Ailing Knudsen Lays Off 60 Staff Members; More Cuts Expected

Knudsen Foods has laid off about 60 middle managers and administrative staff members to reduce operating costs at the financially troubled dairy products firm, a company spokesman confirmed Wednesday.

The layoffs, most of which have affected employees at its Los Angeles headquarters, took place over the last two days. Winn Enterprises, Knudsen’s parent, employs about 5,600 people.

Additional layoffs are expected throughout the week, the spokesman said, as part of a comprehensive cost-reduction program that includes cutbacks in the company’s health and vacation benefits as well as in its severance program.

The company declined to say how much money would be saved as a result of the layoffs, which follow by two weeks the resignations by most of Knudsen’s top managers. A week ago, the company retained Kenneth Glass, a professional crisis manager from the Gilbert C. Osnos firm, to run the company’s day-to-day operations. Glass has been appointed Knudsen’s chief executive and president.

The Knudsen spokesman said the cost-reduction program was formulated by Glass. The spokesman said that human resources, personnel, accounting and data-processing departments were affected by the layoffs. He emphasized that the cutbacks wouldn’t reduce the company’s ability to continue its operations at normal levels.

Knudsen, the largest dairy in the West, faces an involuntary bankruptcy action filed by three creditors who claim that they are owed more than $5 million. The company, which supplies about one-quarter of California’s milk and other dairy products, relies on a weekly $20-million infusion from its banker, Citicorp Industrial Credit Bank, to finance its day-to-day operations.

Knudsen has also laid off production workers at its plants around the state, largely in response to a lower milk supply. Many dairy farmers found other buyers for their milk after Knudsen said it could not pay 400 dairy farmers $36 million that it owed them for milk. Teamsters Union officials in Northern California said that Knudsen has closed down its powdered milk operations in Willows and Visalia due to a drop in milk supplies.

However, that action isn’t expected to hurt the company much, since the powdered milk was a low-profit item made from surplus milk that Knudsen sold to the government.