Firings Highest Since 2010 as Ford to Dow Face Slump
Ford Motor Co. (F) and Dow Chemical Co. (DOW) joined a growing number of companies firing thousands of workers as sluggish U.S. growth and Europe’s deepening recession lead to a persisting slump in sales.
North American companies have announced plans to eliminate more than 62,600 positions at home and abroad since Sept. 1, the biggest two-month drop since the start of 2010, according to data compiled by Bloomberg. Firings total 158,100 so far this year, more than the 129,000 job cuts in the same period in 2011.
Ford is closing its first European car-assembly factories in 10 years and Colgate-Palmolive Co. (CL) said today it will cut 2,300 jobs, adding to more than 5,500 cuts announced by Dow Chemical, DuPont Co. and Advanced Micro Devices Inc. (AMD) in the past week. The reductions coincide with a majority of U.S. companies missing analysts’ third-quarter revenue estimates and a focus on jobs in the final weeks of the U.S. presidential campaign.
“Companies are saying, ‘Let’s not build up inventories, let’s be lean and mean until we know until we have a better idea of what 2013 is going to look like,’” said Janna Sampson, who helps manage more than $3 billion for Oakbrook Investments in Lisle, Illinois. “There is a fear now as companies see that the economic recovery is not picking up.”
So far, out of 235 S&P 500 companies that have released third-quarter earnings, 137 have reported sales that trailed analysts’ estimates, according to data compiled by Bloomberg.
Those results, similar to the S&P 500’s second-quarter performance, signal employers may increase firings over the next two quarters, according to John Challenger, chief executive officer of Challenger, Gray & Christmas Inc., a human resources consulting firm based in Chicago.
Sales misses are “a sure prescription for layoffs starting to heat up as companies take immediate action to show their shareholders how responsive they are,” Challenger said yesterday by telephone.
The U.S. unemployment rate fell below 8 percent in September for the first time since January 2009, and a surge in firings may counteract job gains elsewhere in the economy.
The technology hardware and equipment industry has announced the most job reductions among North American companies this year with 41,200, led by Hewlett-Packard Co. (HPQ)’s announcement in September that it plans 29,000 cuts, more than it originally disclosed. Banks are next with plans to eliminate more than 19,000 positions, according to Bloomberg data.
AMD, the second-largest maker of processors for personal computers, said last week it will cut 15 percent of its staff, or about 1,665 jobs, after forecasting fourth-quarter sales that fell short of analysts’ estimates.
Restructuring measures designed to trim annual costs by about $190 million are “difficult but necessary steps to ensure our plan has the right scale and scope to address the market and competitive challenges we now face,” Rory Read, chief executive officer of the Sunnyvale, California-based company, said on an Oct. 18 conference call.
Colgate, the maker of Speed Stick deodorant and Irish Spring soap, said it will eliminate about 6 percent of its 38,600 jobs over four years after third-quarter revenue missed estimates. The New York-based company reported sales of $4.33 billion, short of the $4.38 billion projected by analysts.
The closing of about 20 plants in the U.S. and abroad will eliminate about 2,400 jobs, Midland, Michigan-based Dow Chemical said this week. DuPont, based in Wilmington, Delaware, plans to trim 1,500 jobs after third-quarter profit trailed analysts’ estimates and it reduced its full-year forecast.
Earlier this month, Cummins Inc. (CMI), a Columbus, Indiana-based engine maker, said it expects to erase as many as 1,500 jobs by the end of 2012 and lowered its forecasts for sales and profit.
“A lot of companies have been positioned for continued growth and we’re seeing some stagnation or a modest decline,” Andy Kaplowitz, a New York-based industrial analyst for Barclays Plc, said in a telephone interview on Oct. 24.
U.S. companies are also restructuring European operations to stem the slowdown. Kimberly-Clark Corp. (KMB) said this week it plans to cut manufacturing and administrative operations as it exits the diaper business in western and central Europe, except for Italy, to concentrate on faster-growing regions. The Dallas- based company didn’t say how many workers may lose their jobs.
Ford Shuts Factories
Ford, the second-largest U.S. automaker, is closing two factories in the U.K. and one in Belgium by the end of 2014. Including previously announced cuts, Ford said it is eliminating 6,200 positions, or 13 percent of its European workforce. In contrast, the Dearborn, Michigan-based automaker has added more than 6,500 hourly jobs and 900 salaried positions in the U.S. this year, Todd Nissen, a spokesman, said in e-mails.
Companies based in western Europe have also accelerated large-scale job reductions this year as the recession in the European Union worsens. Services and manufacturing shrank more than economists forecast in October and business confidence in Germany, Europe’s biggest economy, dropped to the lowest in more than 2 1/2 years.
“We’re seeing uncertainty about whether Europe will make it or not,” Diane Swonk, chief economist for Mesirow Financial Holdings Inc. in Chicago, said in an interview.
Among western European companies, there have been 47 job- cut announcements so far this year involving at least 1,000 workers, compared with 32 in the same period of 2011, according to the data compiled by Bloomberg. The peak month was July, with 39,800 firings. That brings the year-to-date total for the region’s companies to 165,700, up from 162,420 in the same period a year earlier, the data show.
Alcatel-Lucent SA (ALU), the Paris-based phone-equipment maker whose stock is trading near a 23-year low, said last week it plans to trim 5,500 positions worldwide, including about 1,400 in France. The reductions will primarily affect sales, marketing and administrative employees, said Simon Poulter, a spokesman.
Lighting company Royal Philips Electronics NV, based in Amsterdam, is eliminating 2,200 additional jobs to wring out an extra 300 million euros ($389 million) as economic conditions deteriorate. Munich-based Siemens AG (SIE), the maker of high-speed trains, turbines and medical gear, has identified about 8,000 potential cuts globally, and the number that may reach 10,000 by year-end, a person familiar with the plan said this month.
Back in the U.S., companies are hesitant to expand until they know the result of the presidential election and how lawmakers will handle the so-called fiscal cliff, or the $607 billion in tax increases and spending cuts set to take effect in January if Congress doesn’t intervene. Inaction probably would cause a recession in the first half of 2013, according to the Congressional Budget Office.
The world’s largest economy probably grew at a 1.8 percent annual rate in the third quarter after expanding at a 1.3 percent pace in the previous three months, according to the median forecast of economists surveyed by Bloomberg before an Oct. 26 Commerce Department report. It would be the first back- to-back readings lower than 2 percent since the U.S. was emerging from the recession in 2009.
“We are operating in a world where demand is still very weak,” Jeff Fettig, CEO of Benton Harbor, Michigan-based Whirlpool Corp. (WHR), said in an Oct. 23 interview. The world’s largest appliance maker boosted its 2012 adjusted earnings forecast this week, helped by the elimination of 5,000 jobs in the past year.
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