Nokia CEO Kallasvuo: "No lifetime jobs in open competitive market"

Nokia will not reconsider its decision to close down the mobile telephone factory in the German city of Bochum. According to Nokia President and CEO Olli-Pekka Kallasvuo, the factory's outdated equipment and Germany's high labour costs are an impossible equation in a situation of tighter competition.
      "In spite of numerous attempts we have not found a sustainable solution for the Bochum factory. It is difficult to imagine that anything new would be found in discussions with personnel, that would change our decision."
     
Mobile phone sales are growing fastest in Asian and African countries, where the average income is low.
      Nokia calculates that the average price of a mobile telephone has declined by 35 per cent in a five-year period.
      Kallasvuo believes that competition will continue to intensify in the future, and he does not believe that replacing the antiquated production equipment at the Bochum plant would solve the impossible equation.
      "Securing Nokia's competitiveness and profitability will ensure our investment in the future. We are making many investments into new areas of business. It is a question of responding to intense competition, and preparing for even tougher competition."
     
In its published set of values, Nokia says that a goal of its philosophy of corporate responsibility is to bring people closer together and to increase a sense of community. Nokia's corporate activities are supposed to reflect a culture of caring.
      "In all of our internal discussions on values I have emphasised that no company operating in open competition can guarantee lifetime employment."
      Nokia plans to prove its sense of responsibility in the way that it handles the aftermath of the closing of the Bochum plant.
      "We are ready for innovative solutions to help the personnel, and the city of Bochum."
      Kallasvuo did not want to reveal yet what these innovative solutions might be.
     
Nokia's management has discussed the fate of Bochum for many years. From 1994 the company has invested EUR 600 million into converting the old television factory into a mobile telephone factory.
      The extensive automation at the factory has minimised the need for personnel in order to keep labour costs under control. The factory produces large series of mid-range handsets.
      Bochum accounts for six per cent of Nokia's mobile phone production. Labour costs of the factory account for 23 per cent of the labour costs of all of Nokia's production.
      The biggest expense in the production of mobile telephones are materials and components. Of the remaining expenses, 70-80 per cent of the costs in Germany are labour costs.
     
Kallasvuo does not want to make any public estimates on the costs of closing down the factory - a move which will make 2,300 employees redundant.
      "This kind of a solution is never cheap, especially in Germany."
      Nokia's decision has sparked widespread anger in Germany, including boycotts of Nokia phones. Kallasvuo says that he is surprised at the severity of the reactions.
      "We did not get our message through early enough. Considering that the reaction was so strong, something could have been done better."
      According to a poll commissioned by the magazine Stern, 68 per cent of Germans feel that the closure of the Bochum factory has seriously damaged Nokia's reputation.
     
Kallasvuo spoke with German Chancellor Angela Merkel by telephone on Monday. He describes their conversation as constructive.
      "The Chancellor sought to look at what is best for Germany, and I looked at what is best for Nokia in the long term. Now German federal administration, the state administration, and Nokia need to work together."
     
After the closure of the Bochum plant, the only mobile telephone factory that Nokia will have in a country with high income levels will be the one in Salo in the southwest of Finland.
      "There are no plans with respect to Salo, nor are there any thoughts about shutting down production. We also use Salo for experimental production."
      A large part of Nokia's research and development work in mobile telephony is in Finland.

More on this subject:
 Nokia market share breaks 40 per cent threshold

Previously in HS International Edition:
  Nokia top management meet with Bochum employees (22.1.2008)
  Anger at Nokia swells in Germany; top politicians join fray over plant closure (21.1.2008)
  Nokia shutting down plant in Germany, moving manufacture to Romania (16.1.2008)
  Anti-Nokia sentiment unites Ruhr region in massive protest (23.1.2008)

Links:
  Frankfurter Allgemeine Zeitung: Interview with Olli-Pekka Kallasvuo (in German)