Hewlett-Packard Unveils Programs to Cut Work Force
Hewlett-Packard is offering an early retirement program and incentives for voluntary severance that it estimates will reduce its work force by 1,500 by Oct. 31.
The program is designed to eliminate excess employment in manufacturing areas where increased automation and improved product design have led to greater production efficiencies, company officials said Thursday.
The Palo Alto-based company, which last year sold $6.5 billion worth of computer products and scientific instruments, said the incentives will be offered only to its U.S. employees. Of Hewlett-Packard’s 84,000 employees, 56,000 are in the United States. The company said that about 1,800 employees will be eligible for the early retirement benefits.
Analysts said they expected the programs to affect earnings in the company’s fourth quarter, which ends Oct. 31. Richard C. Edwards, a senior analyst at Robertson, Colman & Stephens in San Francisco, said he anticipates a one-time charge of $20 million in that quarter, which could shave 5 cents off his prediction of per-share earnings of 55 cents.
However, analysts said, the reduction in force, plus anticipated sales of H-P’s recently introduced Spectrum computer line, should lead to greater profitability in 1987. “I really expect their profits to surge next year . . . profitability will be strong the next year or two out because of measures like these,” said John Girton, analyst with Birr, Wilson & Co. in San Francisco.
Gene Endicott, a company spokesman, said it was not yet possible to identify which plants or divisions would be most affected by the program.
In Southern California, H-P has about 3,000 employees; half of those are at the company’s San Diego plant, its only major manufacturing facility in the Southland. Endicott cited the peripherals products made there as an example of improved design that facilitates manufacturing efficiencies. The eight-pen plotter, a printer device for sophisticated graphics and data, required 2,000 components 10 years ago. Today, it has only 200 parts.
Also, the company’s Spectrum computers are based on a simplified internal design that requires fewer parts. And the company has increased automation at many of its plants.
Hewlett-Packard officials say the programs are part of ongoing efforts to reduce employment imbalances. The company has a no-layoff history and only recently returned to full employment following a program of reduced pay and reduced work hours that affected all of its U.S. employees in 1985.
Dean O. Morton, H-P executive vice president and chief operating officer, said the computer industry slowdown “has had a significant dampening effect on our recent operating results. However, the programs we are announcing today are primarily in response to work imbalances, which have existed within the company for some time.” Morton said excess employment primarily affects manufacturing areas.
The company said that any of its employees meeting the requirements may take advantage of the early retirement benefits. Employees aged 55 years or older with at least 15 years’ service at the company may participate. Many of the eligible workers, however, are in manufacturing areas.
The voluntary severance program will be open only to employees in specified job categories, where there is overemployment.
Analyst Girton said that even though the company has been grappling with the excess manufacturing capacity for some time, the computer industry slump probably played a role in the timing of the program. “I don’t think it’s a coincidence,” he said. “Early retirement programs generally happen when sales aren’t up to expectation.”
For its 1986 second quarter ended in April, sales rose 6%, but the company’s profit declined 2% from the year before to $127 million--the fifth consecutive quarter of year-to-year earnings declines.