Osram axes 4,700 jobs and closes factories as industry moves to LEDs

Osram is cutting 4,700 jobs - 12 per cent of its workforce – as part of the wider industry move away from incandescent and towards LED light sources.

The global lamps giant is closing or selling a string of factories which manufacture incandescent light sources and other older technologies in a bid to save US$1.3 billion (€1 billion) ahead of its sell-off by parent Siemens this year.

 

Parent company Siemens had initially planned to float Osram in an IPO, but last year announced that it would spin the company off to existing shareholders instead, citing ‘volatile’ market conditions. The spin-off is subject to approval by shareholders at a meeting on 23 January 2013 and is likely to be completed by the middle of the year.

Osram chief Wolfgang Dehen said the newly announced job cuts and plant closures ‘are aimed at plants with products at the end of their product life cycle or the closure of smaller plants with lower sales. At the same time, Osram is aiming to restore profitability with efficient structures in production, research and development and sales as well as in central functions’.

Meanwhile, staff numbers in ‘future-oriented business fields’ will be increased, and the company plans to invest hundreds of millions of euros in its LED assembly plant in Jiangsu, China, which will employ 1,700 people. But growth in such areas will only ‘partially compensate’ for the losses in traditional areas.

Siemens' annual report for 2012 shows that while Osram's revenue was up from US$6.5 billion (€5 billion) to US$7 billion (€5.4 billion), it made a loss of more than US$130 million (€100 million) amid ‘ongoing market challenges’. The business suffered a pre-tax hit of more than US$522 million (€400 million) in 2012 as a result of the abandoned IPO, including depreciation, amortisation and other costs that were not accounted for last year.

Osram cut 1,900 jobs worldwide in 2012 and other global players Philips and GE have also shed staff in recent years as the manufacturers deal with what analysts call their ‘legacy issues’ of old technology, especially incandescent which is being phased out around the world.

Osram is investing US$13 million (€10 million) in a production line for halogen lamps at Eichstätt in Germany. It will open this summer and produce efficient burners for halogen lamps which are seen as a key transition technology for consumers facing national bans on incandescent light sources in their home countries.

About 80 per cent of the lamps produced at the site will be for general lighting, and the rest will be for special applications such as cars and cinemas.

After the phase out of incandescents, Osram expects more people to move towards alternative halogen sources, as well as CFLs and LEDs.

The Eichstätt site opened in 1962 and now produces about 250 million lamps a year, including halogen lamps, halogen automotive lighting and xenon short-arc lamps for cinemas.

Osram, LG Electronics and LG Innotek have agreed to settle all their LED patent litigations worldwide.

Under the agreement, the parties will dismiss all patent disputes pending in various countries, including Germany, South Korea, Japan, China and the US. The parties have reached a license agreement for their respective LED patent portfolios, which they have agreed to keep confidential.

‘We're very satisfied with the settlement reached,’ said Aldo Kamper, CEO of Osram Opto Semiconductors. ‘It is our longstanding policy to reach license agreements with other manufacturers of LED products.’