October 12, 2007
Bear Stearns analyst Kevin Kessel shares his view from Wall Street on changes taking place with EMS provider Flextronics, including some near-term ramifications resulting from the completed Solectron acquisition.
Combining points of interest from other sources mixed with wisdom based on years of industry experience, Kessel examines the initial scope of Flextronics’ restructuring plan that is resulting in a couple of factories closing in Western Europe (e.g., Chateaudun and Canjan in France), the U.S. (e.g., North Carolina and Massachusetts) and, Canada as well as in Turkey.
Kessel believes these actions could be the beginning of a comprehensive global restructuring effort by Flextronics of high-cost and underperforming locations in an attempt to strike an ideal manufacturing balance in an industry with an over abundance of manufacturing square footage.
Kessel estimates roughly 8.3 million square feet or, 43+ facility locations with overlapping high-cost footprints, could be ripe for consolidation.
Wall Street seems to be viewing all of this favorably and Kessel feels the restructuring program currently underway should improve Flextronics’ overall cost structure resulting in better synergies and meaningful cost savings.
Detail
An Agence France Press report referenced by Bear in Kessel’s report indicated Flextronics is on course to close its manufacturing plant in Chateaudun, France. The location is expected to close before the end of January 2008 resulting in laying off approximately 360 employees and 150 temporary staff.
Following the Flextronics’ takeover of Solectron’s Canjan, France location, Flextronics announced to the 540 ex-Solectron employees it will close the facility. On this note, according to the managing director of Flextronics France, the Company also intends to close its plants in Raleigh (North Carolina) and Boston (Massachusetts) and Montreal (Canada) and Istanbul (Turkey).
Back in the United States, the closing of Flextronics’ Youngsville, North Carolina facility will eliminate 650 jobs. Kessel believes actions subsequent to this by Flextronics could result in the Company utilizing Solectron’s Charlotte sites when the time comes for Flextronics to begin transferring OEM programs out of Youngsville.
Source: Bear Stearns
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