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Alcatel Lucent battles unions in bid to slash 5,500 jobs

Low cost threat from China looms large

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Ailing telecoms kit maker Alcatel Lucent is facing a typically robust response from French unions as it tries to slash costs, and over 5,000 jobs, in a bid to compete better - especially against low-cost rivals from China.

The firm first announced plans to cut more than six per cent from its 78,000 strong global workforce back in July, after Q2 sales fell 7.1 per cent year-on-year to €3.54bn (£2.77bn).

Of those job losses, 3,300 will go in EMEA, around 1,000 in the Asia-Pacific region and 1,200 in the Americas, according to Reuters.

Alcatel’s home country of France is being hit particularly hard, accounting for over a quarter of the planned cuts, so it’s not surprising that union representatives have apparently called on the government to intervene.

While that it has given no assurances, the government said it will keep a close eye on developments to make sure Alcatel’s strategic presence remains strong in France and will look to spur further investment in high speed broadband, Reuters said.

One of the key challenges facing Alcatel Lucent is low cost competition from China in the form of Huawei and ZTE, whose rise over the past five years has transformed the telecoms equipment market.

There have been suggestions that the Shenzhen-based duo’s rise was helped by illegal state subsidies – allegations both deny.

Back in May, the EU seemed set to launch a massive case against Huawei and ZTE alleging they ‘dumped’ products on the market at below cost.

It’s not just Alcatel Lucent that’s feeling the heat financially, though, the whole industry seems to be suffering from the global economic slowdown.

Nokia Siemens Networks recently said it will slash almost a quarter of its jobs, 17,000, by the end of 2013; Huawei’s profits dropped by a quarter to 8.79bn yuan (£886m) in the first half of 2012; and ZTE’s revenue is set to dip 260 per cent year-on-year in the first three quarters.

In fact, things are so dire at the firm that its top execs have agreed to take a 50 per cent pay cut until the firm is profitable again.

The Chinese tech giants are also limited in terms of expansion in the US after a high profile House of Representatives report earlier this month labelled them a national security threat. ®

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