Ericsson Says Sweden Won’t Be Excluded From Further Job Cuts

(Bloomberg) -- Ericsson AB, responding to a report that it plans to shut down the last of its network-equipment production operations in Sweden, said its home country won’t be excluded from a worldwide drive to cut jobs and save on costs.

The company, struggling amid slowing demand and fierce competition that has eaten into profit, ousted its chief executive officer in July and has targeted cost cuts aimed at saving 9 billion kronor ($1.05 billion) a year by 2017. Svenska Dagbladet reported late on Wednesday that the company was considering firing 3,000 employees at its network-products unit in Sweden, citing a copy of the plan.

“We will handle this on a country-by-country basis and our employees and, where applicable, union representatives will always be informed first,” Ericsson said in an e-mailed statement. “We have large operations in Sweden which are not excluded” from the cost-saving plans, Ericsson said.

The company is going through a turbulent period, trying to revive earnings growth through job eliminations while battling Huawei Technologies Co. and Nokia Oyj. Ericsson is also trying to find a permanent successor for Hans Vestberg, who was ousted as CEO two months ago amid waning revenue and profit.

Shares of Ericsson gained 2.7 percent to 59.60 kronor at the close Thursday in Stockholm. They’ve lost 28 percent this year.

Ericsson may close its production sites in Boraas and Kumla, which would end 140 years of production in Sweden, Svenska Dagbladet said, citing the document. The two sites employ about 1,200 people, it said. There may also be job cuts within other areas of network products, such as research and development, which would bring the total number of jobs affected to about 3,000 in Sweden, Svenska Dagbladet said.

The company is considering multiple alternatives for its Swedish operations, including selling some parts such as its manufacturing facility in Boraas, Swedish Radio reported Thursday, without saying where it got information.

Meanwhile, the country’s government has appointed a task force to coordinate its work around any potential layoffs, Swedish Finance Minister Magdalena Andersson confirmed.

“There will be such a group,” Andersson said in an interview after an event in Stockholm, declining to discuss it in detail. She said she didn’t know what Ericsson will decide to do.

Swedish Enterprise Minister Mikael Damberg has contacted Ericsson Chairman Leif Johansson, as well as representatives from unions and local municipalities, Svenska Dagbladet reported earlier Thursday.

The company unveiled a cost-cutting plan in 2014, targeting 9 billion kronor in savings in 2017. “This program is progressing according to plan, but is not yet finished,” Ericsson said.

In July this year, Ericsson revealed further measures entailing a doubling of its previously announced operating savings targets in order to achieve a reduced annual operating cost level, excluding restructuring charges, of 53 billion kronor in the second half of next year. That would be 10 billion kronor less than the company had in 2014, it said.

Vestberg left after revenue and profit sagged and an array of investigations at the Swedish maker of wireless-networking equipment led to growing shareholder unease. It named Jan Frykhammar CEO until a replacement is found. Earlier that month, the company said it would accelerate cost cuts after reporting four straight quarters of disappointing revenue and profit.

--With assistance from Johan Carlstrom

To contact the reporter on this story: Niklas Magnusson in Stockholm at nmagnusson1@bloomberg.net.

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net, Tasneem Hanfi Brögger at tbrogger@bloomberg.net, Ville Heiskanen