Q U A E S T U S               Strategy & Marketing Consultants

 

Home
Up
Who we are
What we do
How we work
Industry Sectors
The Quaestus Team
Publications
Contact Information
For US Firms

    Politics & Economy:
    Global Slowdown Tames the Irish Tiger

    Baltimore Technologies Is Expected to Join List of Companies Cutting Workers
    Software Maker to Announce Restructuring Plans on Wednesday; U.S. Tech
    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.