MNCs prefer Mexico to Europe

A number of multinational companies are cutting jobs more heavily in Western Europe than in other regions and fleeing to low-labour-cost countries like Mexico and those in Eastern Europe, a US media report said.

For example, IBM said last month that of its 14,500 planned layoffs, 70 per cent would fall on Europe, mainly in Germany, France and Italy.

Household appliance maker Electrolux AB of Sweden said it is evaluating 27 factories for possible closure as part of a strategy to shift the focus of its production from high-wage Western Europe to countries with cheaper costs, especially Mexico and some in Eastern Europe.

Auto giant General Motors is currently shedding 12,000 employees in Europe, including nearly a third of its 32,000-strong German workforce -- a proportionately deeper cut than its parallel cost-cutting measures in the US.

"There is clearly a geographical trend," Julian Callow, chief economist at Barclays Capital in London, told The Wall Street Journal.

"The basic message is that globalisation has a lot further to run, and in that reshaping, Europe is increasingly being bypassed."

"It is purely driven by consumers," said Jacob Broberg, a company spokesman for Electrolux. "Consumers are not willing to pay extra for a product that is produced in a specific country."