Hewlett Plans Periodic Plant Shutdowns

Warning that it sees no end to the computer industry slump, Hewlett-Packard on Thursday announced periodic, wide-ranging shutdowns affecting 45,000 employees through October and said extended “holidays” might be ordered for the Thanksgiving and Christmas seasons.

The Palo Alto-based computer maker said that it will close all facilities except sales offices for one or two days a month and that employees won’t be paid for those days. A combination of vacation and unpaid time off might be implemented in November and December.

The actions followed a companywide shutdown July 1 to 3 in which employees were required to take vacation time.

The cutback resembles a program put into effect during the industry’s severe recession in 1970 and is further evidence that executives expect the current slowdown to continue indefinitely. Fifteen years ago, Hewlett-Packard workers were sent home without pay every other Friday.

Orders Remain Flat

Company officials indicated that orders remain flat compared to year-earlier results, a far cry from the 25% growth that Hewlett-Packard has enjoyed in recent years. In the quarter ended April 30, orders edged up just 1% and profits fell 12% to $129 million.

“While our order rate has not worsened (since then), the prolonged sluggishness in our industry brings us to where more aggressive plans are needed,” said Dean O. Morton, executive vice president and chief operating officer.

Like many other high-technology firms, Hewlett-Packard has gone to great lengths to avoid outright layoffs during the downturn. One reason is the assumption that the slump will be followed by a return to rapid growth, which the firms want to be in a position to exploit.

Despite its ongoing efforts to cut costs, Hewlett-Packard has actually increased its worldwide employment to 85,000 from 80,000 over the last year, a company spokesman said. That partly reflects gearing up for a major new line of minicomputers called Spectrum.

About 26,000 of Hewlett-Packard’s employees are based in California, including 3,000 in Southern California.