Apr 25, 2002 St. Petersburg, Fla.
Jabil Circuit Inc. will reduce headcount at two European plants that are leased from financially troubled Marconi plc.
Due to underutilization, Jabil, a St. Petersburg, Fla., EMS provider, will close its Liverpool, England facility that has between 450 to 500 employees. The company will also cut 100 jobs from its Coventry, England operation. Both sites were leased from the British telecom equipment maker.
EMS companies have been under pressure to reduce costs during the current recession. Jabil will shift production from the Liverpool operation to the Coventry plant. Jabil inked a three-year outsourcing pact valued at $4 billion with Marconi last year.
Marconi is expected to bear the entire costs of the downsizing efforts, which could be within a $25 million to $30 million range, said Michael A. Schneider, an analyst at Robert W. Baird & Co. in Milwaukee.
Under the terms of the Marconi pact, Jabil "had been limited from making any headcount or capacity reductions for one year," Schneider noted.
"Over the past year, Marconi paid Jabil excess expenses to maintain the higher cost structure," Schneider said. "Marconi will pay to close the Liverpool facility and reduce headcount. While we expect no financial impact on Jabil, we believe Marconi should benefit from a lower cost structure."
Jabil will not acquire a German plant from Marconi that was part of the initial supply agreement, according to documents the company filed with the U.S. Securities & Exchange Commission in Washington, D.C.
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