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2,000 Zenith Jobs in Jeopardy

October 9, 1998

CHICAGO (AP) _ Zenith Electronic Corp. said Friday it has ended talks with Philips Electronics Corp. about the Dutch consumer electronics giant buying Zenith’s suburban Melrose Park picture tube plant, putting 2,000 jobs in jeopardy.

Zenith earlier this week warned workers at the plant that the television picture tube-making facility may be shuttered by Dec. 5 if the company cannot find a buyer as it struggles to reorganize its operations. The company said then it was in talks with an unnamed company to buy the plant, but said Friday that negotiations with Philips’ American operations apparently fell through.

Spokesman John Taylor declined comment on the stumbling blocks.

Zenith also said it has asked unions at the plant for alternative ideas that might keep the plant open, but sources for both sides said such a plan was unlikely since workers were unlikely to take large-scale pay cuts.

Jose Caez, business manager for the International Brotherhood of Electrical Workers Local 1031, which represents about 75 percent of the workers, was out of town Friday and could not be reached for comment.

Glenview-based Zenith invested millions of dollars a few years ago in updating the Melrose Park plant, only to see the color picture tube market erode and prices fall sharply. Analysts have said Zenith also bet incorrectly that the market for mid-size TVs would remain strong instead of focusing more on large-screen sales that have soared in recent years.

Zenith, which has had only one profitable quarter since 1985, has worked out a deal with its chief investor, LG Electronics of South Korea, to become a wholly owned subsidiary of that company in exchange for debt forgiveness and additional financing.

The company also has announced an ambitious plan to remake itself, essentially divesting itself of and outsourcing all its manufacturing operations, while maintaining the recognizable Zenith name and continuing to research new technologies.

The company also is hoping it will begin to see returns from its long investment in high-definition television and digital set-top boxes.

Zenith has never recovered from the competition from cheaper Japanese televisions that began in the mid-1970s. It is also facing a serious challenge from industry leader Thomson SA of France.

LG Electronics bought a majority interest betting that a zest among manufacturers and lawmakers to bring digital television to American viewers would bring Zenith back to its glory days _ and billions to LG Electronics, which also makes Goldstar products.

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