1,600 Jobs at Stake As ST-Ericsson to Be Split Up
Loss making ST-Ericsson has announced that it is to be shut-down by its two parent shareholders, Ericsson and STMicroelectronics after they were unable to find a buyer for the company and there could be around 1,600 job losses during the restructuring.
As part of the shut-down, Ericsson will take on the design, development and sales of the LTE multimode thin modem products, including 2G, 3G and 4G multimode. STMicroelectronics will take on the existing ST-Ericsson products, other than LTE multimode thin modems, and related business as well as certain assembly and test facilities
The formal transfer of the relevant parts of ST-Ericsson to the parent companies is expected to be completed during the third quarter of 2013, subject to regulatory approvals.
After the split up it is proposed that Ericsson will assume approximately 1,800 employees and contractors, with the largest concentrations in Sweden, Germany, India and China.
It is also proposed that STMicroelectronics will assume approximately 950 employees, primarily in France and in Italy, to support ongoing business and new products development within STMicroelectronics.
In connection with the transfer of the majority of its workforce to the parent companies, ST-Ericsson will carry out restructuring of its current operations which could impact some 1,600 employees worldwide, out of which in a range of 500-700 are in Europe, including 400 to 600 positions in Sweden and 50 to 80 positions in Germany.
In addition, ST-Ericsson is pursuing external options for the future of the connectivity business, which employs around 200 employees worldwide.
The companies also announced that Carlo Ferro will be appointed President and Chief Executive Officer of ST-Ericsson during the shut-down phase of the company.
Ericsson has previously made provisions of SEK -3.3 b. (US$516 million) in 2012 which will cover costs related to the company being split. Once the multimode thin modem business has been fully integrated into Ericsson in Q4 the operation will be reported as a standalone segment. Their current best estimate is that it will generate operating losses of approximately SEK 0.5 b. (US$78 million) in Q4 2013, primarily related to R&D expenses.
STMicroelectronics expects to incur cash costs, including the covering of ST-Ericsson's ongoing operations during the transition period and its restructuring costs, in the range of approximately $350 million to $450 million, narrower than the range provided at the end of January 2013.