Nokia to close Germany plant, lay off 2,300

Nokia will discontinue the production of mobile devices in Germany and close its Bochum site by mid-2008.

By Suzanne Deffree, Managing Editor, News -- Electronic News, 1/15/2008

Nokia today announced plans to discontinue the production of mobile devices in Germany and close its Bochum site by mid-2008.

The company, ranked as number 1 in terms of global mobile phone shipments and market share, said the decision is based on the “lack of competitiveness” of the location. Nokia further said that renewing the site was not an option, as doing so would require additional investments that would not result in manufacturing in Bochum being globally competitive. The company said it plans to move manufacturing to its other, more cost-competitive sites in Europe, however, it did not disclose location details.

"The planned closure of the Bochum production site is necessary to secure Nokia's long-term competitiveness," said Veli Sundbäck, executive VP of Nokia and chairman of the supervisory board, in a statement today. "Due to market changes and increasing requirements for cost-effectiveness, production of mobile devices in Germany is no longer feasible for Nokia. It cannot be operated in a way that meets the requirements for global cost efficiency and for flexible capacity growth. Therefore we have to make this tough decision."

Nokia follows BenQ and Motorola in exiting mobile phone manufacturing in Germany. Taiwan-based BenQ made its exit as part of a larger bankruptcy cost-reduction plan in 2006, while Motorola did so as part of a headcount-reduction plan that cost it more than $300 million in 2007.  
 
Nokia said that as a consequence of the planned shift of production from Bochum to other European sites, it also intends to discontinue other non-production activities at the Bochum site and will therefore sell its line fit automotive business. Nokia reported that it in negotiations with communications player Sasken Technologies to sell the Bochum-based adaptation software R&D-entity.
 
All in all, the planned closure of the site in Bochum is estimated to affect approximately 2,300 Nokia employees.
 
Without giving estimates, Nokia said the financial costs associated with the restructuring will be determined along with the consultation process and reported in Nokia's quarterly reporting for 2008.

In related news, Applied Material today announced it will lay off 1,000 employees as part of a larger cost-reduction plan.