As it continues to struggle to keep pace with Huawei and Nokia, Ericsson (NASDAQ:ERIC) has announced it will trim 3,000 positions in Sweden as part of a larger transformation plan. Most of the job reductions will come from the production sector, but R&D and group and support activities also will see cuts.
To offset the impact, Ericsson said it plans to recruit approximately 1,000 R&D personnel over the next three years. The new employees will come mainly from universities, the company predicted.
Ericsson employs approximately 16,000 people in its home country. That figure will be reduced by approximately 1,000 positions in production, approximately 800 in R&D, and approximately 1,200 in other operations. Swedish sites affected include Borås, Göteborg, Karlskrona, Kumla, Linköping and Stockholm; Ericsson described the reductions in Borås and Kumla, where it has production sites, as "significant." The company added it plans to let go 900 consultants in Sweden as well.
The company expects to conclude most of the reductions during the first quarter of 2017. The reductions in Borås and Kumla are expected to be concluded during the second half of 2017.
Despite the reductions in the R&D sector, Ericsson executives asserted the company's technology development engine will remain strong.
"We have a clear goal that our R&D in Sweden should be world leading, not least in next-generation systems," asserted Ulf Ewaldsson, chief strategy and chief technology officer at the company. "In the short term we have to reduce the number of positions in R&D, primarily within administrative roles. At the same time our intention is to bring in new competence in new technologies. Therefore, we intend to recruit approximately 1,000 engineers in Sweden, primarily from universities, over the coming three years."
"Ericsson is going through a large transformation," added Jan Frykhammar, Ericsson's president and CEO. "We continue to have a strong focus on R&D, and since many years, most Ericsson employees work in software development and services, rather than hardware production. The measures are necessary to secure Ericsson's long-term competitiveness as well as technology and services leadership."
The staff reductions are part of an overall cost-reduction program that aims to save SEK 9 billion ($1.1 billion) during 2017. Ericsson also announced this past July an initiative to reduce annual operating expenses, excluding restructuring charges, to SEK 53 billion ($6.18 billion) in the second half of 2017. The company said its expenses for full-year 2014 were SEK 63 billion ($7.34 billion). Concurrent with the July announcement, the company parted ways with then President and CEO Hans Vestberg (see "Vestberg out as Ericsson CEO"). Frykhammar is filing the slots on an interim basis while the search for a more permanent replacement continues.
Ericsson last made a significant reduction of its Swedish workforce in 2012 (see "Ericsson to slash Swedish workforce").
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