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Swiss manufacturers cut jobs that sector warns won't come back

[ZURICH] Visitors say views through the glass floors in Schindler's Auckland Sky Tower elevators offer one of the most exhilarating lift experiences in the world.

But for the Swiss workers who make the elevator parts, their uncertain future might feel as dizzying as the 220-metre drop underfoot as Swiss industry accelerates job cuts to mitigate the impact of the galloping franc.

Six decades after opening, Schindler's hometown factory in Ebikon that decades ago employed hundreds will be scaled back to under 100 employees by the end of 2017.

They will focus on special orders the company said would secure the site's competitiveness, justifying higher costs than at factories it opened this decade in China, Slovakia and India.

General Electric is also cutting 900 Swiss industrial jobs, Rieter 150 and Sulzer 90 since the "franc shock", the central bank's abandonment in January 2015 of the ceiling for the franc against the euro that abruptly made Swiss goods a fifth costlier abroad.

The franc's leap unleashed a wave of job cuts as factories shut down and small manufacturers struggled to keep afloat.

Now fears are mounting that jobs in the manufacturing sector - still a bedrock of the Swiss economy even as other advanced economies shift more to services - are going for good after being whittled away during decades of automation and offshoring.

"These jobs aren't coming back," said Guido Schluep, secretary general of industry at the Syna union, who has helped negotiate the extent of job cuts at Schindler.

Switzerland has long had an international reputation for high-quality manufacturing of everything from luxury watches and precision instruments to Nespresso capsules and cancer drugs, as well as Schindler elevators and escalators.

Bucking the trend in nearly every other developed country, manufacturing has gained importance for the Swiss economy over the past 25 years. It accounted for 19.5 per cent of Swiss economic output last year, up from 17.6 per cent in 1991.

Just over 620,000 jobs - or 16 per cent of the total - are in manufacturing, twice the per centage in countries such as Britain, once known for robust industry.

But the number is down from 800,000 in 1991, when industry generated 23.2 per cent of Swiss payrolls.

Since last year's shock, manufacturing employment has fallen 1.6 per cent while overall numbers of workers stagnated on a seasonally adjusted basis, based on first-quarter figures.

Outsourcing, automation and a shift towards high-end products requiring less manual input had already taken their toll on the numbers employed.

A boom in the pharmaceutical and chemical industries has seen the Swiss economy through difficult years, offsetting industry's emaciation and buoying trade.

But these businesses contribute only modestly to Swiss jobs, representing just one in eight manufacturing posts and generally requiring technical training or beyond.

While jobs in the pharmaceutical industry may have nearly doubled in the past 25 years, one in three mechanical production jobs has become obsolete.

Even as order books start filling and revenues rebound, experts say layoffs could take another year and a half to work their way through the industry.

The mechanical and electrical engineering industry has taken a particularly hard hit, with payrolls falling more than 4 per cent in just over a year. Industry lobby Swissmem calls this an "accelerated structural change" in which manufacturers move manual work to cheaper countries.

Politicians from Swiss President Johann Schneider-Ammann - an industry mogul himself - to the leader of the Social Democrats warn that creeping deindustrialisation could take a turn for the worse if the franc strengthens again. The franc hit a five-week high against the euro on Tuesday.

The government has been consulting with business but has said it sees no need for a special economic stimulus package.

Unlike previous crises in which state-subsidised short work hours helped companies limit wage costs while ensuring they could ramp up production once good times returned, employers are hardly positioning themselves to bring those jobs back.

A scant rise in short-time contracts in 2015 indicated that"employers in industry no longer expect to have any more work for many employees even if the economy picks up", Credit Suisse economists wrote.

The franc's weakening from over parity against the euro on Jan 15, 2015, to 1.10 per euro of late and an additional 61 million francs in spending to support small- and medium-sized exporters this year have helped ease some of the pressure.

Price-sensitive domestic sectors such as retail and tourism have shown the first tentative signs of a pick-up.

But while production and exports showed some signs of stabilisation in the first quarter, Credit Suisse said it was too early to speak of a pronounced industrial recovery. It now thinks its January forecast for a 1.2 per cent fall in manufacturing employment this year was "a bit too optimistic".

Two-thirds of the world's elevators are now installed in China, an opportunity that Schindler - a rival of United Technologies' Otis, Kone and ThyssenKrupp - is seizing.

It announced on Tuesday it was taking a stake in a Chinese joint venture partner.

Schindler has said it has no choice but to adapt to new market conditions. "Due to robust market growth in Asia and high production costs in Switzerland, more and more of our orders are being processed abroad," it said.

Talks between labour and management reduced the number of job cuts in Ebikon from 120 to 105. Union representative MrSchluep said 60 cuts could come from "decent solutions" like early retirement or finding other opportunities for laid-off workers.

Well-trained personnel had better chances of finding new jobs, he said. "But mass production relying on cheap work that doesn't require special training doesn't have a future here," he said. "It's the unskilled jobs I am worried about."

Workers affected by the cuts did not want to speak to the media while talks on how to cushion their blow continued.