Caterpillar Inc.’s decision to cut 20,000 jobs – announced as part of a fourth-quarter report showing earnings off 28 percent – led the damage of a day in which at least 57,000 layoffs were announced by five U.S. companies.
Noting that global economic conditions and commodity prices have continued to decline significantly, the world’s largest maker of bulldozers and excavators said that it is rapidly executing strategic “trough” plans. That includes implementing a series of cost actions led by the employee reduction, part of a companywide effort to scrutinize every indirect dollar of spending.
While both quarterly and full-year sales were records, Caterpillar said it was forecasting a 25-percent decline in sales volume, and thus was lowering production costs accordingly-reducing selling, general, and administrative, and research and development costs to supporting its Machinery and Engines business by about 15 percent.
“These are very uncertain times, and it’s imperative that we focus Team Caterpillar on dramatically reducing production schedules and costs in light of poor economic conditions throughout the world,” said Caterpillar chairman and CEO Jim Owens. “While it’s painful for our employees and suppliers, it’s absolutely necessary given economic circumstances.” Most of the actions will be in place by the end of the first quarter in what he expects will be “a very tough year.” But, he said, “it’s important to remember that economic cycles aren’t new, and we will emerge from this even stronger than we are today.”
Pfizer Inc.’s announcement that it was paying $68 billion for rival pharmaceutical company Wyeth – also coming out on earnings-report day – brought with it the additional disclosure that it will cut 8,000 jobs, the beginning of what is expected to become a 15 reduction of the combined companies’ workers. Job reductions there eventually will tally nearly 20,000, according to the Associated Press. “It will be done in a methodical way,” Pfizer spokesman Ray Kerins told the AP. “We will continue to look at the staffing needs of the company and make decisions based on those needs.”
Sprint Nextel Corp. plans to eliminate 8,000 positions by March 31, reducing internal and external labor costs by about $1.2 billion on an annualized basis. Its reductions include about 850 positions to be eliminated under a voluntary separation plan started late last year. The telecommunications company said that it expects to take a first-quarter charge exceeding $300 million for severance and related costs. Sprint will cut other employee-related costs, suspending its 401(k) match for 2009, extending a wage freeze through the end of the year, and suspending its tuition reimbursement program for 2009. In addition, Sprint will suspend paying 401(k) retirement matching funds.
Home Depot, meanwhile, said it that would close down its EXPO design business, and is taking steps to streamline its support functions in a way that will cost the jobs of 7,000 employees, or about two percent of total workforce. Home Depot said that its EXPO business “has not performed well financially” and is not expected to anytime soon. “Even during the recent housing boom, it was not a strong business,” the home improvement giant admitted. Over the next two months the company will close 34 EXPO Design Center stores, five YardBIRDS stores, two Design Center stores and a bath remodeling business known as HD Bath, with seven locations. These steps will impact about 5,000 jobs in those locations, their support functions and their distribution centers.
The company also said that it would continue its shift to a region- and district-based support model in various field functions, reducing headcount in administrative functions in the company’s store support centers. These support reductions will impact about 2,000 associates and will result in a 10 percent reduction in the company’s officer ranks. A salary freeze among all officers was also announced, although the company will continue to offer merit increases to non-officer employees, and earned bonuses and the company’s existing 401k matching contribution for all employees, including officers. It also said that it will offer severance, earned bonuses, and other benefits to all those losing their jobs.
Home Depot will take a total pretax charge of $532 million, of which $390 million will be recognized in the fourth quarter and the remaining $142 million in 2009 and beyond. The charge consists primarily of fixed asset write-offs, lease reserves on closed stores, severance, and store closing costs. The cash component related to severance and store closing costs is projected to be about $153 million over the next 12 months, and is expected to be offset by cash received for liquidated inventory.
General Motors, for its part, said it will cut 2,000 jobs in Michigan and Ohio as a result of eliminating shifts. GM spokesman Chris Lee told the AP the cuts are part of the automaker’s continuing efforts to “align production with market demand” as sales of cars and trucks continue to slump.
U.S. layoffs were only part of the day’s story. In Europe, ING Groep NV, the Dutch financial services giant, said it will eliminate 7,000 jobs, or 5.4 percent of its workforce, as part of a wider cost-cutting effort. Royal Philips Electronics NV said it will cut 6,000 jobs. And Indian steelmaker Tata Steel Ltd. said it will eliminate 3,500 jobs, or 8 percent of its workforce, bring the total global job losses announced by mid-afternoon to more than 70,000.