Tide Goes Out For Some P&G Jobs

The Procter & Gamble Co. will cut about 9,600 jobs worldwide — 9 percent of its work force — as it tries to restore long-term growth, the company said Thursday.

About 40 percent of the job cuts will be in the United States. Combined with reductions announced earlier in the reorganization, the cuts total 17,400.

One-third of the job cuts will come from manufacturing, and those reductions are expected to include plant closings and consolidations. Company officials declined to elaborate.

The announcement followed reports a day earlier that Procter was considering eliminating up to 20 percent of its work force in response to the economic downturn.

The latest cuts by the maker of Crest toothpaste, Tide detergent and Pampers diapers follow similar large reductions at large corporations as DaimlerChrysler AG, Compaq Computer Corp., Lucent Technologies and Motorola Corp.

Management of the 164-year-old company said the job cuts are needed to make P&G leaner and more competitive in today's worldwide market.

P&G officials expect the job cutting program to cost $1.4 billion after taxes, with most of that expense coming during the company fiscal year that begins July 1. Savings from the reduction should total at least $600 million a year after taxes by fiscal 2003-04, management said.

Employees were told Thursday morning of the plan. Management said that it will finish up 7,800 cuts announced in a 1999 restructuring begun by former chief executive Durk Jager to cut out layers of bureaucracy.

"This program is right for the long-term health of our business and is the next step in our plan to restore long-term growth," said A.G. Lafley, the company's president and chief executive.

The job cuts will begin immediately in the United States with a voluntary departure plan open to all non-plant employees who would have enough service time to be eligible. Outside the United States, management is still organizing the plan country by country.

P&G officials said some employees will be laid off, but management hopes to limit that number.

P&G management said it continues to review the company's operations with the goal of more tightly focusing on core businesses. No conclusions have been reached, but decisions are expected by the end of the current bookkeeping year that ends June 30.

Depending on those decisions, P&G could incur additional costs of $400 million to $800 million after taxes, management said.

The Organization 2005 restructuring is costing P&G $2.1 billion and is expected to save the company $1.2 billion after taxes by the year beginning July 1, 2004, chief financial officer Clayton Daley said Thursday.

But P&G management realized that it needed to cut ovehead and manufacturing expenses further to be competitive with rivals, Daley said.

P&G's sales have suffered because the company has been unable to meet competitors' prices, Lafley said Thursday.

"This is a crucial problem because when our pricing is out of line, nothing works," he said. "We've not delivered the volume and results we're capable of."

P&G must at least match the job that its rivals have done of building market shares of core products, Lafley said. P&G's overhead costs in research and development and in manufacturing are 20 percent higher than those of its best competitors, he said.

Sales volume and sales growth results are expected to be flat this year from last year's totals, Lafley said.

"This is not a cost-cutting program," Lafley said of the strategy announced Thursday. "It is a way to restore competitiveness. It is a way to restore growth."

Lafley said he wants to focus research and development operations on fewer and bigger projects that can get to market more quickly and improve P&G's bottom line.

"We've cut out the smaller and highly speculative projects," he said.

He has told top managers to fix the problems of financially underperforming businesses or to get P&G out of those businesses within a year.

The Cincinnati-based company has long been an important source of executive leadership, corporate donations and payroll taxes in the city. City and Hamilton County officials were conferring Thursday with P&G executives about the impact of the reductions.

On Wednesday, P&G shares were down $2.70, or 4 percent, to close at $63.20 on the New York Stock Exchange.

Procter & Gamble makes some of the most widely recognized product brands.

"They are supposed to be a pretty recession-resistant company because they sell household products," said Douglas Christopher, who follows P&G for Crowell, Weedon & Co. in California. "But their sales look really bad, and volumes don't look strong at all. It's also a company that's still going through a restructuring."

By John Nolan
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