Ericsson confirms 3,000 job losses as part of efficiency drive in Sweden

Change in operations and adjustment of competence is designed to meet technology shifts, new customer groups and a continued increased proportion of software development

Ericsson confirms 3,000 job losses as part of efficiency drive in Sweden

Ericsson confirmed today (4 October 2016) that 3,000 jobs will be lost in Sweden. The confirmation follows announcements in June that job losses were being considered as part of a cost and efficiency programme. Union consultations about the proposed changes are ongoing.

The positions are in production, research and development (R&D) and sales and administration. The company will use a combination of voluntary and forced reductions, as well as other measures such as outsourcing.

Jan Frykhammar, president and CEO, Ericsson said: "Ericsson is going through a large transformation. We continue to have a strong focus on R&D, and since many years, most Ericsson employees work in software development and services, rather than hardware production. The measures are necessary to secure Ericsson's long term competitiveness as well as technology and services leadership."

Ericsson has approximately 16,000 employees in Sweden today. The proposed reduction of approximately 3,000 positions, affect approximately 1,000 positions in production, 800 in R&D and 1,200 in other operations.

The proposed reductions will impact operations on the following sites in Sweden: Borås, Göteborg, Karlskrona, Kumla, Linköping and Stockholm. Ericsson intends to make significant reductions of operations in Borås and Kumla. The proposed reductions are intended to be met through a combination of voluntary and forced reductions as well as other alternatives such as outsourcing.

Ericsson will also make general cost reductions and take out external costs, primarily by reducing the number of consultants in Sweden by 900, but also through general reductions in operating expenses.

R&D operations
Ericsson said it has continued to drive change in its global R&D organisation to increase efficiency, optimise operations and reduce the number of R&D sites globally. Ericsson in Sweden is the base for R&D in radio technology and 5G.

Ericsson has invested SEK 7 billion in three global ICT centres supporting R&D operations and forming the base for new digital business models. Two of them are in Sweden, in Rosersberg and in Linköping, strengthening Sweden's role as a platform for R&D in Ericsson.

Ulf Ewaldsson, chief strategy and chief technology officer, said: "We have a clear goal that our R&D in Sweden should be world leading, not least in next generation systems. In the short term we have to reduce the number of positions in R&D, primarily within administrative roles.

“At the same time our intention is to bring in new competence in new technologies. Therefore, we intend to recruit approximately 1,000 engineers in Sweden, primarily from universities, over the coming three years."

Production operations
Ericsson noted that production in telecom has changed significantly over the past decade with smaller products and a more efficient production - manufacturing time per radio unit has been reduced by more than half.

Higher volatility in production volumes has increased the need for flexibility and using partners has become more important. As a consequence, Ericsson is consolidating its own production to fewer sites globally.

Sales and administration
The cost in sales and administration will be reduced as a result of the new company structure introduced 1 July 2016, with the aim to create a more efficient and purpose built organization to meet the needs of different customer segments and more quickly seize business opportunities.

Ericsson said that union consultations on the proposed changes in Sweden are ongoing. The process will have a step by step approach and, for the majority of the operations, is expected to be concluded during the first quarter of 2017. The process related to the operations in Borås and Kumla is expected to be concluded during the second half of 2017.

Ericsson intends to continue the discussions with the Swedish union representatives about the need for competence development, flexibility and transformation.

Cost and efficiency programme
The cost and efficiency program targeting savings of SEK 9bn (£820m) during 2017 is progressing according to plan. In addition, the company announced on 19 July 2016, additional activities to reduce the annual run rate of operating expenses, excluding restructuring charges, to SEK 53bn (£4.8bn) in the second half of 2017.

This is to be compared with SEK 63bn (£5.7bn) for full-year 2014 and equates to double the previously targeted savings in operating expenses. At the same time, the company announced its intention to intensify activities to reduce cost of sales and adapt operations to a weaker mobile broadband market

Total restructuring charges for 2016 are, as previously communicated, estimated to be SEK 4-5bn (£364-456m).

Ericsson currently employs approximately 115,000 professionals and has customers in 180 countries. It support networks that connect more than 2.5 billion subscribers with 40% of the world's mobile traffic carried over Ericsson networks

Ericsson was founded in 1876 and has its headquarters in Stockholm, Sweden. Net sales in 2015 were SEK 246.9 billion (US$ 29.4 billion/£22.5 billion). Ericsson is listed on NASDAQ OMX stock exchange in Stockholm and the NASDAQ in New York.

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