Ecolab, the St. Paul-based sanitizer and detergent maker, laid off 1,000 workers Wednesday in response to the stagnant economy that has dramatically affected the company's restaurant and hotel customers.
About 100 of the layoffs will take place in Minnesota, the company said. The news caught many workers by surprise because until now Ecolab has navigated through the brutal economy with hiring freezes, waste reductions, product consolidations and other cost-saving measures.
The company expects the job reductions to save $70 million to $80 million a year. It will take a $19 million charge in the fourth quarter and charges this year of $65 million to $75 million to cover severance and restructuring costs.
More than half of the layoffs will be in the United States with the rest mostly in Europe. In Minnesota, the layoffs will affect workers in the corporate headquarters in St. Paul and at the company's research and product-development facilities in Eagan.
Managers told the affected workers Wednesday morning that it would be their last day, and the company arranged for many to be taken home by taxi. Workers will get a minimum of three months of severance pay plus health insurance and outplacement aid.
Ecolab is the latest in a string of Minnesota companies to deliver pink slips. In seven weeks, Minnesota firms such as 3M, Andersen Corp., Pentair, Hecker Automotive Group, Graco, Tennant and Hutchinson Technology have collectively shed nearly 7,000 workers. Retailers such as Best Buy, Cost Plus World Market and Linens 'N Things also recently cut about 800 jobs in Minnesota. All have been pinched in some way by frozen home sales, the credit crunch and consumers who have put the brakes on restaurant meals, vacations and other discretionary spending.
Ecolab spokesman Mike Monahan said the layoffs resulted from "what in our recent memory is unprecedented economic conditions," adding that "huge raw-material costs" also played a factor.
"We have tried for the last several years to reduce our costs and we have been pretty successful," Monahan said. "But eventually you reach this unprecedented economic situation and you are no longer able to use ordinary means against extraordinary forces."
'Huge headwinds'
In the second quarter of 2008, Ecolab officials noticed that customers were cutting back on orders. "We said we have these huge headwinds that we are facing and we need to do something with our cost structure," Monahan said.
Ecolab generates $5.5 billion a year, providing sanitizers, food safety services, dish and laundry detergents, glass cleaners and pest elimination products to hospitals, hotels, grocery stores and restaurants.
CEO Douglas Baker reiterated Wednesday the forecasts he set in October. Ecolab's 2008 earnings are expected to reach $1.85 to $1.87 a share when they are announced, while 2009 earnings should hit $1.95 to $2.05 per share. Fourth-quarter earnings for 2008 are expected to be 44 to 46 cents a share, he said.
Ecolab shares closed at $33.01 Wednesday, down 79 cents or 2.3 percent.
Dee DePass • 612-673-7725