Hasbro, Philip Morris Plan Layoffs
Philip Morris Cos. and toy maker Hasbro Inc. delivered bleak Christmas tidings to their work forces on Tuesday with layoff announcements.
Philip Morris said it will slash 2,500 jobs to restructure its international food business, hoping to make the sluggish division as profitable as the company’s North American tobacco and food businesses.
Hasbro said it also plans to cut about 2,500 positions, or 20% of its work force. It will also quit making some toys, close at least one factory and buy back $500 million of its stock to boost its share price, resulting in a fourth-quarter pretax charge of $140 million.
The world’s second-largest toy maker said it will complete the moves in a few months and expects the plan to save the company $350 million over five years, starting with about $40 million next year.
Hasbro, which makes Tonka trucks, G.I. Joe dolls and Milton Bradley games, is also hoping that by reducing costs, adopting a more global marketing strategy and finding toys to shore up the declining popularity of action figures, it will bring its earnings and share price into line with those of No. 1 Mattel Inc.
Pawtucket, R.I.-based Hasbro said about half the job cuts are expected to be made in the U.S., where the company has five plants.
“This company was really built on a series of acquisitions, and those weren’t organized as efficiently as they could have been had it grown as a single company,” said Sean McGowan, an analyst at Gerard Klauer Mattison.
Philip Morris, which makes Marlboro cigarettes, Kraft foods and Miller beer, said it will sell overseas businesses not related to its core food products, which include coffee and chocolate. The company did not say which ones it will shed.
Spokesman Nicholas M. Rolli said the job cuts will amount to 8% of the worldwide food business work force, or about 2% of all Philip Morris employees. The reductions will be implemented gradually, he said.
The New York-based company said it expects annual savings from the restructuring to approach $200 million by 2000. It will take a pretax charge of $630 million in the fourth quarter to reflect the changes.
The international food business has always been a laggard for the profitable conglomerate, said Martin Feldman, an analyst with Salomon Smith Barney Holdings Inc.
“Their margins have been flat for about five years,” Feldman said, noting that U.S. divisions of the company have seen profit margins rise from about 12% five years ago to 17% currently.
Philip Morris traditionally has little patience for weak performers. In 1995, after merging its Kraft and General Foods divisions, the company sold off Entenmann’s cakes and cookies, Kraft marshmallows and Parkay margarine.
This time around, the company wants Kraft Foods International to focus on its strong coffee, chocolate, cream cheese and powdered soft drink products.
“Those have been the moneymakers,” Feldman said.
In October, Philip Morris sold its Kibon subsidiary, a Brazilian ice cream maker, to Unilever for $930 million. Philip Morris shares fell 31 cents to close at $44.56 on the New York Stock Exchange. Hasbro shares rose $1.25 to close at $31.25 on the American Stock Exchange.
