The sudden collapse of electronics group BenQ Corp.'s German cell phone subsidiary has forced a major component supplier, Balda AG, to seek buyers immediately for three plants in Germany.
The final straw for Balda was BenQ's decision to pull the plug last month on the money-losing German operation, which BenQ bought from Siemens AG last year. Munich-based BenQ Mobile GmbH & Co. has since filed for bankruptcy protection.
``Since October 2005, we have committed and invested an inordinate amount of capital and resources into our German mobile phone subsidiary. Despite the progress achieved in reducing cost and expenses, widening losses have made this very painful decision unavoidable,'' BenQ Corp. Chairman K.Y. Lee said in a news release. BenQ is based in Taipei, Taiwan.
Balda, an injection molder based in Bad Oeyenhausen, Germany, depends heavily on the cell phone sector. In recent months, it also has seen its European business with Nokia Oyj dwindle, as well as a fall-off in telecommunications-related sales in Asia.
The impact also is hitting Balda's operations in Manaus, Brazil and in Asia.
Faced with the sudden, drastic drop in telecommunications business in Europe, Balda announced plans to sell its German molding plants in Herford, Oberlungwitz and Seelbach by the end of this year. The firm has already approached potential buyers of these facilities, which serve mainly BenQ and Nokia.
The planned sale represents a cut of more than 50 percent in the molder's production capacity, and will see its German workforce fall from 1,600 to around 600. It admitted the disposal could result in ``a significant book loss.''
Although Balda already had plans to double the space occupied by its growing medical component business at its Bad Oeyenhausen plant by the end of this year, now the company will cut 250 jobs there, said Chief Executive Officer Joachim Gut. Talks are being held between management and the plant's works council to explore all options, he added.
In addition, Balda intends to lay off 450 temporary employees working at those German plants earmarked for sale. But the molder does expect the prospective buyer to safeguard some 750 jobs at the three units: 300 at Herford, about 340 at Seelbach and around 120 in Oberlungwitz.
The impact of the BenQ crisis will be felt beyond Germany, with a further 400-450 Balda job cuts at its Hungarian facility, mostly temporary workers.
``We are deeply moved that this sudden and unexpected development takes away the alternative pursued until now, which was to secure all jobs by gradually replacing the existing products,'' Gut said. But immediate action is necessary to enable Balda to continue growing next year and to secure jobs and its longer-term future, he stressed.
Balda, which has seen falling sales through 2006, forecast it will post a pretax loss of between 45 million and 50 million euros ($57 million to $63 million) this year. This compares with net profit of 33.4 million euros ($42 million) in 2005, on annual sales of nearly 400 million euros ($508 million). Balda currently estimates that it will reach sales of 350 million euros ($444 million) this year, and profit of between 50 million and 55 million euros ($63 million to $70 million).
Balda still is gearing up for growth at new plants in China and India, and an existing facility in Ipoh, Malaysia, with other high-end products such as automotive parts.
Balda recognized that, while cell phone makers increasingly are sourcing components in Asia, price pressures on suppliers are leading to shrinking sales, despite growth in market volumes.
Despite BenQ's problems, Balda still expects its cell phone business to grow again next year. The company expects growing sales to Nokia in Asia will more than compensate for a decline in business from BenQ.
In China, Balda operates two injection molding plants in Suzhou, near Shanghai, where it has been raising molding capacity steadily. Earlier this year, Balda Solutions (Suzhou) Ltd. ran 79 standard injection presses with another 24 machines capable of in-mold decoration.
A new plant in Beijing, with 20 Krauss-Maffei and Arburg injection presses, has room for up to 60 machines, and is set to employ nearly 1,000 by the end of this year.
Meantime, Balda was due to start production of cell phone handsets this fall at a molding plant in Chennai, India, established through a joint venture with Indian auto parts molder Sumi Motherson Group. Balda's strategy of continuing to expand in Asia reflects the expected mobile phones boom in China and India beyond 2010. Its global customers include Motorola, Alcatel and Nokia.
Balda operates more than 450 injection presses at plants in Europe, Asia and South America. Its total workforce numbers more than 8,000.
BenQ, Taiwan's biggest phone handset manufacturer, was formerly known as Acer Communications. The company also manufactures computers, projectors, liquid crystal display panels and digital cameras.