French President François Hollande called on Alcatel-Lucent on Tuesday to save as many jobs as possible in France after the telecom equipment maker said it plans to cut 10,000 jobs worldwide, about 14 per cent of its entire work force.
The announcement by the Franco-American group, which plans to cut as many as 900 jobs in France, was criticized by Hollande’s government, which is having to battle with record levels of unemployment across the country.
“In the framework of the decisions to be taken, the restructuring plan, it should be examined how the job cuts can be limited as much as possible,” Hollande told reporters in the central town of Saint-Étienne, where he was promoting government efforts to cut unemployment.
Other government officials acknowledged measures were needed to save the group, in which France has a 3 per cent stake.
Alcatel-Lucent said the job cuts represented its last chance to turn itself around and stem losses.
The product of a 2006 transatlantic merger aimed at creating a global giant, Alcatel-Lucent told a European works council meeting that it intends to axe nearly one in seven of its employees.
“Everyone knows this plan is the last chance. The company is in a very serious situation,” chief executive officer Michel Combes, the latest of three CEOs since the merger, told Le Monde newspaper.
The group plans to focus on high-growth areas ranging from 4G mobile to high-speed broadband, and to lower fixed costs by more than 15 per cent, saving a total of €1-billion ($1.4-billion).
Including past measures, the total cost of the “shift plan” is €1.2-billion, an amount the company expects to fund through asset sales.
Alcatel’s share price rose 2 per cent after the news but closed down 4 per cent at £2.71 as the government’s opposition to its plans intensified. The stock has almost tripled in value this year on buyers’ hopes that Combes, a former CEO of Vodafone Europe, can rescue the business.
“The group is eating up a lot of cash and is unable to enhance its profitability, so some kind of change was needed to make sure it has a long-term future,” said one Paris-based financial analyst who declined to be named.
The group, which employs 72,000 staff worldwide and competes with larger rivals Ericsson of Sweden, China’s Huawei and Finland’s Nokia, has posted five successive quarters of losses.
Altogether, 4,100 jobs will go in Europe, the Middle East and Africa, 3,800 in Asia Pacific, and 2,100 in the Americas.
France’s CFDT union said it would fight a plan that entailed cuts to about 15,000 jobs, although 5,000 new ones will be created, giving the overall loss of 10,000. Nine hundred jobs would go in France, with the closing or disposal of five sites.
“The CFDT is aware of the seriousness of the situation and deplores this,” it said in a statement. “But once again it is the staff that are paying the price. ... We will fight this plan and make proposals to change it.”
The union said Alcatel was planning to close its sites in the French cities of Rennes and Toulouse quickly, and sell its Eu, Ormes and Orvault sites by the end of 2015.
France’s left-leaning Industry Minister Arnaud Montebourg, who has led a campaign for French consumers and companies to buy homegrown products, said the loss of hundreds of French jobs is “excessive.”
He called on the country’s network providers to help the firm by favouring its products over those of cheaper rivals, and asked Alcatel-Lucent to review its cost-cutting plans with trade unions.
“We have asked management to revise the restructuring plan downwards,” he told parliament. “We can’t keep on paying the price of their errors.”
But other sources in President Hollande’s Socialist government, which has watched Alcatel-Lucent’s problems closely as it battles rising unemployment in France, emphasized that the plan was an attempt to get the group growing.
The Alcatel-Lucent merger was an attempt to pool resources but any savings were lost due to fierce price competition in the sector and as slow economies, particularly in Europe, dented demand for telecom equipment.
Last year, the group posted a loss of €1.2-billion – the biggest since 2008 – largely due to a writedown on its mobile unit and restructuring costs from an earlier plan to lay off 5,000 workers.
The restructuring will heighten speculation of a possible approach by Nokia, a move that sources close to the matter said last month that the Finnish group was discussing internally.
Alcatel-Lucent confirmed it would dedicate 85 per cent of its research and development budget in 2015 to next-generation technologies, up from 65 per cent today. Spending on older technologies would be cut by 60 per cent.
The group has a long history of innovation, for example, pioneering the DSL technology that has brought quick Internet to millions through standard copper telephone lines.
However, it has been slower to trim its costs than rivals such as Nokia Siemens Networks, which cut around a quarter of its work force two years ago.