Politics & Economy:
Global Slowdown Tames the Irish Tiger
Baltimore Technologies Is Expected to Join List of Companies
Software Maker to Announce Restructuring Plans on Wednesday;
Firms Have Eliminated More Than 1,500 Jobs This Month
By staff reporters Stephanie Gruner,
David Pringle and James R. Hagerty
The Wall Street Journal Europe via Dow
Jones August 24 2001
Ireland's economy, which soared in the 1990s through technology
investment, is bracing for more bad news this week following
the recent loss of more than 1,500 high-tech jobs through the
closure of two big plants by U.S. companies.
Baltimore Technologies PLC, once a star
of Europe's tech sector, is expected to announce significant
job cuts Wednesday as it unveils a major restructuring program.
The unprofitable security-software company, which is fast running
out of cash, has already shed more than 250 of its 1,400 staff
following a series of sales warnings this year. Baltimore has
seen its share price fall by 98% since its market capitalization
peaked at about GBP 5.5 billion (8.67 billion euros) in spring
2000. Some analysts believe the company may have to merge with
another security-software firm to survive.
Baltimore's expected moves come on the back of an announcement
on Friday that General Semiconductor Inc. of the U.S. would close
a plant in Macroom, located
in County Cork in southwestern Ireland, eliminating 670 jobs.
Most of that plant's work will be transferred to factories in
China and Taiwan with lower production costs.
On Aug. 8, U.S. computer seller Gateway
Inc. said that it would close its European manufacturing operations
in the U.K. and Ireland, resulting in the loss of more than 900
jobs at the company's European headquarters in North Dublin.
The continuing layoffs don't bode well for Ireland's so-called
Celtic Tiger economy, which has roared the past decade as low
taxes and a well-educated work force drew high-tech companies
from the U.S. and elsewhere to the country. "Obviously there
will be a huge effect that will ripple through the economy,"
said Darach McEvoy, managing director of strategy consulting company
Quaestus Ltd. in Dublin. Suppliers, subcontractors and local
communities will all be affected, he said of the high-tech layoffs.
Following news from General Semiconductor
last Friday, Irish Deputy Premier Mary Harney cut short her summer
holiday to deal with the latest setbacks for Ireland's technology
sector. Ms. Harney, who serves as enterprise, trade and employment
minister, said she planned to meet with affected workers, but
urged Irish citizens not to despair. "Recent job losses
are not symptomatic of a deterioration in the competitiveness
of Ireland's economy," said Ms. Harney. "I remain confident
that the fundamentals of the economy are strong."
Industry experts said that people seemed
to be taking the high-tech downturn in stride. "The reaction
here is much calmer than if this had happened 10 years ago,"
said Mr. McEvoy. "People realize that tech companies come
and go. Obviously for a small town, it's a big blow. But what
the company is leaving behind is a world-class factory and a
world-class work force, which will be valuable assets to other
technology companies when the market picks up."
Few expect that to happen soon. With high-tech
businesses struggling as global sales nosedive, some analysts
predict further waves of layoffs at U.S.-based technology companies
in Ireland. Still, said Aziz McMahon, an economist at
Ulster Bank in Dublin, "I don't think it means the economy
is headed for really, really troubled times." According
to the Irish Central Statistics Office, 320,000 new jobs were
created between 1996 and 2000 and unemployment remains low at
4% in 2000, down from 11.5% in 1996. "We remain a competitive
economy," said Mr. McMahon. "When the global economy
recovers, Ireland will still be there."
Foreign-owned technology companies employ
about 50,000 people in Ireland out of a total work force of 1.7
million, said Mr. McMahon. But those tech firms account for a
much larger share of Ireland's exports and are an emblem of the
country's surge in prosperity over the past decade. Ireland's
economy has been growing so fast in recent years that it has
outstripped the capacity of the country's roads and other infrastructure
and sent housing prices soaring. As a result, many Irish leaders
have long said that a slowdown was inevitable and would help
restore balance. The current slowdown is turning out to be abrupt,
however, and that could damage consumer confidence as well as
property prices. Mr. Aziz forecasts that the growth of Ireland's
gross domestic product will slow to about 6% this year from
11.5% last year. Already, 3,500 job cuts have been recorded in
the technology sector this year, mainly as a result of cutbacks
by U.S. multinationals.