Western Digital to Close Irvine Plant, Lay Off 110 : Cutbacks: Company’s continuing reorganization will have cost 1,000 jobs worldwide after next month.
Western Digital Corp., continuing a reorganization begun 11 months ago, said Tuesday that it will shut an electronics plant in Irvine and lay off 110 employees.
The plant, which will be closed Aug. 30, had been making electronic circuit boards for International Business Machines Corp.’s laptop computer. IBM will now produce the boards at its own plants, a change the companies had previously announced, said Robert Blair, a Western Digital spokesman.
Western Digital said employees who are laid off will receive severance pay based on their years of service with the Irvine computer products company.
In the past year, Western Digital has slashed more than 1,000 jobs worldwide, which will bring its payroll to 6,700 after the latest layoffs are completed. In February, the company eliminated 160 jobs.
The company launched the reorganization last year as it attempted to make the transition to some new technologies. Western Digital had hoped for an orderly transition, but the recession forced the company to speed the process and lay off hundreds of workers.
Sales of the company’s older PC components, which used to be mounted on bulky circuit boards, fell sharply as the recession hurt computer sales. And the company couldn’t manufacture enough of its newer products--smaller components that could fit on microchips--to make up for the lost sales.
The big drop in sales of the older products left the company with too much manufacturing capacity, resulting in the closing of a plant in Puerto Rico and now the Irvine facility. Meanwhile, the company has increased production at a new chip-making plant in the Irvine Spectrum business park to supply the newer products.
The layoff will leave the company with about 1,700 employees in Orange County.
Blair did not rule out the possibility of other plant closings as the company continues its restructuring, but he declined to comment on any future actions. The firm also has manufacturing plants in Ireland, South Korea and Singapore.
The company wrote off as a loss the cost of closing the Irvine plant in its second quarter ended Dec. 31, 1990. Blair declined to specify the cost, except to say it was part of a previously reported $66-million restructuring charge.
No additional writeoffs related to plant-closing costs are expected, he said. Company officials warned several months ago that they were considering closing one or more of the company’s board plants.
Earlier this month, Western Digital reported that it expects a loss of $5 million to $7 million for the fourth quarter ended June 30. The announcement surprised several analysts, who were expecting a small profit. They said it was a sign that the company’s recovery is moving more slowly than expected.
The losses for the past two quarters have left Western Digital in violation of loan agreements covering $160 million of long-term debt. Blair said the company is renegotiating the agreements with its lenders and expects to have a favorable conclusion within the next few weeks.
Blair also said Tuesday that the company’s chief financial officer, David W. Murphy, has taken an extended medical leave of absence. He will be replaced on an interim basis by George L. Bragg, a company director.
On a brighter note, Blair said Western Digital will supply parts to IBM for a line of PC products that the Armonk, N.Y.-based computer giant plans to launch in the Japanese market. The deal could result in a significant increase in sales for the company, if the products are successful.
