Kellogg To Cut Work Force

Kellogg Company on Wednesday said it's laying off 525 salaried positions and 240 contracted jobs at its headquarters in order to save $105 million starting next year.

The company expects to record a non-recurring after-tax charge of $45 million, or 11 cents per share in its fourth quarter, to pay for the change.

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"Over the past three months we have been engaged in aligning our work activities to our growth strategy," CEO Arnold G. Langbo said in a press release. "This alignment is the foundation for building a more focused, results-oriented organization."

The world's number one cereal maker, struggling with flagging sales, plans to grow its ready-to-eat cereal business, accelerating the expansion of our convenience foods, and improving the cost-efficiency of its operations, he said.

Kellogg plans to report quarterly and full-year 1998 results on Jan. 29.

The company had been expected to announce layoffs as part of a cost-cutting program.

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Kellogg disclosed the plans after telling employees in individual meetings on Tuesday who would lose their jobs.

The cuts affect workers at the Battle Creek headquarters and other North American operations.

"We regret the adverse impact on employees leaving the company," Langbo said in the press statement.

He said the company would provide "generous severance pay and benefits as well as career transition assistance."

Kellogg had been evaluating the work performed by 2,000 of its 2,500 salaried employees in North America since September.

The reorganization is also designed to improve sales. Kellogg's domestic market share is about 32 percent.

In October, Kellogg posted third-quarter earnings of $141.9 million, a 31 percent drop over year-ago profits. The company blamed a soggy cereal market and the cost of investments designed to strengthen its international market share.

About one-third of the jobs cut involved people eligible for retirement, Kellogg spokesma Joseph Stewart said at a news conference.

"These savings can be invested into growing our business ... innovation and increased marketing activity," he said.

Fred Jeffers of Lakeview, a research technician who worked for more than 30 years for Kellogg, told the Battle Creek Enquirer he was pleased that he was offered an early retirement package.

"I'm a Battle Creek kid and there's not a better company in the world than Kellogg," Jeffers said. "They've gone out of their way to help people."

Nomi Ghez, an analyst with the investment firm Goldman Sachs, said the job cuts were slightly larger than anticipated. The company had said it wanted to save $100 million in costs.

But Ghez also said some investors were expecting larger changes within the company.

"This is a positive, but they have to do much more. They have to get their business going," she said. "As long as their market share continues to deteriorate, all these cost savings are not going to get their stock moving."

Ghez also said analysts would be watching to see whom the company appointed to run its North American businesses. Thomas Knowlton resigned from that job on Sept. 21.

"If it is a strong outsider with a good track record, it would help," Ghez said.