Lucent shifts business focus
Lucent Technologies' manufacturing plant in Bydgoszcz will likely be affected by the parent company's plan to outsource its global manufacturing operations, the general director of Lucent's Polish operations said last week.
"For sure it (the Bydgoszcz plant) will be affected, but when and how we don't know," said Stanislaw Szuder, the Warsaw-based head of Lucent Technologies Poland.
Szuder said the New Jersey-based parent company's decision to outsource its global manufacturing operations was a result of the increasing amount of competition in the telecom equipment sector. "With the growing competition and the rapid changes in the (industry), we have to focus on development, implementation and customer support," he said.
Any outsourcing at the Bydgoszcz factory would affect the plant's production of metal and plastic parts for telephone switchboards and cables for export, Szuder said. He added that the Bydgoszcz facility's integration operations, or the testing of the factory's final products, would remain at the plant.
Szuder said he didn't foresee any outsourcing of the Bydgoszcz plant's manufacturing operations resulting in the loss of jobs or the closing of the factory, but he added that Warsaw was still waiting to hear "the final plans" from officials in New Jersey. Szuder said he expected to receive the news by the end of June.
Lucent, the American telecommunications equipment and systems manufacturing giant, announced April 19 that it would change the strategy of its global equipment manufacturing operations by expanding the company's relationships with contract manufacturing partners. The move was designed to improve Lucent's earnings and allow it to concentrate on other areas of business, according to a company press release. The company, however, said that it would retain manufacturing operations for its high-end, or sophisticated electronics, equipment.
Lucent Technologies employs a total of 1,300 workers in Poland in its administrative, marketing and sales offices in Warsaw and Wroclaw, and at its manufacturing plant in Bydgoszcz. The Bydgoszcz factory employs 800 people, or 62%, of the company's Polish workforce. The plant produces telephone switches the devices that connect callers to their answering parties as well as switch-related transmission and cable equipment for both Poland and international markets, with most of the parts for switches exported to Lucent's companies in the United States and Western Europe. In Poland, the Bydgoszcz manufacturing plant is one of the main providers of telecommunications equipment for Telekomunikacja Polska (TPSA) and private operators.
Dorota Niemczynowicz, Lucent's director of communications in Poland, called the parent company's plans to outsource its global manufacturing activities a "total business decision." Lucent's unit in Poland wants to focus more on research and development, not only with the manufacturing of switching systems, but also with customer service, she said.
"You cannot do everything, so you outsource," said Niemczynowicz. "The company is specializing more and more in supplying full systems, not just parts." To date, all of the Bydgoszcz plant's manufacturing work has been done in-house, she said.
Lucent's outsourcing, or transference of certain manufacturing operations to outside contractors, should take place within the next 18 to 24 months, according to the company's press release. The press release did not specify the countries or facilities that would be affected, but said that five facilities engaged in Lucent's high-end manufacturing operations in the U.S. would be retained.
"Today there are companies whose sole business is manufacturing sophisticated electronics equipment," said Richard McGinn, chairman and chief executive officer of Lucent Technologies, in the press release. "They can provide us with the high-quality products and flexibility we need to increase our speed to market and improve our cash flow. We will concentrate our resources in the areas where we add the most value, such as R&D (research and development), systems integration, customer support, network design, consulting and installation, as well as high-end manufacturing."
Despite the failure of the press release to state which specific global equipment manufacturing plants would be affected as well as the concerns of company officials at Lucent's Polish headquarters in Warsaw, two Lucent spokesmen based outside Poland said that the Bydgoszcz plant would remained untouched by the change. Furthermore, they said that the parent company's announcement on April 19 pertained to the outsourcing of manufacturing operations at U.S. facilities.
"The question's come up before for different countries," said Bob Spaulding, a Paris-based spokesman for Lucent's Europe, Middle East and Africa division. "It's not oriented toward international operations."
When asked if Lucent had plans to outsource any manufacturing work in Poland, Spaulding said: "There's been no specific discussion about the outsourcing of operations."
Another spokesperson at Lucent's headquarters in New Jersey also said the change in strategy would not affect manufacturing operations abroad. "This change in our strategy primarily involves our U.S. manufacturing facilities where most of our work is performed," said Mary Ward of Lucent's corporate media relations department, in an electronic mail. "It has minimal impact on our facilities outside the U.S. so our factory in Poland will not be affected by it."
Niemczynowicz, however, said that the outsourcing would affect manufacturing plants in both the U.S. and abroad, but how it would affect them would vary from "market to market (and) from country to country."
Anita Farrell, a telecom equipment analyst at Merrill Lynch, said the outsourcing of manufacturing operations has been a trend in the industry for the last few years, with companies such as Lucent and its competitors, including Germany's Siemens and France's Alcatel, seeking to sharpen the focus of their businesses. "It's a question of focus," Farrell said. "(Lucent) doesn't consider manufacturing to be a core competency, so it's happy to outsource to free up management," she said, so that the company can concentrate on the other lines of business that it would like to develop.
