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Jabil cuts 200 local jobs
By JEFF HARRINGTON, Times Staff Writer
ST. PETERSBURG -- Jabil Circuit is cutting up to 200 more jobs at its St. Petersburg headquarters next week, while its foreign work force continues to swell. The continuing exodus, which comes on top of cutting 300 Tampa Bay area jobs last month, has raised questions about Jabil's long-term commitment to manufacturing work in St. Petersburg. The company has increasingly funnelled work to low-cost labor markets outside the United States. It marks a dramatic about-face for a tech company that a few years ago boasted more than 3,000 Tampa Bay area workers as one of the biggest public companies on the west coast of Florida. The latest cuts will bring Jabil down to 1,500 employees in the area. A contract electronics company, Jabil makes circuit boards and other equipment sold under the names of its customers, including industry leaders such as Cisco Systems Inc., Dell Computer Corp. and Hewlett-Packard Co. Globally, Jabil has grown over the past month from 24,500 to 26,000 employees as it integrates its recent acquisition of nine factories from Royal Philips Electronics NV. But its U.S. work force has shrunk during the past few years, standing at less than 3,500 as of last month. Workers remember the glory days when thousands of Jabil workers kept eight local manufacturing facilities running at full capacity 24 hours a day. Today, workers say Jabil's St. Petersburg manufacturing hub is a shell of its former self. The company this spring is closing its a 300-employee warranty and repair operation just outside Oldsmar. A majority of the work there is going to Mexico. Employees were briefed Wednesday about plans for 175 to 200 more job cuts next week, the company confirmed Thursday. Employees said the company also broached the possibility of eventually closing all Florida manufacturing operations. Jabil spokeswoman Lisa Allison confirmed the number of cuts but would not discuss the company's long-term manufacturing prospects here. According to the company's Web site, Jabil has 600,000 square feet in St. Petersburg, but Allison could not say how much of it is being used. It is vacating 90,000 square feet in Oldsmar. By the end of this year, Jabil expects 70 percent of its manufacturing will be in low-cost countries compared to 30 percent in the United States and Western Europe. Three years ago, the ratio was just the opposite. Workers have complained about the job-shifting strategy, but Jabil chief executive Tim Main has said he has little choice if he wants the company to remain competitive. Shawn Severson, an analyst who covers Jabil for Raymond James Financial, said the flight to low-cost labor is "just the way it is" for contract manufacturers. "There's a tremendous sea change happening in where manufacturing is being done," he said. Large customers are demanding low costs, leaving Jabil to choose between paying upward of $10 an hour to employees in the United States or a couple bucks an hour to workers in Mexico or less than $1 an hour to laborers in China. "That's tough to match," Severson said. In recent quarters, the company has increased revenues sequentially but it is still in a dogfight to remain profitable. "This is still a horrific market and intensely competitive," Severson said. "We're not anywhere near that things are good enough that you can stop cutting costs." Severson gives Jabil management kudos for keeping tight reins on the budget at a time that dozens of smaller contract manufacturers have folded. He counts Jabil among the best in its breed, with a "strong buy" recommendation on its stock. Joseph Wolf, an analyst with UBS Warburg, is less keen on Jabil's short-term aspects, rating it neutral. But Wolf agreed with Severson that Jabil's production strategy means most but not all of its work will be done outside the United States. They both expect less expensive, low-end products will increasingly be made in plants in China and other low-cost labor markets. But they anticipate Jabil will stick with U.S. production for high-end, custom products, particularly for major U.S. customers. Jabil's stock closed Thursday at $15.63 a share, up 20 cents or 1.3 percent. -- Jeff Harrington can be reached at harrington@sptimes.com or (813) 226-3407.
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From the Times Business report
From the AP
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