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Thousands of layoffs feared as Ericsson announces cuts

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Thousands of layoffs feared as Ericsson announces cuts
One of Ericsson's offices in Kista, Stockholm. Photo: Hasse Holmberg/TT
07:53 CEST+02:00
There are fears that thousands of jobs could be lost after Ericsson announced plans for a major new austerity package to combat weak sales.

The Swedish telecom giant's shares fell hard on the Stockholm stock exchange on Tuesday after it presented its half-year financial report. By closing they had dropped by 5.6 percent.

“It has been a tough quarter. The trends we saw at the end of 2015 and in the first quarter of this year – particularly in countries with macroeconomic challenges and currency devaluations – have intensified during the second quarter,” Ericsson CEO Hans Vestberg noted.

The dismal financial report showed that overall sales for the company were down by as much as eleven percent in the second quarter, and in markets like Russia its revenue had almost ceased. Underlying profit had plummeted even further, falling by 40 percent.

Vestberg put forward a major new savings package in response.

“It is our ambition to continue to gradually increase our profitability,” he explained.

In the pursuit of increasing profitability Ericsson will now double its efficiency measures. That will mean thousands more layoffs across the group. In the second quarter alone, 3800 positions have already been cut. It is feared Sweden could be hit hard. 

“There is no country that will be excluded from this,” Vestberg insisted.

Of the group's 116,000 employees, just over 15,000 are employed in Sweden. And the trade union for employees in the Scandinavian nation predicts four digit reductions in personnel in their country alone.

Per Norlander, chief union negotiator for graduates employed by Ericsson, criticized the way the company's management has responded to poor sales.

He argued that excessive short-term cost cutting will work against the development of the kind of products that the company could profit from in the future.

“We need to survive tomorrow too,” Norlander said.

The union negotiator thinks that Ericsson's management is placing too much weight on the economic side of the company.

“There is not enough focus on engineering from the management just now and too much on economics,” he insisted.

Questions are now also being raised by analysts, over whether Vestberg is the right person to take the company.

“One can understand that, of course, stock prices have not developed well, and both my and the management's job is to continue to develop Ericsson,” the CEO told news agency TT in response.

It has been a difficult week for the Swedish telecoms giant. On Monday, shares fell after reports in Swedish daily Svenska Dagbladet claimed that the company had exaggerated its revenue figures. Ericsson strongly rejected the reports. 

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