May 30, 2014

Motorola closing Alliance smartphone factory

The factory, operated by Flextronics, opened to much fanfare last year as the only U.S. smartphone factory. But sales of the Moto X phone have been too weak to keep it operating.

Less than a year after opening a smartphone manufacturing plant in far north Fort Worth to great fanfare, Google’s Motorola Mobility announced Friday that it will close the Alliance facility by the end of the year.

Motorola Mobility spokesman Will Moss said sales of its flagship handset made at the facility, the Moto X, were too weak and the costs of running the 450,000-square-foot plant too high to keep operations going. The Moto X will be made elsewhere, including China and Brazil, the company said.

The Fort Worth facility, which had more than 3,500 workers at its peak, now has about 700, the company said. Those people are mostly employed by Flextronics International, which operates the facility.

Renee Brotherton, a spokeswoman at Flextronics’ San Jose, Calif., offices, said the closing is the result of “our customer strategy to consolidate its product manufacturing globally.” She said the company will provide severance packages and when possible will try to place affected employees at other operations.

Fort Worth Mayor Betsy Price said in a prepared statement that city leaders “are obviously disappointed” in the news.

“It’s just part of the economic cycle that businesses will rise and fall,” Price said, but “I remain confident that business and job growth will remain strong for the foreseeable future.”

The city noted that the companies did not receive any economic incentives when they opened the facility.

It’s a sharp turnaround from the Sept. 10 grand opening, attended by Google Chairman Eric Schmidt and Texas Gov. Rick Perry. The plant, a former Nokia cellphone facility, had begun limited operations some months earlier and went into full production Aug. 6.

At the opening, Schmidt said the Fort Worth facility, the only U.S. smartphone plant, would be just the first in a series of steps that would change the perception of American manufacturing. Perry said Google was making a key investment in Texas, noting that “not every place in America can fill that demand for jobs.”

Fort Worth was among several sites considered for the Moto X plant. At the opening, Flextronics CEO Mike McNamara said the North Texas facility was selected because of its proximity to Alliance Airport, a foreign-trade zone that allows lower importing costs and better supply chain efficiencies.

But the pricey phone never quite caught on, and by January the 16-GB model that debuted at $579.99 without a contract could be had for as little as $299.99. Late last year, Motorola announced the new, less-expensive Moto G and earlier this month it introduced its cheapest phone, the Moto E, in what analysts said was an effort to appeal to value shoppers.

Google, which bought Motorola Mobility in 2012, in January agreed to sell the handset maker to China’s Lenovo Group for $2.91 billion.

One market researcher, Strategy Analytics, estimated that 900,000 Moto X phones sold in the year’s first three months. That compares to 26 million copies of the latest Apple iPhone 5S and 3 million Moto G phones.

Motorola President Rick Osterloh on Friday told The Wall Street Journal, which first reported the closing, that “what we found was that the North American market was exceptionally tough.” The Fort Worth plant was intended to provide fast service to U.S. customers buying customized phones.

Motorola’s Mark Randall told the Journal that Moto X sales were not strong enough to overcome higher labor and shipping costs compared to overseas facilities. And since the Moto G sells mostly in developing markets, making it in Fort Worth didn’t make sense.

Moss said the company would not make executives available for additional comments.

Lenovo spokeswoman Milanka Muecke, in an email statement Friday, said the decision to close the plant is Motorola’s to make, but Lenovo remains “fully committed to our plans to grow and win with Motorola” once the purchase closes. Muecke said the Beijing-based company will continue its own U.S. operations, including a personal computer manufacturing facility in North Carolina.

A spokesman for Hillwood Properties, developer of Alliance, declined to comment on the closing, saying it was the business of its tenant. He noted that Alliance is home to about 37 million square feet of space in total and 365 companies.

Related content



Editor's Choice Videos