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THE GREAT U.S. JOBS PURGE
PRESSURED MORE THAN EVER TO PRODUCE GOOD FINANCIAL RESULTS, EXECUTIVES ARE QUICK TO SAVE MONEY THROUGH MAJOR LAYOFFS

Mass layoff announcements have rolled in almost daily.

Some prominent names from Corporate America, including General Motors, Whirlpool and Chrysler Group, have rolled out plans to wipe out thousands of positions.

Such huge job cuts are nothing new for companies trying to reduce costs. What seems to be different this time, some economists and observers say, is the speed with which the companies are turning to that approach.

As the once-robust economy weakens, big companies are using job cuts to control costs and send a signal to Wall Street that they're serious about confronting the slowdown.

Last year, companies announced more than 600,000 job cuts, according to Challenger, Gray & Christmas, an employee outplacement firm. January figures will be released on Monday, but several major companies have announced cuts totaling more than 90,000 jobs so far in 2001. That doesn't include the tens of thousands of jobs that General Electric Corp. is expected to cut after it completes its proposed merger with Honeywell Corp.

The companies announcing the reductions have said they'll try to achieve as many of those cuts as painlessly as possible, through retirements, attrition and eliminating vacant positions. But layoffs are clearly a big part of the equation.

The stock market is providing some of the impetus. Executives are moving much more quickly when bad financial news appears on the horizon, said Lewis Mandell, dean of the University at Buffalo's School of Management.

"Companies are under more pressure from stockholders than they were before," he said. In previous years, "many of them felt they could sort of weather it and maybe there would be an upturn."

As companies make their cuts now, they're being more selective about who they let go, Mandell said. The employees most at risk: those with just basic skills, such as clerical or call center workers, who could be replaced with minimal training if economic conditions improve several months from now.

Workers with more specialized skills, especially those who have direct contact with customers, are more likely to be safe, he said.

Dubious results

Among the companies announcing cuts recently was Seattle-based Amazon.com, which said it will lay off 1,300 workers. The online retailer portrayed the job cuts as a step toward profitability by the end of the year.

But cutting workers might not lead to the results companies are counting on. Kenneth De Meuse, a professor at the University of Wisconsin-Eau Claire, studied Fortune 100 companies that had large layoffs in 1989, and found that their financial performance worsened two years later.

Executives tend to look at layoffs as something they can quantify, he said. "They get seduced into using this almost corporate anorexia. They hire and purge, hire and purge."

For some companies, the layoffs are almost a matter of survival, Mandell said. That applies to dot-coms as well as industry giants such as Xerox and Eastman Kodak, who have unleashed massive layoffs since the 1990s. "The stakes are much larger now," he said.

But layoffs can't be measured in strictly dollars and cents, Mandell said. "There are very real costs. There are morale costs."

De Meuse notes that for each of the past 10 years, U.S. companies have cut about 500,000 jobs a year. The announcements are grabbing bigger headlines now because they're coming in quick succession and amid a weakening economy, he said.

"The good thing was, when we were as an economy growing and robust, the economy could absorb these people fairly rapidly," he said.

Easier to make cuts

The layoff announcements seem to come in waves, said Arthur Wheaton of Cornell University's School of Industrial and Labor Relations. "There's less of a stigma attached when everybody's doing it."

Many companies turn to layoffs because they see labor as a cost they know how to control, Wheaton said. While that might seem like an immediate solution, the companies could end up missing their skills later on, particularly in areas like research and development.

Widespread coverage of the stock market, through media outlets and the Internet, has brought more attention to how the companies perform, he said. "It's kind of the lead story now. Now it's dinner table conversation."

Wheaton said he doesn't expect the economy's overall health to worsen much more. "I think if you have skills in demand, you'll be just fine," he said.

Western New York has seen some smaller-scale job cuts as companies take steps to make themselves more profitable.

Occidental Chemical is shutting down its research and development center on Grand Island as it shifts those R&D operations to its different plants, eliminating 40 local jobs. Occidental Petroleum, its parent company, had reported a $52 million loss in its chemical division last year.

Clientlogic last December cut 90 jobs companywide, with less than half of those at its Buffalo-area call center operations, to reduce costs.

Despite the host of big cuts that have been announced, De Meuse said, there's still a tremendous number of jobs out there. And companies are often spreading their cuts over one or more years.

Auto cuts hit home

In Western New York, the most immediate impact of the economic slowdown has come in the auto industry, a cornerstone of the local economy. The automakers have slowed production to cope with a glut of vehicles on dealer lots, leading to less work for suppliers like Delphi Automotive and engine producers such as the GM Tonawanda plant.

For the most part, those layoffs have been temporary, on a week-to-week basis. If the laid-off United Auto Workers members have enough seniority, they can still collect up to 95 percent of their pay even when they're not working.

Delphi's Lockport plant has placed 260 of its workers on "indefinite" layoff, meaning the plant has no immediate plans to recall them.

The auto parts company has moved swiftly to adjust its staffing levels to match the automakers' production schedules. Delphi last year generated 71 percent of its 2000 revenues from GM; the automaker has said its North American vehicle production in the first quarter will be 2 percent lower than a year earlier.

American Axle and Manufacturing's chairman, Richard Dauch, had words of praise for the workers at the company's Cheektowaga plant when he visited last year. But he also cautioned they had a stake in keeping the plant competitive.

"Your jobs are not an entitlement," he told them then. "Go ask the hundreds of thousands of men and women in General Motors that have lost their jobs in the last 15 years."

George Palumbo, a Canisius College professor, noted that the region is especially sensitive to swings in the auto industry, since those workers' earnings represent 20 percent more of the region's wages than they did 20 years ago. That's due to the loss of other manufacturing jobs and the addition of new jobs that pay less.

The local impact of some of the other massive job-cut announcements that have been announced, such as GM's plan to eliminate 10 percent of its salaried work force, have yet to be felt in the region. GM has said it plans to rely on retirements and attrition and cutbacks of contract workers rather than layoffs.

Honeywell's research facility in South Buffalo employs 150 people, but it's not yet known if that site will be affected by the pending GE-Honeywell merger.

Motorola is eliminating 2,500 jobs as it ceases cell phone operations in Illinois, but that won't affect its plant in Elma. Separately, the local plant recently laid off 50 workers due to the auto industry slump.

De Meuse said companies that follow good business models will do what they can to retain the investments they've made in workers. "They're hard to come by. Typically what separates one company from another is not the equipment or the machinery. It's the people."

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