BBC NEWS Americas Africa Europe Middle East South Asia Asia Pacific Arabic Spanish Russian Chinese Welsh

 You are in: Business
Front Page 
UK Politics 
Market Data 
Your Money 
Business Basics 
Talking Point 
In Depth 

Commonwealth Games 2002

BBC Sport

BBC Weather

Tuesday, 4 September, 2001, 16:20 GMT 17:20 UK
Marconi axes 2,000 more jobs
Marconi, the troubled telecoms equipment company, has announced the resignation of its top two managers and said it is to cut another 2,000 jobs.

In a statement revealing a shake-up aimed at restoring profitability, Marconi said that chairman Sir Roger Hurn and chief executive Lord Simpson had resigned with immediate effect.

Lord Simpson
Lord Simpson: Resigned
More factories are also set to close in an "extensive global programme" aimed at cutting small sites and manufacturing duplication, and weeding out surplus plants.

And the company also revealed further job cuts on top of the 8,000 already announced this year.

About 600 of the cuts will be made in the UK, 1,000 in the US and the remainder in continental Europe, central America and Asia Pacific, the firm said.

Union anger

The measures represent "a decisive response to the dramatic shift in the fortunes of the global telecoms industry", said Mike Parton, Marconi's new chief executive.

We will not stand by and see people forced out of work... if members wish to oppose job losses we will support them in their opposition

Roger Jeary, MSF

But the job cuts were condemned by union leaders, who said they had been given no warning of the announcement.

"It was completely unexpected," said Danny Carrigan, chairman of Marconi's trade union committee. "The company is clearly in turmoil."

Union leaders, set to meet on Wednesday, have pledged to fight any compulsory redundancies.

Manufacturing Science and Finance union representative Roger Jeary said: "We will not stand by and see people forced out of work.

"We are quite clear - if members wish to oppose job losses we will support them in their opposition."

Collapsing earnings

The shake-up follows an operational review launched in July after Marconi announced that, because of "much tougher" market conditions, operating profits for the year to the end of March would come in at half the previous forecast.

That warning prompted a halving in Marconi's share price, to 112.5p.

The shares, which have since halved again, threatening Marconi's place among the elite FTSE 100 club of leading listed UK firms, closed 1p lower at 53p on Tuesday.

The company's latest statement revealed that, thanks largely to a 25% slump in sales of network equipment, Marconi ran at a 227m loss in the April-to-June quarter.

A current upturn in sales, "albeit below expectations," combined with savings made from job losses and rationalisations already announced, should see the firm break even between July and September, the briefing said.

Market retreat

The company predicted that the measures unveiled on Tuesday will lead to annual cost savings of 250m, on top of the 350m achieved through earlier job and plant cuts.

Mike Parton, chief executive, Marconi
Mike Parton: New man at the helm

The firm expects to employ 29,000 people by March 2002, compared with 39,000 at the end of March this year.

The "streamlined" Marconi will operate as one organisation instead of three divisions.

And it will focus largely on optical and broadband equipment markets, in which it forecasts growth as "voice, data and multimedia traffic continues to require additional network capacity".

"We have reshaped our core business to concentrate on those activities where we are most competitively positioned," Mr Parton said.

IT investment delays

Marconi revealed it is also to resort to the kind of corporate belt-tightening measures which it has itself fallen victim too, revealing that it has "rescheduled" the roll-out of a 250m company-wide IT platform.

Nonetheless, even following the cost-cutting measures and the upturn in sales, the firm said it was unable to give forecasts of profits for the rest of the year.

In light of continued uncertainty over customer spending "the company is not in a position to give further sales and operating profit guidance for the full financial year", Tuesday's statement said.

Mr Parton said: "'We continue to work closely with our customers to develop innovative solutions which will enable us to participate effectively in the longer-term growth of the telecoms market and begin to restore value for Marconi shareholders."

Boardroom reshuffle

Outgoing chairman Sir Roger Hurn, who had revealed intentions to retire before July's profits warning debacle, said Mr Parton, former head of Marconi's networks division boasted a "wealth of industry experience".

Sir Roger Hurn
Sir Roger Hurn: Praised new board

"The new Marconi executive team brings together an outstanding combination of skills to lead Marconi through the challenges ahead," Sir Roger added.

He also praised outgoing chief executive Lord Simpson for the strategic shift which transformed the broad-ranging GEC business into a telecoms-focused Marconi.

"I would like to pay a special tribute to George Simpson for his leadership and energy in reshaping Marconi as a leading network communications business," Sir Roger said.

"Dangerous game"

But the appointment of an existing employee to chief executive, and the promotion of existing director Mike Donovan to chief operating officer, received a cool response from City analysts, who had been expecting Marconi to appoint chiefs from outside the firm.

The entire board should now consider their positions. Workers need a strong team to lead them out of this crisis

Roger Lyons, Manufacturing, Science and Finance Union

"It is a dangerous game they are playing," said Robin Hardy at WestLB Panmure.

"But they correctly surmised that they could do nothing with that management in place."

The City had also expected Marconi follow British Telecom in unveiling a rights issue, in which extra stock is issued and offered at cut price to existing shareholders in an effort to raise cash.

Roger Lyons, Manufacturing, Science & Finance general secretary, urged more widespread boardroom changes.

"There seems to be no end to the disasters affecting Marconi," he said.

"The entire board should now consider their positions. Workers need a strong team to lead them out of this crisis."

The BBC's Greg Wood
"There must be serious doubts as to whether Marconi can survive in its present form"
Roger Lyons, Manu., Science and Finance Union
"They got their strategy completely wrong at board level"
See also:

18 Jul 01 | Business
Shareholders vent their anger
05 Jul 01 | Business
The impact on Coventry
05 Jul 01 | Business
Unions lash out at Marconi
29 Jun 01 | Business
Marconi re-thinks options plan
Internet links:

The BBC is not responsible for the content of external internet sites

Links to more Business stories are at the foot of the page.

E-mail this story to a friend

Links to more Business stories