that would still not have made it competitive. The Finnish company will also sell its German automotive mobile products business and a software research unit.

Nokia’s new €60m plant in Romania will start production within the next two months with about 500 workers. It will eventually employ 3,500.
Copyright The Financial Times Limited 2008