LG fiddles while Mexico iMac plant burns

Will Apple's Q3 results be affected?

Apple's iMac production programme was hit last week by a major fire at LG Electronics' Mexicali, Mexico plant. Damage from the fire itself, reported by the AppleInsider Web site, and the water used to put it out, forced the closure of the plant for "at least a month", according to LG sources quoted by the site. Quite what the effect on Apple's sales will be remains to be seen, however, but it's unlikely to be as bad as some Apple watchers have claimed. The Mexicali plant began punching out iMacs as part of a deal Apple struck earlier this year to outsource iMac production to LG (see Apple tight-lipped on LG's iMac production deal and Apple axes 450 jobs in Cork, Ireland). Any impact on the company itself is likely to be taken in its Q3 1999 results -- Q2 ended on the day of the fire, 27 March -- largely thanks to a reduction in the number of iMacs in Apple's various sales channels. That said, the whole point of the LG deal was to give Apple access to LG's economies of scale. Assuming Apple has signed LG to supply x iMacs per month (say), LG will have to do so, even if those machines must come from its plants in Europe and the Far East. And if those machines cost more to produce as a result, well, that's technically LG's problem, not Apple's. This is, after all, why factories are insured. ®