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RJR Nabisco to Eliminate 6,000 Jobs to Help Earnings : Restructuring: Pricing pressures have eroded profit at the food and tobacco conglomerate.

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From Staff and Wire Reports

RJR Nabisco Holdings Corp. on Tuesday became the latest consumer products company to take drastic steps to cut costs, announcing it will slash 6,000 jobs in a restructuring aimed at saving $250 million a year.

The maker of Winston and Camel cigarettes, Ritz crackers and Oreo cookies said it will take an after-tax charge of $445 million in the fourth quarter to pay for the companywide overhaul.

The food and tobacco conglomerate said it is undertaking the restructuring, which includes cuts in corporate, marketing and manufacturing costs, to return to earnings growth in 1994.

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Large consumer products companies including Philip Morris Cos., Procter & Gamble Co. and Anheuser-Busch Cos. have announced thousands of job cuts this year in attempts to enhance profits in a sluggish economy.

As consumers have grown more cost-conscious, traditional best-selling brands have come under pressure from lower-cost store-label and generic brands.

The tobacco industry, including RJR Nabisco’s R.J. Reynolds subsidiary, has been hit particularly hard, with earnings hammered by a fierce price war that pushed prices of top-selling cigarettes down 20% this year.

According to RJR Nabisco spokeswoman Carol J. Makovich, there are more than 600 people in the Los Angeles area employed by RJR Nabisco in both the tobacco and food business. Whether or not the layoffs announced Tuesday will have an impact on people employed in the Los Angeles area remained unclear. “We are not giving any break-outs geographically or by operation,” Makovich said.

She added that the 6,000 people to be eliminated from the work force include 1,000 already laid off from the domestic tobacco area, which RJR Nabisco announced in August. The restructuring does not include any major plant closings but could include minor consolidations, Makovich said.

The RJR Nabisco reduction amounts to about 10% of the company’s 63,000 worldwide work force and is the second series of major cuts since the $25-billion takeover brawl for the conglomerate five years ago.

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Domestic tobacco sales at R.J. Reynolds, the No. 2 U.S. cigarette maker, are expected to drop to $1.2 billion this year from $2.1 billion in 1992, said Emanuel Goldman, an analyst at Paine Webber Inc. in San Francisco.

“Our restructuring program is intended to improve margins in both the tobacco and food businesses, so we can resume our earnings growth track next year,” Charles M. Harper, RJR Nabisco’s chairman and chief executive, said in a statement.

RJR said its restructuring could boost net income by $250 million a year. The gain of nearly 19 cents a share could come as early as 1995, according to analysts.

RJR Nabisco stock rose 4% following the announcement, gaining 25 cents a share to $6.50 on the New York Stock Exchange.

The company has already taken significant steps to pare costs, cutting 3,000 jobs in 1989-90 following the leveraged buyout that took the company private.

In December, 1988, a bidding war for RJR Nabisco ended with the investment firm Kohlberg Kravis Roberts & Co. agreeing to pay nearly $25 billion to take the company private.

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Kohlberg Kravis has since dramatically reduced RJR Nabisco’s debt load and returned the company to public ownership in a highly successful stock offering.

Average debt level is down to $14 billion from a peak of $27 billion.

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