Motorola, Inc. (NYSE:MOT) and Celestica, Inc. (NYSE, TSE:CLS) today announced a strategic manufacturing alliance that has a total estimated value of more than $1 billion over a three-year period. Under the terms of the agreement, Motorola will sell its manufacturing operations in Dublin, Ireland, and Mt. Pleasant, Iowa, to Celestica for approximately $70 million subject to post-closing adjustments and will outsource the manufacturing of some cellular phone handsets, messaging devices, two-way radio products and accessories to the company.
This is the second major outsourcing agreement Motorola has announced this year. The agreement is part of a long-term, company-wide strategy to improve supply chain efficiencies, consolidate manufacturing and restructure to improve financial performance and build on company strengths.
"Motorola must remain nimble in order to stay ahead of the marketplace and grow our position as a technology leader," said Christopher B. Galvin, Motorola's chairman and chief executive officer. "Leveraging the expertise of a strategic partner and technology leader in the electronics manufacturing services industry, like Celestica, enables Motorola to anticipate our customers' evolving needs better and speed our products to market around the world."
The agreement is expected to close in Q1 2001. Celestica will continue manufacturing some Motorola cellular phone handsets, messaging devices, two-way radio products and accessories for at least three years at the Mt. Pleasant facility and two years in Dublin.
"Celestica is very pleased to enter into this significant relationship with Motorola, a strategic telecommunications customer," said Eugene Polistuk, Celestica's president and chief executive officer. "This announcement further strengthens Celestica's position as a world leader in the EMS industry, specifically in the rapidly expanding wireless telecommunications sector."
As a result of the agreement, Motorola's Boynton Beach, Fla., manufacturing facility will be converted to concentrate on software applications, product design activities and administrative support. Pager Care Center operations will be transferred to Motorola's Fort Worth, Texas, facility, while manufacturing will shift to Celestica in Dublin. The Dublin facility will also continue to manufacture cellular phone handsets for Motorola. Prior to closing the sale, Motorola will consolidate operations in Mt. Pleasant to a single facility.
For Motorola, the manufacturing consolidation will result in the elimination of approximately 2,870 positions out of the total workforce of 130,000. Celestica will offer positions to approximately 650 of Motorola's 1400 Dublin employees and 550 of the 670 Mt. Pleasant employees. Of the 800 affected Boynton Beach employees, 100 will be eligible to transfer to Motorola's Fort Worth facility, and another 250 will be eligible to transfer to Plantation, Fla.
Severance and outplacement benefits, as well as the opportunity to apply for other positions within Motorola, will be provided to eligible employees.
The businesses being impacted include Motorola's Personal Communications Sector; Integrated Electronic Systems Sector; and Commercial, Government and Industrial Solutions Sector.
In a similar move announced earlier this year, Motorola realigned the outsourcing of manufacturing for some of its wireless products, network equipment and set-top boxes to Flextronics International Ltd. (NASDAQ: FLEX). The consolidation will reduce time-to-market, streamline the supply chain and enable the company to meet increasing consumer demand for Motorola products.