Business

ON THE CUTTING EDGE OF CHANGE

JOHN SCHOFIELD January 25 1999
Business

ON THE CUTTING EDGE OF CHANGE

JOHN SCHOFIELD January 25 1999

ON THE CUTTING EDGE OF CHANGE

Business

It was founded in 1895 to make phones. And in the early years, Northern Telecom Ltd.-known then as Northern Electricturned its manufacturing expertise to radios, TVs, even Hammond organs. But last week, the Brampton, Ont.-based company, which is now called Nortel Networks, said goodbye to part of its manufacturing heritage and announced that it will cut about 8,000 employees worldwide. Factory work ers are increasingly being cast aside by companies such as Nortel as they switch their focus from making hardware to build ing high-speed, Internet-based communi cation networks, a service that offers much higher profits. "Manufacturing is less and less a part of what we do," CEO John Roth told Maclean's last week as his executive jet flew over California. "More and more, what we get paid for is the software we develop and the networks we put together."

So, over the next three years, Nortel (which is 41 per cent owned by Bell Canada’s parent company, Montreal-based BCE Inc.) will sell or close some of its 24 manufacturing plants around the world, reducing its workforce of 80,000 by about 10 per cent. Once completed, the move is expected to save Nortel up to $450 million a year, and comes only four months after it eliminated 3,500 workers, including 600 in Ottawa. Roth said the company’s six Canadian manufacturing plants could come under the knife this time,

too. Workers are waiting anxiously for the verdict on which of the 24 plants will close. Nortel employs 24,000 people in Canada, but 80 per cent are in research and development, engineering and marketing—and it is hiring hundreds more for research and engineering positions. The company says it will preserve some factory jobs through retraining.

Nortel may also opt to sell some of its plants to components makers. Firms such as Toronto-based Celestica Inc. and Nepean, Ont.-based JDS Fitel Inc. have grown rapidly as more telecom

giants turn the work of making and assembling parts over to suppliers, who can often do it more cheaply. “It’s the way manufacturing is being done now—it’s being outsourced,” says Benoit Chotard, an industry analyst with Levesque Beaubien Geoffrion Inc. in Montreal. It makes good sense financially. But that is cold comfort for workers who find themselves on the losing end of the communications revolution.

JOHN SCHOFIELD