The Reality Check at Motorola Electronics Giant's Cuts in Light of Weak Earnings Indicative of Ever-Changing Industry

By Schmitt, Anne | Daily Herald (Arlington Heights, IL), October 9, 1996 | Go to article overview
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The Reality Check at Motorola Electronics Giant's Cuts in Light of Weak Earnings Indicative of Ever-Changing Industry


Schmitt, Anne, Daily Herald (Arlington Heights, IL)


Byline: Anne Schmitt Daily Herald Business Writer

For years, Motorola has been the darling of corporate America, racking up impressive profits, taking the lead in the cellular and paging businesses and setting standards in quality.

But lately, the Schaumburg-based company has taken its share of nicks as its profits have fallen amid increased competition in its biggest businesses.

In response, Motorola said it is cutting costs and adjusting its work force.

That can be scary news. After all, Motorola has been adding thousands of jobs every year, helping shield the Chicago area from the effects of the 1991 recession and creating an economic boom in Lake, Kane and McHenry counties. Motorola has 24,000 Illinois employees, making it the 10th largest employer in the state.

But analysts say even a company as well-managed as Motorola is not immune to the ups and downs inherent in the capitalist system.

"In an industry that is growing as chaotically as wireless telecommunications, to expect any company to maintain consistent growth and profitability over a decade is absurd," said Herschel Shosteck, a telecommunications analyst in Wheaton, Md.

Motorola announced Monday that third-quarter earnings fell 58 percent from the same quarter last year.

It said it wouldn't have details of cuts in spending or personnel for a few weeks, but they are likely to fall most heavily in its semiconductor business, where sales fell 19 percent last quarter. Semiconductors - the electronic devices used in computers, cellular phones and other equipment - are made in Austin, Texas, and the Phoenix area.

But some local operations are being affected already.

Motorola's Automotive, Energy and Controls Group in Northbrook has established a hiring freeze, released temporary employees and offered some people a voluntary severance package to cut costs, said spokeswoman Anne Stuessy. The group also has operations in Schaumburg, Buffalo Grove and Vernon Hills.

She wouldn't say how many employees have been affected since the beginning of the year when the company introduced the cost-cutting efforts. Stuessy also said company officials don't know yet if additional cuts will be needed.

The news elsewhere is better.

At one of its largest businesses, the Libertyville-based Cellular Subscriber Group, sales are falling, despite an increase in phone shipments, because of declining prices, the company said.

Nevertheless, plans for the group's new Harvard campus continue unchanged, said spokesman David Pinsky. Motorola has about 1,000 people working at its Harvard plant and a second manufacturing site nearby, he said.

"We are continuing with the plans as they were," Pinsky said. Nor is he aware of any planned layoffs or other cost-cutting measures, he said.

Work on the new Elgin headquarters for Motorola's Messaging, Information and Media Sector also is on track, said spokesman Albert Lopez. Earth-moving equipment arrived on site last month, and the project is scheduled for a mid-1998 completion, he said.

Motorola's semiconductor business has reduced expenses by halting planned building construction and reducing its work force through attrition, a voluntary severance plan and layoffs of a couple hundred workers in Austin, said spokesman Jeff Gorin.

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