Seagate To Close Chinese Factory, More Than 2,000 Layoffs
In July 2016, American data storage firm Seagate Technology PLC (NASDAQ: STX) said that it will reduce its overall workforce by around 14%, that works out to about 6,500 jobs, and all this before the start of July 2017. Well, it looks like a large chunk of that is coming from their disk drive manufacturing plant in Suzhou, China, where 2,217 employees will lose their jobs.
The job cuts are a part of the company’s restructuring plan that would shrink Seagate’s manufacturing processes around the globe. Currently, they have factories in Asia, the Middle East, Africa, Europe, and the Americas.
The plant in Suzhou covers 1.1 million sq ft. which Seagate acquired with its purchase of a rival HDD manufacturer, Maxtor, in May of 2006 for $1.9 billion.
Why It Was Necessary
A decrease in demand of disk drives has contributed to the company’s closure of the plant. They ended their first quarter of 2017 with 44,455 employees. As their average employee cost has remained around the $35 to $40,000 range, a conservative estimate by Aaron Rakers, Managing Director at Stifel Nicolaus, puts the savings at around $20 million per quarter.
While its a sad time whenever anyone loses their jobs, the cost savings to the company is hard to argue with. Hopefully all Seagate employees will land back on their feet.
What do you think about Seagate’s decision?