People's Democracy

AS all the economic medications have been showing for the last more than one year, what began as an economic slowdown in the US at the end of 2000, is slowly and inexorably becoming a dramatic global phenomenon.

The recent period has been a nightmare for the working class the world over with the drastic announcements of job cuts. Leading the retrograde trend has been the Japanese hi-tech sector. At least three major companies have announced major job cuts to minimise their losses including the Japanese chip and PC giant Fujitsu which has unveiled a restructuring plan that will see 16,400 jobs go, two-thirds of them outside Japan, to counteract the global slump in the demand for technology.

With 11,400 job losses in overseas operations, the cuts will have serious implications for the ICL, the Fujitsu’s UK subsidiary, which was once the country’s most important computer maker.

A spokesman for the ICL, which has 11,000 of its 19,200 workforce based in the UK, has said 900 jobs will be lost at ICI and Fujitsu’s DMR US subsidiary, but could not be more specific. Analysts believe another 220 could be at risk at Fujitsu Telecommunications’ operations in Birmingham in the UK.

The cuts follow the company’s 55 billion yen (1.8 billion dollars) loss for the quarter to June this year, and its warning that the full year could see a loss as big as 220 billion yen.

With no recovery foreseeable until next year at the earliest, the job cuts may mean that Fujitsu pulls out altogether of chip manufacturing in the US.

"Fujitsu want to concentrate on its software and service business and will rationalise its manufacturing division. Only 5 per cent of the cuts will affect the software business of which ICL is a part," ICL’s spokesman said.

ICL has under-performed in recent years, losing its chief executive in the dot com slump last year, and repeatedly shelving plans for a float. Now, in June last it was announced that ICL, though one of the best known names in the UK computer industry, will disappear by March next year, to be rebranded as Fujitsu. Earlier plans for a 5 billion pounds float were abandoned and its accounts will now be fully merged with those of its Japanese parent.

The company has suffered like its peers from the slowing demand for chips and other components, and from the effect of corporations slashing IT spending. Flash memory for mobile phones has been an area of business particularly hard hit amid the sharp slowdown in handset demand and Fujitsu is also reviewing its US flash memory plant in Oregon, which it shares with Advanced Micro Devices (AMD)

Last month, Fujitsu announced a plan to offer 9,000 workers over the age of 45 a voluntary early retirement package, while production has been suspended at three plants in Japan and Fujitsu AMD Semiconductor Limited, its joint venture with Advanced Micro Devices (AMD), shut down.

The Electronics giant tech power house Toshiba, hit by the collapse in computer chip prices, is to axe 18,800 jobs. Japan’s largest chipmaker, has confirmed media reports that it is to cut its global workforce by 10 per cent. Earlier in August decided to close a semiconductor line in Japan and is considering speeding up a three-year restructuring plan.

Last week US chipmaker General Semiconductor announced it would close its plant in Ireland and move production to China and Taiwan, shedding one eighth of its workforce.

Toshiba is also exploring a tie-up with European rival Infineon, which has reported a slump of almost two thirds in profits at its memory chip division.

The moves provide further evidence of the difficulties besetting Japan’s tech sector, still reeling from Fujitsu’s of the axing of announcement a week ago 16,400 posts.

Hitachi, Japan’s largest electronics manufacturer, is also considering cutting 20,000 posts, reported recently by a Japanese newspaper. Hitachi has confirmed it: cut of 800 jobs by March at its electronic materials and household chemicals unit, Hitachi Chemical, with news of more widespread cuts to follow.

Toshiba blamed the job losses, which will be implemented by March 2004, on the deteriorating business climate, which has affected firms in technology sectors particularly badly.

"The dramatic economic slowdown that began in the US at the end of 2000 is becoming a global phenomenon that has undermined worldwide demand for IT," the firm said in a statement.

The majority of jobs culled - about 17,000 - are from operations in Japan, where six of 21 factories will be closed. A further 10,000 staff will be encouraged to shift posts within the group. "With this action plan we want to regenerate the company," company president Tadashi Okamura said.

It is as yet unclear where Toshiba, which has offices throughout the world, will make the rest of the cuts. In the UK alone, Toshiba has operations in Bristol, Cambridge, Crawley, Durham, London and Plymouth, and at various locations in Surrey. But a Toshiba spokesman in Tokyo said it was unlikely that any jobs in Britain would be lost as a result of the statement.

The announcement also revealed that Toshiba expects to make a pre-tax loss of 190 billion yen (1.6 billion dollars) in the year to March, compared with a previous forecast of a 110 billion yen (900 million dollars) pre-tax profit. Sales, which the firm had estimated at 6,440 billion yen over the year, are now expected to come in at 5,750 billion yen.

The troubled computer maker Gateway is to shed up to 4,600 staff, or a quarter of its global workforce, and close key operations outside of the US.

In a radical restructuring, Gateway is to close its branches in Malaysia, Singapore, Japan, Australia and New Zealand in order to focus on its core business in the US. A spokeswoman for Gateway said that with the possible closure of its European operations, the job cuts would total about 4,600 out of a worldwide workforce of about 19,000. Gateway ran up losses of 9 million dollars in the second quarter of the year as sales around the world dwindled. The firm has suffered from weak demand and an intense price war with its rivals such as Compaq and Dell.

The US has not escaped the redundancies, with the firm cutting 15 per cent of its US workforce, closing call centres in four states and a US manufacturing plant in Utah.

"We are doing all the right things to create a new company with a unique competitive edge and a healthy, profitable future," said Gateway chief Ted Waitt, admitting that the decisions had been tough to make.

The restructuring will incur a charge of about 475 million dollars in the third quarter of the year, but should then save the company 300 million dollars a year.

"We are planning to win by building a lean, nimble organisation that is unified and focused on our customer base," said Mr Waitt.

Shares in Gateway had fallen from a 52-week high of 69.85 dollars to just 8.6 dollars on the New York Stock Exchange rising again to 9.22 dollars in after-hours trading as the company soothed nervous investors by saying that there was enough cash for the foreseeable future.

Some 144,000 jobs in London could be lost by the end of the next year as the capital’s economy stalls, according to a new forecast from the Centre for Economics & Business Research (CEBR).

The CEBR predicts London’s economy will grow by just 1.8 per cent this year, compared with 2.1 per cent for the UK as a whole. This would be the first time since 1992 that the capital’s output growth has fallen behind the national average.

The London economy is being dragged down by sluggish performance in the crucial financial services sector, as well as by the natural constraint of its high cost of living - especially property prices.

The finance business, whose prolonged boom has largely underpinned the capital’s bubbly housing market, is growing at just 0.7 per cent this year, compared with an annual rate of 6 per cent in 2000.

The financial slowdown is part of a wider retrenchment in the business services sector, which accounts for close to one-third of London’s economic output. Total output growth in business services, including the consulting, accountancy and advertising industries, has fallen from 4.6 per cent in 2000 to just 1.6 per cent this year, the CEBR found.

The City is leading the downturn. A slump in tourism - related primarily to worries over food safety following the foot-and-mouth disease outbreak - has also had a disproportionate effect on the capital. The CEBR was still tentatively optimistic that these factors may prove only temporary.

"At this stage we still think that a slowdown is more likely than a full-blown recession," said Kevin McCauley, who prepared the report.

But news of a slowdown of any kind will still trouble policy-makers in the city, which has enjoyed a spectacular economic boom over the past five years.

The government is increasingly concerned that London’s infrastructure has not kept pace with growth in its economy.

Property prices in London are twice the national average, the cost of living is among the highest in the world, and the transportation network is notoriously inefficient.

This has led to extraordinary difficulties in attracting low-paid but crucial workers such as teachers, police officers and medical staff.

London’s population has grown sharply over the past few years, swollen by a strong influx from the rest of the UK and overseas. But high prices, and the migration of a few key employers, could already be reversing the trend.

The Office for National Statistics recently reported that London recorded a net population fall of 70,000 people in the year to June 2000, the highest net outflow on record. In all, almost one-quarter of a million people moved out of London last year.

A broad economic slowdown, led by a slump among high earners, should help cool the housing market, making the city more affordable. But it will also knock sentiment, and could lead to a debt crunch among Londoners with hefty mortgages.