Pressac plc, a British custom injection molder that invested heavily in new capacity last year, has cut 324 jobs in the face of the strong downturn in the cellular telephone sector.
Despite announcing some new orders, Pressac of Derby, England, revealed it suffered a significant blow after overestimating the short-term growth in the phone market.
"Some of the mobile-phone volumes we anticipated didn't materialize as we had been led to expect. This is a reversal in our fortunes in the mobile-phone business. It has been nowhere near as prosperous as predicted in this business," said operations director Harry Gordon.
He said the mobile-phone components business is extremely volatile, with constant negotiation for contracts that "either explode through the roof or die on the floor."
But he stressed Pressac sees the downturn as a short-term issue.
"We still believe mobile phones are a growing business. The opportunities are there in the long term," he said in a telephone interview from the company's Bishipbriggs, Scotland, plant. He added that the automotive sector still accounts for more than 70 percent of Pressac's business.
Pressac launched the new, 20 million ($30 million), 110,000-square-foot Bishopbriggs plant last fall. The operation was supposed to create 400 new jobs.
Company layoffs began in January, when Pressac's Kirkintilloch, Scotland, subsidiary John McGavigan Ltd. cut 55 jobs from its molding, printing and assembly complex. McGavigan previously employed a total of 400.
At the end of February, Pressac announced it would concentrate on production of parts for mobile handsets at the Bishopbriggs facility. That decision resulted in closing an East Kilbride, Scotland, plant that Pressac had acquired in August from W.H. Smith & Sons (Scotland) Ltd.
Since last year's takeover, when Smith employed 300, Pressac has let go a total of 194 from that plant, Gordon said.
In a related move, Pressac is suing Smith's former owner for 16 million ($23 million), claiming Pressac was misled over Smith's true levels of business. Smith had operated 42 injection presses making parts such as battery covers, key caps and front and back phone handset sections.
The downturn marks a sharp reversal for Pressac, which last year had said the McGavigan injection molding operations at Kirkintilloch was being overwhelmed with orders from Nokia Oyj, Telefon AB LM Ericsson and Motorola Inc.
The Bishopbriggs plant has space for up to 40 injection presses. The facility already has 17 Demag machines, which were moved from the Kirkintilloch site, and Pressac is buying 12 more new presses, Gordon said.
Telecommunications analyst Mike Costello of London investment firm Dresdner Kleinwort Wasserstein stressed that the mobile-phones downturn is not new.
"It has gone on since mid-summer, last year. When Pressac acquired Smith, the market was heading south in some style," he said.
Growth is expected to return this year with Nokia advisers forecasting 10 percent for 2001.
"We are looking for materially higher growth than that," Costello said. But he damped down expectations that the mobile-telephone industry will return to the rapid growth it experienced before the downturn.
