Nokia shutting down plant in Germany, moving manufacture to Romania
Salo factory in Finland unaffected
Nokia has had plenty of explaining to do to the German media. Despite churning out a record result, and despite having a 40 per cent market share in worldwide sales of mobile telephones, Nokia announced on Tuesday that it is shutting down an entire factory. In Bochum. About 2,300 people face losing their jobs in the German city.
Nokia's management did its best to explain why it feels that the German facility is not viable even though growth is strong.
"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 of Nokia and Chairman of the Supervisory Board of Nokia GmbH.
Germany has proven to be too expensive for Nokia. Production is now being shifted to the company's other European factories - mainly Romania, where Nokia will soon be opening a brand-new factory.
Sundbäck says that personnel costs at the Bochum facility, which used to be Nokia's television factory, are ten times what they are in Romania. Other costs are high as well.
"Another problem is that subcontractors, whose proximity is important for a Nokia factory, have not wanted to come to Germany because of the high costs", Sundbäck says.
Personnel director Juha Äkräs says that the rapid change in the field has simply left the German factory behind.
"Bochum is certainly the most automated of all of our factories, but we have noticed that the faster pace of variation of demand is calling for more extensive customising and variation of our product selection, which requires handwork", Äkräs says.
The Bochum factory has mainly assembled large series of popular models of handsets in the medium price range.
The decision to close down the factory will not have any effect on the company's plant in Salo in the southwest of Finland. After the closure of Bochum, Salo will be the only Nokia manufacturing plant with a Western cost structure, if the British unit manufacturing Vertu luxury phones is not taken into account.
"The cost level of Salo is considerably lower, and in addition, the factory makes different kinds of products. We have no plans with respect to Salo", Äkräs says.
The Salo factory manufactures Nokia's most expensive phones, such as communicators and other models intended for business use. Production is organised in such a way that the phones can be custom-made in small series to better meet the specialised needs of the customer.
Last year Nokia hired 300 more people to work in Salo. There would have been work available for even more, but not enough people with the right qualifications were available in the Salo area.
The Salo factory employs about 2,600 people. Nokia's largest factories in India and Ukraine have between 5,000 and 6,000 people.
The jobs of about 300 of the 2,300 employees of the Bochum plant could be secured, if Nokia manages to sell some of its business activities. The company is holding talks on the sale of Bochum's software development operations to the Indian company Sasken. Discussions are also being held on the sale of car accessory production.
Nokia will not speculate on the cost of closing down the factory, but in Germany, which has stricter rules on severance compensation that Finland, the move could end up being quite expensive.
After the plant in Bochum is closed down, Nokia will still have about 1,000 employees in Germany. Nokia's Internet services operate in Germany, and the company has its own research and development unit in Ulm.
Previously in HS International Edition:
Walkout at Nokia’s mobile phone factory in Salo (19.12.2007)
Nokia shifting production from Salo to Korea because of labour shortage (13.12.2007)
Nokia to build mobile phone plant in Romania (27.3.2007)
Nokia press release (January 15, 2008): Nokia plans closure of its Bochum site in Germany