Thanks for the memory chips

It was the jewel in the crown of an ambitious project linking overseas tech firms with specialized workers in the economically-embattled Philippines.

But the dream of a brighter future for those hard-working employees is fast coming undone.

Canadian electronics firm Celestica is shutting down its factory in the central Philippines, creating 1,000 job losses and widespread panic in a state-run Economic Zone that employees 43,000 skilled Filipinos.

The Toronto-based company, which manufactures telecommunications equipment at the plant on Mactan island, just off the central island of Cebu, has informed the Mactan Economic Zone of its plans to shut down, officials of the zone said.

"They are shutting down their operation due to market forces," the zone authority said, referring to the sharp cutback in the electronics industry in the face of the global financial meltdown.

The agency said Celestica Philippines had already tried cutting its working week down to four days in an attempt to save money and avoid layoffs but this was not enough.

The closure is expected to take effect this summer once Celestica Philippines completes all its clearances, the authority said.

The company first started operation in Mactan in 1989 as NEC Technologies but changed its name when it was acquired by Celestica in 2004.

The impending shutdown of the electronics firm’s plant has fueled worries of other workers at the MEZ meeting the same fate.

"Everybody is worried because it could happen to any of us if the situation doesn’t improve," said Porferio Montesclaros, Jr., board secretary of the Mactan Export Processing Zone Chamber of Exporters and Manufacturers.

The Mactan plant shutdown will be effective August 31 this year, said Jeoffrey R. Escala, senior manager for human resources of Celestica Mactan.

Celestica’s global manufacturing network comprises more than 40 locations in the Americas, Europe and Asia. The company's global services include design and engineering, manufacturing and systems assembly. The company also holds the contract for the Xbox 360 console repair for any broken consoles coming from Canada.

Celestica is the latest major electronics company in The Philippines to shut down or sharply cut the number of workers due to weakened demand brought about by the global slump.

In recent months, Intel Corp. has shut its facilities in The Philippines, with the loss of about 3,000 jobs while Texas Instruments laid off about 400 workers.

Other electronic companies have also resorted to lay-offs or putting workers on shortened work weeks or forced leave.

Philippine officials have warned that around 60,000 workers in the sector might be affected by the downturn, although industry leaders insist a recovery is already taking shape.

Electronic products account for about 60 per cent of the Philippines' exports.

Celestica is pulling out of The Philippines altogether, having shut a plant in Laguna last December in the face of a weak electronics market. It will instead focus its operations at "mega-centers" in China and Thailand.

Meanwhile, Celestica's stock fortunes – it is listed on the NYSE and the TSX – appear to be on the rise. The tech firm's stock is up about 47 per cent in Toronto this year.

"I would say, over the last year, Celestica kind of put its head down and said, 'We're going to fix the business,'" CIBC World Markets' Todd Coupland told The Wall Street Journal earlier this month.

Coupland said the company may use some of its US$1.1 billion cash horde to buy back more debt. He also raised his 2010 earnings estimate to 80 U.S. cents a share from 60 U.S. cents, citing Celestica's increased operating leverage.

Celestica has cut unprofitable businesses, fixed troubled operations overseas and raised margins in tough economic times, Coupland said.

The company's first-quarter gross margins surged to 7.6 per cent from 6.3 per cent a year earlier.

Good news, perhaps, for the company President and CEO Craig Muhlhauser and Celestica's stock holders, not so for its overseas workers in The Philippines.

The Celestica pullout has fueled widespread worries at the Mactan eco-zone.

Rumors that more factories at the state-run eco-zone may follow suit and shut down have been circulating among the zone’s estimated 43,000 workers.

-News Services

 

 

 

 

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