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.

Although Hewlett-Packard did not identify which plants or divisions would be most affected by the program, half of its 3,000 Southern California employees are at the company’s Rancho Bernardo plant, its only major manufacturing facility in the Southand.

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 computer peripherals made in Rancho Bernardo are an example of improved designs that facilitate manufacturing efficiencies, according to Hewlett-Packard spokesman Gene Endicott. Ten years ago, the eight-pen plotter, a printer device for sophisticated graphics and data that is manufactured in Rancho Bernardo, required 2,000 components. Today, it has only 200 parts.

However, the San Diego plant that opened in 1968 has been “working hard to meet the orders for plotters,” said Mike Buckley, communications manager for Hewlett-Packard’s San Diego operations. As the company has implemented job shifts to cope with the overemployment problem, the San Diego plant has added people from other manufacturing areas.

“We’ve become increasingly automated in the last 10 to 15 years,” said Buckley, who added that Hewlett-Packard’s usual retraining and relocation programs haven’t been able to compensate for the growing imbalance.

Palo Alto-based Hewlett-Packard, which last year had revenue of $6.5 billion in sales 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 the company’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.

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, 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.