Pink Slips

[Thomas Kruse <tkruse@xxxxxxxxxxxxxxxx>]

I just found the answer to my question about more layoffs:

Ax and Ye Shall Receive? Companies Are Aiming for Growth in New Round of Layoffs

By Tim Smart
Washington Post Staff Writer
Thursday, November 13, 1997; Page E01
The Washington Post

For 24 hours this week, it looked like the early 1990s again as Corporate
America brandished pink slips with abandon.

Eastman Kodak Co. set the pace, with its announcement Tuesday of 10,000
layoffs as part of the photographic film giant's broad restructuring.
Underwear maker Fruit of the Loom Inc. was not far behind, giving 2,900
workers the ax. Electronic components company Kemet Corp. showed the door to
another 1,000 while New York fashion house Donna Karan International Inc.
sliced its payroll by 15 percent, or 285 employees.

Then came news that General Motors Corp. would take a huge charge, between
$2 billion and $3 billion, for restructuring its operations and closing an
unspecified number of manufacturing plants. It would be GM's biggest charge
against earnings since 1990, when the automaker took a $2.1 billion hit.
Though GM did not specify how many U.S. jobs would be lost, analysts expect
a large number.

American workers, noting the record profits that companies have been posting
the past few years and, until recently, the ever-upward rise in their stock
prices, might wonder why downsizing is back in the headlines after an
apparent hiatus. That's especially true given that the nation's unemployment
rate stands at 4.7 percent, the lowest it has been in almost a quarter century.

Analysts and consultants who advise companies on strategic issues said the
latest restructurings, painful as they are from the viewpoint of the
unemployed worker, are different from the era of massive downsizing that
characterized the turn of the decade.

"This is a new restructuring wave," said Gary Neilson, a senior vice
president at Booz-Allen & Hamilton Inc., a Bethesda-based consulting firm.

And even though the individual numbers seem huge, they still pale in
comparison with some of the bloodletting of 1993, the worst year for
layoffs. International Business Machines Corp., for instance, laid off
60,000 people that year; Sears, Roebuck and Co., 50,000; and Xerox Corp.,
10,000.

Then, some of the companies were in dire financial shape, losing market
share and even in danger of being also-rans in their business. Today, the
restructurings reflect different business conditions.

In GM's case, the automaker probably will record a one-time gain of almost
$4 billion on the sale of its defense arm of Hughes Electronics Corp. to
Raytheon Co. The expected restructuring charges could be offset, in part, by
the gain.

"They almost went broke the last recession," said David Healy, an analyst
with Burnham Securities, a New York investment bank and brokerage. "They'd
like to be sitting on a cash hoard when the next downturn comes."

But even GM has been doing well, with a profit of $4.5 billion through the
first nine months of the year and cash on hand of $15 billion.

"They're behind their competition in North America," Healy said. "They have
too much capacity to build passenger cars and not enough to build trucks."

Similarly, General Electric Co. is enjoying record profits that have it on
track to earn $8 billion this year. Yet, in the past week, it announced a
deal under which it is selling back its stake in Lockheed Martin Corp. of
Bethesda for certain Lockheed assets and a $1.5 billion payment. GE said it
expects to record a $1 billion net gain on the deal, which it will use to
restructure some of its industrial businesses.

Booz-Allen's Neilson, a veteran observer of corporate makeovers, said
today's downsizings are more strategic in nature than those in the past.
"The restructuring we see in this wave is a lot more repositioning for
growth rather than retrenchment," he said.

"It's a lot more `Let's get our act together and focus on who we are going
to be,' " Neilson said. "In the early '90s and late '80s there was more
downsizing for survival."

Still, Tuesday's carnage was the worst one-day round of layoffs since
November 1996, according to Challenger, Gray and Christmas Inc. in Chicago,
an outplacement firm. "They've been surging since July," John Challenger,
executive vice president of Challenger, Gray, said of the cutbacks. "I think
there is a real potential this is another wave."

Driving companies to continue their cost-cutting, according to First Union
Corp. economist Mark Vitner, is an economic environment in which businesses
have been unable to get price increases for their products. "We have seen
absolutely no inflation in the price of goods," Vitner said.

To make the same amount of money or more -- as many firms hope given the
continuing pressure for earnings growth from Wall Street -- companies must
continually prune their overhead, usually people, often one of a company's
highest costs.

"There's been very high rates of job loss and displacement that actually
grew in the recovery," said Lawrence Mishel, research director at the
Economic Policy Institute. "There's a lot of turmoil in the labor markets."

The recent weakness in Asian currencies could exacerbate the situation as
foreign-produced goods become even more competitive against those made in
this country, Vitner said. This is the situation facing Fruit of the Loom
and jeanmaker Levi Strauss & Co., which last week said it would lay off
thousands.

If there's a link between the latest layoffs -- whether in the underwear or
film businesses -- it's that the surge of expansion into foreign markets by
U.S. companies carries both risks and rewards, Vitner said.

"All these layoffs, to me the one thing they have in common is sort of the
downside of globalization," he said.

Nor is the layoff frenzy likely to end soon. Challenger said that while
companies will probably spare workers during the holidays, he warned:
"January is often the heaviest month of the year for downsizing."

BIG layoff Announcements IN 1997

Through TUESDAY

Company Layoffs

Kodak 10,000
Woolworth 9,200
Citicorp 9,000
International Paper 9,000
Levi Strauss 6,400
Fruit of the Loom 4,800*
Whirlpool 4,700
Stanley Works 4,500
Apple Computer 4,100
First Bank System 4,000

NOTE: Figures are for the largest layoffs announced at one time.

* Announced in August; 2,900 additional layoffs were announced on Tuesday.

© Copyright 1997 The Washington Post Company

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