Hungarian town suffers as Nokia announces big layoffs

KOMAROM, Hungary Wed Feb 8, 2012 12:31pm EST

1 of 4. Workers leave after finishing a shift at the Nokia phone assembly plant in Komarom, 85 km (52.8 miles) west of Budapest February 8, 2012.

Credit: Reuters/Laszlo Balogh

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KOMAROM, Hungary (Reuters) - Veronika Szalai had just graduated from elementary school when Nokia, the Finnish phone maker, opened a factory by the Danube in Komarom. The 27-year-old, who has worked here for years, now faces unemployment as the company implements major layoffs.

"They only told us they will let go a mix of people, from all departments," she told Reuters outside the factory on Wednesday, shivering as a bitter cold wind blew from the north.

"Of course it upsets everyone," she said. "In this world a good living is hard to come by. We'll stay as long as we can, then we may get our severance cheques... Then we'll see."

Nokia arrived in Hungary during the boom years of the late 1990s. As its devices reigned supreme on global markets, Hungary produced so many that consumers in Asia and Africa often came to identify the country with the Nokia phone.

But globalization has moved more jobs further east to Asia, and the spread of smartphones has knocked Nokia off its throne in the mobile world, spelling bad news in Komarom, a town of just 20,000 residents in the northwest of Hungary.

Komarom is separated from Komarno in Slovakia only by the Danube river, and many Slovaks commute every day to work in the Nokia plant.

Nokia said Wednesday it would let go 4,000 more people around the world, more than half of them in Hungary, ending all phone assembly operations in Europe.

In Hungary, 2,300 jobs will be axed in two or three steps by the end of the year, Nokia told its workers, adding that most of the losses would be blue-collar, manufacturing positions.

The move hurts the labor market in Hungary as well as Slovakia, where about a third of Nokia's workers have commuted from, even as Hungary's political elite repeatedly declared the phone giant one of its most prized investors.

"I still stand by this: we should support foreign investors who, for decent profit, create jobs for Hungarians and using Hungarian labor they create value," Prime Minister Viktor Orban told an audience of his supporters Tuesday, praising Nokia along with companies like German car makers Audi and Daimler.

"These firms must be welcomed and kept around," Orban said.

It remains to be seen just how big a dent Nokia's move will put in Hungary's economic output. The firm's Hungarian revenues have topped 1 trillion forints ($4.56 billion) per year despite any recent market trouble, the news web site index.hu said.

The phone maker's output has boosted Hungary's overall industrial performance so much that its struggles were felt on a macroeconomic level, analysts said.

"The silver lining is that Nokia is not moving the highest added-value activities, only the assembly function, which represents the lowest added-value in the factory," Takarekbank analyst Gergely Suppan told Reuters.

"The higher-value functions remain here and the lower-value is shipped off to Asia."

A BADLY KEPT SECRET

The fact that Nokia would lay off a large chunk of its Hungarian workers was more than obvious for a long time in Komarom, workers told Reuters.

"The size of the changes was kept secret but the fact that it was coming was clear," said Zoltan Laszlo, who leads the workers' union at the Komarom plant.

"Nokia, like most such firms, adopted a new strategy to move assembly as close to its suppliers as possible, and for quite some time, we have ordered our supplies from Asia."

Workers filed out from the factory at 2 p.m. as the morning shift ended, silently boarding dozens of buses that awaited them in the parking lot.

Few of them would give their names in conversations, because they said management only told them big layoffs would come this year, but who would stay and who would go was not yet clear.

Massive layoffs have been in the air for a long time, several workers said. When Nokia closed down its plant in Romania last year, some of the assembly equipment was installed in Komarom, but the factory was used far below capacity.

"There were times when entire rows of machines just sat there idle," said Kornel Kisistok, 29. "People were told to take weeks off at a time. Bosses never admitted what was going on, but we knew it could not continue like this for long."

"Then today they set up an event hall, gathered everyone around and told us what we needed to know."

(Reporting by Marton Dunai, Additional reporting by Gergely Szakacs; Editing by Helen Massy-Beresford)

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