PARIS Telecoms equipment maker Alcatel-Lucent plans to axe 5,490 jobs worldwide as part of a cost-saving program unveiled in July, with more than a quarter of the cuts coming in France.
Union representatives in France on Thursday pledged to fight the 1,430 job cuts in France and called on the government to intervene, creating another headache for the new Socialist government as it tries to tackle unemployment which is at a 13-year high.
"We are in shock," Isabelle Guillemot, of the CFDT union, said, calling on workers to hold protests on Friday.
The French company said in July that it would reduce its global headcount and find 1.25 billion euros ($1.64 billion) in savings by the end of 2013 by exiting unprofitable markets and contracts. Chief Executive Ben Verwaayen's long-awaited turnaround of the group has been delayed by competition from low-cost Chinese rivals and a slowdown in spending by global telecom operators.
"These are difficult decisions but are necessary for the long-term health and sustainable profitability of the company," a spokesman for the group said on Thursday.
Alcatel-Lucent shares closed up 8 percent, adding to a 7 percent bounce on Wednesday. Despite the two-day rally, the shares remain down about 60 percent since a peak in February, giving it a market value below 2 billion euros.
Alcatel-Lucent is also the most shorted stock on the French blue-chip CAC 40 index with 16 percent of outstanding shares out on loan, according to Markit data, a sign that many investors are betting on further share price declines.
The company, which employs 76,000 people worldwide, has said the job cuts will not affect the 26,000 staff working on research and development worldwide. The CFDT union said that the cuts would mainly hit support functions such as sales, marketing, finance and human resources.
Overall, the company plans to make 3,300 job cuts in the Europe, Middle East and Africa region, with 990 in Asia-Pacific and 1,200 in the Americas.
In France, the company will close the headquarters of its French unit now at Velizy, near Paris, and move the roughly 2,400 staff to another office in Villarceaux, 100 kilometres southwest of the capital. A spokeswoman said the move was aimed at saving money while creating the group's second-largest R&D centre worldwide.
The news adds to thousands of job cuts at large French groups including car maker PSA Peugeot Citroen, drugmaker Sanofi and airline Air France in recent months. The government has tried to exert pressure on the companies to soften the blow on workers.
Industry Minister Arnaud Montebourg said in a statement that the government would be "extremely vigilant" that Alcatel-Lucent preserves the most strategic parts of its business in France. He also pledged that the government would launch a "plan of action" in the coming months to help Alcatel's turnaround by encouraging investment in high-speed broadband.
Alcatel-Lucent is grappling with high cash burn and lacks the scale of rivals Ericsson and Huawei. It issued a profit warning and posted a loss in the second quarter and is due to report third quarter results on November 2.
Verwaayen managed to steer the group to its first annual profit last year since the ill-fated 2006 merger that formed the group, but it has been hit by client spending cutbacks this year, especially in Europe.
The group said last month that it would restructure to centralize procurement, sales and marketing and reshuffle its management as part of the cost-cutting plan.
($1 = 0.7621 euros)
(Additional reporting by Blaise Robinson and Leila Abboud; Writing by James Regan; Editing by Erica Billingham and Leslie Gevirtz)