Jabil Circuit moves work to Mexico
St. Petersburg Times; St. Petersburg, Fla.; Jan 29, 2003; JEFF HARRINGTON;
Jabil Circuit is cutting more than 300 jobs in the Tampa Bay area as part of its ongoing campaign to shift
work to low-cost labor locations outside the United States.
The St. Petersburg maker of electronics components is shutting down a facility in Oldsmar that does
warranty and repair work for Dell and other computer manufacturers, idling about 200 full-time workers, the
company confirmed Tuesday. A majority of the business is being moved to Mexico. Separately, a Jabil
spokeswoman confirmed another 120 jobs will be cut at its Ninth Street plant in St. Petersburg within the
week.
From a high of more than 3,000 jobs in the Tampa Bay area a few years ago, Jabil has slashed its regional
work force to about 1,700, including the pending cuts.
Jabil executives have defended the cuts as a necessary survival strategy at a time when spending on
electronics has shriveled, particularly among large tech customers like Cisco and Dell. But laid-off workers
said insult was added to injury when a group from a plant in Reynosa, Mexico, toured the Oldsmar facility
last week for training.
"It's bad enough that they're taking our jobs, but to have to train people from another country (how to
perform) our jobs?" said Bonnie Walton, who has worked at the Oldsmar plant for two years. "It's not like
we're doing bad work. It's just cost effective for them to move to Mexico."
Jabil spokeswoman Lisa Allison said she did not have specifics on how the work was being reallocated to
locations such as St. Petersburg, Louisville, Ky., and Reynosa.
However, according to a Jan. 7 company memo obtained by the Times, Jabil plans to close the Tampa
facility, known as Jabil Global Services, within 90 to 180 days and shift a majority of the business - repair
work for Dell and Cisco - to Reynosa. A lesser amount of work will be transferred to St. Petersburg and
Louisville.
In a second memo to plant employees dated Jan. 22, plant supervisor Eddie Grimes also indicated that a
smaller part of the Dell business will likely be moved to McAllen, Texas.
Grimes wrote that he has received little detailed information from other executives but expects the job
changes to be completed by late April or early May.
The Reynosa team is "working with our team to develop a plan for the move to happen," he told employees.
"I would expect that Tampa will begin ramping down slowly as Reynosa slowly ramps up."
In the memo, Grimes urged employees not to take their frustration out by damaging or stealing equipment or
tarnish their good work "by ending this thing in an ugly manner."
"Again, thanks for the great job that you guys have done over the past several years," he concluded, "and GO
BUCS."
Jabil did not disclose severance details, but employees said they were receiving a week's pay for every year
of service and all earned vacation time.
David Crane, a former Jabil employee who was laid off from the St. Petersburg plant in November, said the
company treats employees well.
"I was the last one hired and the first one to go," he said. "I didn't have any problem with it."
But other workers, including some who were reluctant to give their names, criticized Jabil for laying off
some employees with more than 20 years of experience.
The shutdown of the Oldsmar plant dovetails with Jabil's strategy to move from high-cost American and
European workers to low-cost Asian, Latin American and South American workers.
The results have been dramatic: By the end of this year, Jabil expects fully 70 percent of its manufacturing
will be in low-cost countries compared to 30 percent in the United States and Western Europe. Three years
ago, the ratio was just the opposite.
At last week's annual meeting, Jabil chief executive Tim Main bemoaned the necessity of moving jobs out of
the United States and the pain it caused employees.
"If we don't move the business, our customers will," he said.
At the time, Main did not say additional cuts were imminent.
Oldsmar bemoans Jabil's changes
St. Petersburg Times; St. Petersburg, Fla.; Jan 30, 2003; MEGAN SCOTT;
When city officials heard the news Wednesday that Jabil Circuit was shutting down a facility in Oldsmar that
repairs computers, they scratched their heads.
"I didn't know they were here in the city," said Jerry Custin, business assistance specialist for the
Oldsmar/Upper Tampa Bay Regional Chamber of Commerce. "I have the city occupational list in front of
me, and I don't see Jabil Circuit on the list."
Mayor Jerry Beverland, a 30-year resident of Oldsmar, also was stumped.
"I wonder how many of those people lived in Oldsmar," he said when he heard that 200 people would be put
out of work. "I commiserate with them."
Oldsmar officials have reason to be puzzled.
Jabil Global Services' employees refer to their place of business as the Oldsmar plant because of its
proximity to the city. But it's not really in Oldsmar. It's in Hillsborough County at the intersection of Race
Track and McCormick Roads.
Jabil plans to close Jabil Global Services, which does repair work for Dell and other computer
manufacturers, within 90 to 180 days and move most of the work to Reynosa, Mexico, said Jabil
spokeswoman Lisa Allison. Some of the other work will be transferred to St. Petersburg and Louisville. The
company is also cutting 120 jobs at its plant on Dr. M.L. King (Ninth) Street in St. Petersburg.
Allison said the "Oldsmar" plant has been at its Tri-County Business Park location since the company
purchased EFTC Corp.'s service and repair business, EFTC Services Inc., in 1999. She declined to say
whether Jabil owns the building.
But whether Jabil is in or outside of Oldsmar city limits, Custin said he feels sorry for the employees, many
of whom probably earn more than entry-level wages.
He also said attracting another company should not be a problem.
"We have folks coming in here looking for property all the time," said Custin. "I think the opportunity to get
a replacement will probably be pretty good."
Despite crash diet, EMS providers urged to shed more weight
Claire Serant / EBN / (01/27/2003 11:46 AM EST)
Weighed down with excess manufacturing capacity and weak end-market demand, major EMS providers
will have to implement another round of severe belt tightening this year to improve profitability, according to
industry analysts. Although efforts to reduce operations produced $1.4 billion in restructuring costs last year
and $2.5 billion in 2001, the EMS industry still has more work to do, analysts said.
"EMS margins will remain depressed until there is a massive restructuring or further consolidation in the
industry," said Chris Whitmore of Deutsche Bank Securities Inc., San Francisco. "The EMS industry needs
to undergo roughly $2.5 billion in restructuring costs to return to satisfactory utilization rates."
Capacity utilization rates in the electronics industry fell to about 68% in 2002 and are expected to drop to
65% in 2003. To reach an optimal 75%, EMS providers need to tack on restructuring charges of more than
$1.2 billion to the $700 million expected for the year, analysts said.
According to Whitmore, those costs should be evenly divided between employee severance, lease and
equipment exit costs, and asset write-offs.
"We'll see more plant closures within the next six months," said Randall Sherman of New Venture Research
Corp., Nevada City, Calif. "Companies like Celestica and Jabil are not overbuilt, but Sanmina-SCI and
Solectron are bleeding from excess capacity."
Analysts cited one key reason why Sanmina-SCI Corp. and Solectron Corp. are suffering more than their
competitors: a higher percentage of their operations are located in high-cost regions such as Europe and
North America. Executives at both companies were not available to comment on whether they intend to
boost restructuring charges in subsequent quarters.
Last week, Sanmina-SCI executives at company headquarters in San Jose told analysts the EMS provider
plans to close three printed-circuit-board plants in North America by June.
"Our PCB fabrication business continues to navigate through a period of excess capacity," said Randy Furr,
Sanmina-SCI's president and chief operating officer. "We are in the process of closing two additional PCB
fabs in Watsonville, Calif., and Ward Hill, Mass., and we also decided to permanently close our Derry,
N.H., facility."
During Sanmina-SCI's earnings call last week, chief financial officer Rick Ackel reiterated the company's
plan to spread out $250 million in restructuring costs during the remainder of fiscal 2003, ending in
September, to gain $50 million in quarterly savings. For the first quarter of 2003, ended Dec. 28, the
contractor reported $36.5 million in restructuring, merger, and integration charges.
Merger costs
Most of Sanmina-SCI's restructuring woes stem from its December 2001 merger with SCI Systems Inc.,
Huntsville, Ala.
"Sanmina-SCI has more work to do than other EMS providers because they were burdened with not only
consolidating manufacturing through a merger, but they faced doing it in the midst of a severe economic
downturn," said Shawn Severson, an analyst at Raymond James & Associates Inc., St. Petersburg, Fla.
But Ackel is convinced that the restructuring efforts will pay off.
"You won't see a real major impact probably until the middle to the end of the third quarter and then the
fourth quarter. That's when the savings really start to ramp because of the time it takes to shut down and
move operations and coordinate with customers," he said.
During Solectron's first fiscal quarter of 2003, ended Nov. 29, the Milpitas, Calif., company took
restructuring charges of $102 million.
"What we see remaining in the fiscal year is between $50 million and $75 million in restructuring charges,"
said Kiran Patel, Solectron's executive vice president and chief financial officer, during a conference call with
analysts last month.
Since the economic downturn took hold two years ago, Solectron has shuttered 19 plants, of which 13 were
located in the Americas and five in Europe, said Thomas Hopkins, an analyst at Bear, Stearns & Co. Inc.,
New York, in a report.
"Although Solectron formally announced 19 closures, we believe substantial floor space has been reduced
from additional facilities," Hopkins said. "Solectron's goal is to have 60% of its capacity in low-cost regions
by the end of fiscal 2003."
Plexus draws a charge
Last week, Plexus Corp., Neenah, Wis., posted restructuring charges of $31.8 million in its first fiscal
quarter of 2003, ended Dec. 31. Plexus closed its San Diego plant last month and plans to reduce the number
of employees at its Seattle plant and in the United Kingdom, along with several smaller sites, said chief
financial officer Gordon Bitter.
"Our restructuring actions have better aligned our global footprint and cost structure with the realities of the
competitive high-end markets that we serve," Dean Foate, Plexus' president and chief executive, told
analysts. "We expect these actions to improve our capacity utilization and bottom line as they are completed
during the current fiscal year."
Flextronics International Pte. Ltd., Singapore, has shut 12 plants since the downturn: seven in the Americas,
four in Europe, and one in Singapore, Hopkins said.
Flextronics reported an aftertax charge of $67.1 million targeted at the company's resized PCB fab footprint,
which included the closure of plants in Irvine, Calif., and Kumla, Sweden, during its third quarter of fiscal
2003, ended Dec. 31.
"We've gone through all of these restructurings and it's not fun, but we're feeling good about our business,"
Michael Marks, Flextronics' chief executive, told analysts last week during a conference call.
In a recent report, Jerry Labowitz, an analyst at Merrill Lynch & Co. Inc., New York, said: "We believe
Flextronics' restructuring efforts will be fully implemented in the March quarter of calendar 2003, with the
benefits beginning to have a more meaningful impact on profitability in the PCB business during the June
quarter of calendar 2003."
AI
Market Data 
Markets 
