First Solar Will Cut 30% of Workforce, Shutter Plants
April 17 (Bloomberg) -- First Solar Inc., the largest thin- film panel maker, will cut 30 percent of its workforce, about 2,000 jobs, in response to a deteriorating European market.
Most of the jobs to be eliminated will be at a factory it's closing in Germany and in Malaysia, where it's idling four production lines, Tempe, Arizona-based company said today in a statement. The company will pay $245 million to $370 million in severance and related costs.
First Solar's thin-film technology, which helped it become the lowest-cost panel manufacturer, generates less electricity than traditional polysilicon panels that are made mostly in China. That's made it less popular for rooftop systems that are favored in the top solar markets in Europe, said Theodore O'Neill, an analyst at Wunderlich Securities in New York.
"They don't have a good product for the rooftop market and Europe doesn't have the big open spaces where their panels make sense," said O'Neill, who has a "hold" rating on the shares. "The factory closures provide some clarity going forward, but they have a lot of work to do to prevent margin erosion."
First Solar fell 1.1 percent to $20.60 at 10:04 a.m. in New York. The shares had declined 38 percent this year through yesterday.
German Factory Closing
The plant in Frankfurt an der Oder, Germany, has about 560 megawatts of First Solar's 2,520 megawatts of annual production capacity, and will be closed in the fourth quarter. The company spent $170 million euros to double its capacity, and it reached full production in November.
The company will idle four lines in Kulim, Malaysia, this month, trimming capacity at the plant by about 144 megawatts out of a total of 1,680 megawatts. First Solar said it expects to produce 1,500 to 1,800 megawatts of panels this year.
Cost savings associated with the cuts will reduce manufacturing costs to 70 cents to 72 cents a watt this year, the company said. Next year, First Solar expects to produce its cadmium-telluride panels for 60 cents to 64 cents a watt.
"After a thorough analysis, it is clear the European market has deteriorated to the extent that our operations there are no longer economically sustainable," Mike Ahearn, First Solar's chairman and interim chief executive officer, said in the statement.
As part of its restructuring, First Solar said it paid down $145 million of debt ahead of schedule under the company's German loan agreement.
(First Solar will hold a conference call at 11 a.m. New York time, accessible at http://investor.firstsolar.com/events.cfm .)
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