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AnonymousInactiveOutsourced/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.What’s next?
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.”Top employer?
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. -
AuthorApril 21, 2008 at 1:07 PM
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