Companies announced around 66,000 in job cuts Monday morning, as
they continue looking for ways to cut costs amid the economic
downturn.
Among the companies announcing large job cuts Monday were
heavy-machinery maker Caterpillar Inc. (CAT) with plans to shed
20,000 jobs; pharmaceutical giant Pfizer Inc. (PFE), which said it
will cut more than 19,000 jobs following its planned $68 billion
acquisition of Wyeth (WYE); telecom Sprint-Nextel Corp. (S), which
warned it will cut 8,000 jobs; and Philips Electronics Ltd. (PHG),
which announced 6,000 cuts. The job cuts are not restricted to the
U.S. and include reductions in the companies' global work
forces.
So far, companies have announced plans Monday to cut some 65,925
jobs. It's the largest job loss announcement for a single day so
far this year, and adds up to more than a third of the 175,175 job
cuts announced by companies so far this year.
As job losses mount, they threaten to deepen the recession.
Banks, which have been hard hit by problems among subprime
borrowers, now face the risk of rising loan losses from borrowers
with good credits who have lost their jobs. Often these borrowers
owe more than subprime borrowers.
Amid signs of rising unemployment, President Barack Obama said
Monday the U.S. can't afford any delay in passing economic-stimulus
legislation. The White House is looking to bolster support among
Republican lawmakers and the public for an $825 billion package of
spending and tax cuts to bring the economy out of recession.
According to a survey released Monday by the National
Association of Business Economics, job losses accelerated in the
fourth quarter, producing the worst survey result in 17 years. Some
44% of firms cut payrolls, while only 14% added workers.
Over the next six months, 39% of companies plan to reduce
payrolls, the survey said.
The plans come as the Labor Department said Thursday that the
number of U.S. workers filing new claims for state unemployment
benefits soared last week to match the quarter-century high reached
in December, suggesting layoffs continued unabated into the new
year.
Monday, Caterpillar said it would cut 20,000 jobs, or about 18%
of its work force, to reflect lower demand. Of the 20,000 workers
Caterpillar plans to shed in 2009, about 4,000 will be full-time
production employees and another 8,000 are temporary workers or
contract workers.
"What would you expect the company to do?," Ingalls & Snyder
analyst Alexander Blanton said in an interview, saying the job-cut
plans from Caterpillar were not unexpected amid the declines in
sales the company is anticipated to see.
Still, Sterne, Agee & Leach analyst Lawrence De Maria said
the number of jobs Caterpillar said it will cut "is more than I
would have anticipated. Certainly 18% will likely be on the high
end of the cuts in our universe."
"This is an unprecedented downturn and some of these companies
have no choice but to reduce headcount in times like this," De
Maria said. "In general we would expect more job cuts as we go
through the year, though not for Caterpillar per se."
Pfizer's plans to cut 15% of its work force following its
planned acquisition amounts to more than 19,000 employees based on
current work force levels at both companies. This will include
Pfizer's new plan to cut its own work force by 10%. Both companies
have laid off thousands of workers in recent years to cut costs, as
has much of the rest of the pharmaceutical industry.
Les Funtleyder, an analyst with Miller Tabak and author of
"Healthcare Investing," called the 19,000-plus jobs being cut "a
significant number."
"There has yet to be a pharma-mega merger that didn't lead to
reductions in force," Funtleyder said, "although this number looks
like it might be bigger than anything we've seen."
He added, "the question is, will it make a difference? Will
these reductions make it any more viable of an institution or
entity? You don't know until a few years out."
As for the rest of the pharma industry, Funtleyder said "we
still have revenue declining, so our expectation is we probably
have more to come but a lot of it will be dependent on what new
drugs companies can kick out." He expects sales forces will be cut,
while cuts on the research-and-development side are "unclear."
Sprint Nextel's slashing of about 8,000 jobs, or roughly 13% of
its work force, comes as it looks to streamline its operations in
the face of further subscriber losses. The job cuts include about
850 positions expected to be eliminated under a voluntary
separation plan started late last year. The company had already cut
4,000 jobs a year ago.
Home Depot Inc. (HD) was also among the companies that announced
job-cut plans Monday. The home-improvement retailer said it will
close its Expo home-design business and cut 7,000 jobs. The
retrenchment comes as Home Depot has been struggling the past
couple years with lower sales amid the housing slump. Its expansion
a decade ago into home-design and higher-end home products through
the 34-store Expo chain ultimately proved a failure.
"In a marketplace where it's hard to raise capital or refinance
debt, this really is a prudent measure," Rochdale Securities
analyst Jaison Blair said in an interview.
He said the overhead costs at many companies "may have been
oversized" during the housing bubble. "The reality is that when an
economy slides into a recession, you've got to make very tough
decisions about the overhead that you carry."
-By Donna Kardos, Dow Jones Newswires; 201-938-5963;
donna.kardos@dowjones.com
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