P&G; Expands Overhaul, Cuts More Jobs
Procter & Gamble Co. said Thursday that it will cut an additional 9,600 jobs, or 9% of its work force, adding to an overhaul that could now cost the consumer products giant $4 billion as it tries to rebound from mistakes and rein in costs.
The maker of Tide laundry detergent and Crest toothpaste is trying to recover from missteps such as price increases that cost it market share and spending on new products that never took off in the market.
At the same time, external factors such as rising raw materials costs and economic problems in some markets have also weighed on the company, driving operating earnings down the last four quarters. And, despite previous cost-cutting programs, the company still has a cost structure that is 20% higher than its best competitors, Chief Executive A.G. Lafley said.
“We have been in a crisis for at least the last nine months,” said Lafley, who became chief executive last year after the company posted a series of earnings warnings that caused its stock to slide.
Shares of Cincinnati-based P&G; fell 45 cents to close at $62.75 on the New York Stock Exchange, recovering with the rest of the market after falling as low as $60.30 earlier in the day.
The latest job cuts are in addition to 7,800 reductions still to be carried out under a program announced in 1999. Together, the cuts represent a 15.8% reduction of the company’s current work force of about 110,000 worldwide.
About 40% of the job cuts will be in the United States, the company said.
The expanded restructuring could also make it more difficult for the company to post double-digit earnings growth, Lafley said.
But executives still held to their long-term goal of double-digit earnings-per-share growth, a target some analysts said is too aggressive.
Workers at the company’s headquarters were reluctant to talk to reporters Thursday but were not surprised by the news.
“If it comes, it comes,” said Jim Dixon, 36, a 15-year P&G; employee. “It’s completely out of our control. The rumors have been going around for months so I can’t call it a big surprise, especially with the economy the way it is and so many industries downsizing.”
P&G; workers once expected lifetime employment with the company. But that has changed over the last several years as the company has undertaken two restructurings.
Procter & Gamble said it expects the costs of the job reductions announced Thursday to be about $1.4 billion after taxes, with the bulk to be incurred in the year ending in June 2002. The company said it expects to see $600 million to $700 million in annual cost savings from the moves by fiscal 2004.
