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8,400 Lucent workers await fate on plant sales

By Bloomberg, Singapore.CNET.com, Bloomberg on January 22, 2001

Summary

Lucent Technologies, the biggest maker of phone equipment, said it plans to seek buyers for two of its four US factories in the next six months to cut costs by contracting out manufacturing.

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MURRAY HILL, New Jersey--Lucent Technologies, the biggest maker of phone equipment, said it plans to seek buyers for two of its four US factories in the next six months to cut costs by contracting out manufacturing.

The plants in Oklahoma City and Columbus, Ohio, together have 8,400 employees making traditional phone switches and wireless equipment. Lucent can't predict how many positions may be lost until sale negotiations are completed in about six months, spokeswoman Mary Ward said.

"We very probably will be working for another employer," said Michael Quinlan of the International Brotherhood of Electrical Workers, which represents 6,400 workers in Columbus and Oklahoma City. "Lucent wants out of manufacturing."

Lucent has been slower than many rivals to pull out of manufacturing and focus on equipment design and development. Last year, Nortel Networks sold four factories to Solectron for US$900 million, and Flextronics International paid US$100 million for Cabletron Systems' manufacturing and repair operations.

Cisco Systems contracts out about half of its manufacturing to Solectron, Flextronics, SCI Systems and others.

"Lucent is way behind," said Lehman Brothers analyst Steve Levy, who rates the stock a "hold."

Shares of Lucent, once a high-flyer, fell 81 percent last year as earnings tumbled. The stock rose US$0.88 to US$20.56

Four plants left
Since unveiling a plan in April to reduce its manufacturing work force of 30,000, Lucent has spun off Avaya; sold Power Systems, a maker of power supplies; and earmarked its Agere Systems microelectronics business for spinoff. That leaves the Columbus and Oklahoma City factories, and plants in Atlanta and Merrimack Valley, Massachusetts.

Lucent raised the possibility of selling all or part of the Columbus and Oklahoma City plants in June.

The company may provide details on the factory sale schedule when it reports earnings next Wednesday. The company has said it will discuss a plan to slash US$1 billion a year in costs, including job cuts.

Makers of communications equipment are getting out of basic manufacturing, where products such as circuit boards and capacitors are commodities, and profit margins are lower than for sophisticated equipment. This month, the United Kingdom's Marconi agreed to sell five factories to contractor Jabil Circuit for US$390 million.

As companies from IBM to Motorola extend the push to outsourcing, Jabil and other contractors are boosting sales.

Ward said Lucent hasn't decided whether to contract out more manufacturing at Merrimack Valley, where it employs 5,500, or Atlanta, which has a staff of about 3,000. It already outsources some production at Merrimack Valley.

New owners at Oklahoma City and Columbus would make equipment to Lucent's specifications, and Lucent will continue to design and develop new products, Ward said.

"The goal here is that people will follow their jobs," she said.

Agere, the microelectronics unit Lucent is spinning off by October, has four plants of its own. Lucent, based in Murray Hill, New Jersey, has a worldwide work force of about 105,000 without Agere.

Related stories

Lucent shuffles execs for new focus

Lucent to lay off 240 employees

Lucent retrenchments won't affect Asia at this point

Lucent Technologies wins US$232.1m in contracts

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