By ()
Updated: 2007-06-27 11:12

It's occurred from Airbus to Lenovo, General Motors to Citigroup, and Dell to Motorola. A string of multinational companies (MNCs) have entered into merger and acquisition deals or carried out internal restructuring, resulting in layoffs.

Jobs are usually slashed in developed markets, such as the US and Europe. But in emerging markets, including China, jobs are usually maintained and even added. In some cases, senior management positions are moved to developing nations.

Citigroup Inc in April said it would eliminate 17,000 jobs, or 5 percent of its workforce, as part of a broad restructuring plan designed to cut costs and bolster its stock price.

It also declared that more than 9,500 jobs will be moved to lower-cost locations worldwide, including China and India.

Behemoth aircraft maker Airbus announced in January it would cut 10,000 jobs across Europe, as well as transfer three plants and share research and development cost with partners over the next four years.

The move is to help the company's pre-tax profit reach 210 billion euros by 2010, compared with a negative pre-tax profit last year. It also hopes to accumulate 5 billion euros in cash between 2007 and 2010.

While the job reduction plan did not cover China, some senior managers have been sent to the world's fastest-growing market.

Lenovo Group, the world's third-biggest PC maker, said in April it would lay off 1,400 people, mostly in the US and Europe.

The effects of the restructuring will be felt hardest in Raleigh, North Carolina, where roughly 20 percent of jobs will be cut or relocated to emerging markets like China, India and Eastern Europe. Through the restructuring, the company expects to save about $100 millon in the current fiscal year.

"The main driver of (the layoff) trend is cost savings, considering how much lower the cost of labor is in developing marketplaces," said Leigh Baker, senior advisor of human resources consulting services firm New Leaders International.

However, Andy Xie, former Morgan Stanley chief economist in Asia, said that labor costs have continued to climb, particularly in China's eastern coastal provinces, due to renminbi appreciation and a shortage of skilled workers.

A survey from the London-based Economists Intelligence Unit showed that China's average labor cost increased $1.36 per hour in 2005, up 72 percent by 2001, and is to double to $2.70 per hour by 2010.

Baker said that in addition to the cost of workers, MNCs' decision to keep or expand their workforce in China is due to the large market.

"Normally, they want a lower manufacturing cost base for their global business," Baker said. "Secondly, they want to supply the local market and can only be competitive against local companies over time if they have a similar cost base."

Bill Amelio, Lenovo's chief executive, said the reason behind relocating jobs to emerging markets was to be "closer to Lenovo's suppliers and manufacturing operations".

PepsiCo, the world's No 2 soft drink company, has announced a plan to double its workforce in China over the next half decade as it fights for a bigger slice of the growing market.

Meanwhile, because of the shortage of experienced local senior managers, MNCs transferred senior foreign managers to join the local management team.

"Those senior managers are assigned to implement corporate production, supply, financial and other business systems, all of which require in-depth knowledge of the systems themselves and long work experience in MNCs," said Baker, a veteran MNC consultant.

Baker forecast that MNCs will ultimately phase out their senior foreign managers and replace them with Chinese managers they have been training to take over.

He said Chinese managers will be more effective in managing Chinese staff and operating in the local market, which can save costs and improve corporate profit growth.