By Jack Keough
Osram AG, one of the world’s largest lighting companies, will cut 7,800 jobs in Germany and throughout the world as the customer switch to LEDs have taken place faster than many had predicted, causing a sharp drop off in the sale of traditional lighting products. The job cuts account for nearly 22 percent of the company’s total workforce.
The layoffs will mean hundreds of millions of dollars in cost savings through 2017 for the Munich-based company, which was spun off from Siemens last year.
“We have always stressed that the transformation of the lighting market will also continue after 2014 and that it will require additional capacity adjustments,” Chief Executive Officer Wolfgang Dehen said in a statement.
“The company needs a cost structure that is appropriate to the size of the company. I think the whole industry is surprised by the fast decline in traditional products,” he said.
The cuts were announced as Osram released its third quarter earnings report ending June 30th in which sales climbed to $1.6 billion. Solid state lighting products accounted for 39 percent of its sales, up from 31 percent in the previous quarter. However that increase did not make up for the nearly 15 percent drop off in sales of traditional lighting products. As an integrated lighting expert, Osram offers the entire spectrum from LED chip to lamp, luminaire and all the way up to complex lighting solutions.
Osram’s subsidiary, Sylvania, is headquartered in the U.S. with facilities in Mexico and Canada.
Of the new job cuts, 1,700 will occur in Germany and 6,100 elsewhere, affecting traditional lighting manufacturing jobs as well as sales and administrative functions.
This was the second round of major job cuts announced by Osram in the past several months. After it was spun off by Siemens last year, Osram said it would cut 4,800 jobs with most of those cuts occurring outside Germany.
Since this second round of cuts “is likely to involve more white-collar workers, we could imagine that the savings might be even higher,” Frankfurt-based Deutsche Bank analyst Uwe Schupp said in a note to clients as reported by Bloomberg.com.
While Osram has strongly increased its sales of LED products, it has struggled to shift from traditional lighting products to the new technology. In the past few years, Osram has reduced its overall headcount by about 17,000, as well as closing a number of factories in the U.S. The company currently employs about 34,000.
Lighting makers are also grappling with a price war in the LED market as chip-based technology has allowed new competitors – such as South Korea’s Samsung Electronics and Japan’s Toyoda Gosei – to grab market share, Reuters.com reports.
According to research firm IHS Technology, the average retail price of LED lamps was 11.8 percent lower in June 2014 than a year earlier.
Philips said recently it was speeding up the transformation of its lighting business, which includes the spin-off of lighting components, as quarterly sales of traditional lighting products dropped by 13 percent, according to Reuters. Philips said in June that it will merge some lighting units into a $1.4 billion standalone company to share research and development costs with outside investors, echoing the move by Siemens to spin off Osram.
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