Nokia to cut up to 2,300 staff

HELSINKI (Reuters) - Nokia NOK1V.HE, the world's top cellphone maker, said on Tuesday it plans to close its plant in Bochum, Germany, by mid-2008 and may cut up to 2,300 staff as it moves production to lower-cost regions.

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Nokia said the Bochum site, which makes mobile devices, is not competitive enough, even with additional investment.

Shares in Nokia were down 0.46 percent at 23.56 euros by 11:35 a.m. EST, compared with a 1.48 percent lower DJ Stoxx European Technology Index .SX8P.

“We are moving production to existing plants, mainly in Romania, which will start during the first quarter,” Nokia spokeswoman Arja Suominen said, and added recruitment had already begun.

Nokia board member Veli Sundbaeck told journalists in Duesseldorf labor costs were almost ten times higher in Germany than in Romania and further investments could not save Bochum.

Nokia announced its plan to set up a mobile phone plant in Romania in March last year, investing 60 million euros ($89 million).

EQ Bank analyst Jari Honko said the closure did not come as a big surprise as competitiveness had been an issue at Bochum.

“In the long term I consider this a smart move. In the short term, we don’t know yet about the costs,” Honko said.

“Generally, Germany is an expensive country to ramp down a plant or lay off staff. This is likely to be an expensive move in the short term,” he added.

The Nokia plant closure is another blow for the telecommunications manufacturing industry in German. Just over a year ago 3,000 employees lost their jobs when BenQ Mobile 2352.TW declared bankruptcy.

“That is a catastrophe for Bochum. The news hit us like a bomb,” said Ulrike Kleinebrahm, local head of union IG Metall and member of the supervisory board of Nokia GmbH (Germany).

“We cannot understand why Nokia closes down this site despite having earned so much money here. The union will take action against Nokia’s decision,” she said.

Nokia said it also planned to sell its automotive accessory business and is in talks with Sasken Technologies to sell the Bochum-based adaptation software research and development unit.

Nokia's network gear venture with Siemens SIEGn.DE, Nokia Siemens Networks NSN.UL, has also said it aims to cut 9,000 jobs, or 15 percent of its global workforce, by the end of 2010, with 2,290 positions to go in Germany.

Most of Nokia’s cellphone production is in lower-cost countries, including Hungary, Romania, China and India, while the company also has a plant in Salo, Finland.

Reporting by Sami Torma, Agnieszka Flak, Jens Hack and Nikola Rotscheroth. Writing by Sakari Suoninen; editing David Cowell