*NEWS*OUTSOURCED…….LEXMARK OPEN PHILIPPINE BASE
*NEWS*OUTSOURCED…….LEXMARK OPEN PHILIPPINE BASE
2008-04-21 at 1:06:10 pm #19769
outsourced/Lexmark opens Philippine base
SOME FEAR LOCAL JOBS COULD BE SENT OFFSHORE.
A company executive told the Philippine media at the celebration that the country’s operation now has just as many employees as the corporate headquarters. And it’s hiring 300 to 400 more people over the next few years.He also said the company can now build a product from beginning to end at the site, a process that was once the primary domain of the company’s armada of highly paid engineers and scientists in Lexington.”If you’re in Lexington, you’ve got to be nervous,” said Larry Jamieson of industry tracker Lyra Research. “Every other major company is moving more and more stuff offshore into wherever they can get the cheaper labor. Is it going to be the same company? Who knows?”
‘A global company’
Lexmark years ago moved the majority of the manufacturing of its printers and ink cartridges — some of which were once produced in Lexington — outside the United States.Within the past two years, it has closed an inkjet cartridge plant in Scotland to focus more of its manufacturing in lower-wage countries. Some of Lexmark’s support functions such as finance and accounting have also gone overseas.But Lexington has continued to be the site of research and development of new technology.In a statement, the company told the Herald-Leader it hired more than 150 new research and development employees in Lexington last year, “and the company plans to continue to add R&D resources in the U.S. in 2008.”Those moves resulted in a net gain in Lexington’s R&D positions, the company said. Overall employment in the city, though, did not grow substantially as the company eliminated 200 positions in support areas, sending some of them to lower-cost countries.
Company executives declined requests for an interview.
Two years ago, in advance of the company’s 15th anniversary, CEO Paul Curlander told the Herald-Leader that U.S. research efforts remained critical to the company. He said at the time that the company’s goal was to move things currently being done in Lexington to other locations so “we can then use the resources in Lexington to do more technology, more innovation work, which we think is kind of the core strength of the company.”He emphasized then as the company did in its current statement that Lexmark has to remain cost-competitive with rivals.”Lexmark is a global company. We sell our products globally. We manufacture our products globally. We design our products globally,” the statement read. “And we compete against other global manufacturers. But we also remain committed to our presence in the Lexington community.”
But at the grand opening of the Philippine facility earlier this month, Lexmark executives played up the fact that they can do all the R&D there.
Chris Burdette, general manager of Lexmark’s hardware development, told the Sun Star newspaper in the Philippines that the facility there “can do everything” that Lexington does.”We can develop a product here from start to finish,” he told the paper.The company has done R&D in the Philippines for some time, using leased space, but, as executives noted at the celebration, the new plaza shows it is committed to the Philippines for decades to come.And the plans to grow show in the equipment at the facility. The R&D center has an acoustics chamber to test printer noise, as well as a lab that examines electromagnetic waves emitted by printers to make sure they meet international standards. That’s a first for the Philippines, Lexmark told the newspaper. Both are also in the company’s vast complex off New Circle Road at Newtown Pike.
Burdette told the Sun Star that the printers that the company plans to build at the facility will be second-generation versions of ones developed in Lexington.Tom Carpenter, a vice president and senior equity analyst at Hilliard Lyons in Louisville, said companies should want to have R&D facilities in the geographic areas where they sell their products.And, as Jamieson said, many of those countries are in emerging markets that are growth areas for the printer industry, and locations there give them “a better understanding of what the emerging markets are looking for, instead of just sort of throwing in a cheaper version of the technology that they had in the mature markets.”Industry leader Hewlett-Packard is developing some of its low-end laser printers in China, he said, and some copier companies have outsourced their design for low-end products to companies in China and Taiwan.
And it’s also loads cheaper for Lexmark.
“The reason why there’s so many people in the Philippines is they’re in a race against time to reduce their costs,” Carpenter said, specifically noting the company’s struggles with its inkjet printer division that has been dragging down performance since the latter half of 2005.”If inkjet remains viable, the rate of job loss can slow. If it doesn’t, the process could accelerate,” he said.
Two restructuring plans since 2006 have seen 400 administrative and sales support jobs either eliminated in Lexington or moved to lower-wage countries.
The company also has seen some of its top managers leave over the past year, some heading to competitors and others moving to different industries. Few agreed to talk, but one marketing employee who left in 2006 and later wound up at rival Kodak said he understood why some might be looking to leave Lexington.”The things they’re doing now … if they had been doing them, say, four years ago, they wouldn’t be in the hole they’re in today,” said Ben Smith.Lexmark bars its employees from speaking to the media.
Lexmark’s plans for domestic and foreign staffing aren’t obvious to those closely watching the company.”It’s hard to say whether they’re simply trying to expand their global footprint and reducing costs or they’re seeking some redundancy for a bigger change down the road,” Carpenter said of the facility in the Philippines. “They do have a lot of employees there.”Jamieson said Lexington’s future is likely to be secure, at least in the short term.”I’d be afraid to move everything to someplace like the Philippines until you know that things are going to work out right,” he said. “The last thing you need is for things to go wrong on your product. So I would think they would be running in tandem for quite a while.”But he did offer a prediction.”At some point, they’re going to say ‘we don’t need both facilities’ and they’ll go to the other guy.”
Lexmark was once hands-down the top private employer in Lexington, employing more than 5,500 in 1995. The company now employs about 3,000, putting it behind the Saint Joseph Health System, which employs 3,500. When independent contractors are factored in, the two have roughly the same number of workers.The printer-maker’s jobs are among the best paying in town. Lexmark jobs paid an average hourly wage of $40.86, according to data provided by the state Cabinet for Economic Development last year. That’s about $85,000 annually.