As sales slump, mass layoffs follow
- Article by: CHRIS BURRITT
- Bloomberg News
- October 25, 2012 - 11:00 PM
GREENSBORO, N.C. - Ford and Dow Chemical have joined a growing number of companies firing thousands of workers as sluggish U.S. growth and Europe's deepening recession lead to a persisting slump in sales.
North American companies have announced plans to eliminate more than 62,600 positions at home and abroad since Sept. 1, the biggest two-month drop since the start of 2010, according to data compiled by Bloomberg. Firings total 158,100 so far this year, more than the 129,000 job cuts in the same period in 2011.
Ford is closing its first European car-assembly factories in 10 years and Colgate-Palmolive Co. said it will cut 2,300 jobs, adding to more than 5,500 cuts announced by Dow Chemical, DuPont Co. and Advanced Micro Devices in the past week. The reductions coincide with a majority of U.S. companies missing analysts' third-quarter revenue estimates and a focus on jobs in the final weeks of the U.S. presidential campaign.
"Companies are saying, 'Let's not build up inventories, let's be lean and mean until we know until we have a better idea of what 2013 is going to look like,'" said Janna Sampson, who helps manage more than $3 billion for Oakbrook Investments in Lisle, Ill. "There is a fear now as companies see that the economic recovery is not picking up."
So far, out of 235 S&P 500 companies that have released third-quarter earnings, 137 have reported sales that trailed analysts' estimates, according to data compiled by Bloomberg.
Those results, similar to the S&P 500's second-quarter performance, signal employers may increase firings over the next two quarters, according to John Challenger, chief executive of Challenger, Gray & Christmas Inc., a human resources consulting firm based in Chicago.
Sales misses are "a sure prescription for layoffs starting to heat up as companies take immediate action to show their shareholders how responsive they are," Challenger said.
The U.S. unemployment rate fell below 8 percent in September for the first time since January 2009, and a surge in firings may counteract job gains elsewhere in the economy.
The technology hardware and equipment industry has announced the most job reductions among North American companies this year with 41,200, led by Hewlett-Packard Co.'s announcement in September that it plans 29,000 cuts, more than it originally disclosed. Banks are next with plans to eliminate more than 19,000 positions, according to Bloomberg data.
AMD, the second-largest maker of processors for personal computers, said last week it will cut 15 percent of its staff, or about 1,665 jobs, after forecasting fourth-quarter sales that fell short of analysts' estimates.
Colgate, the maker of Speed Stick deodorant and Irish Spring soap, said it will eliminate about 6 percent of its 38,600 jobs over four years after third-quarter revenue missed estimates.
The closing of about 20 plants in the U.S. and abroad will eliminate about 2,400 jobs, Midland, Mich.-based Dow Chemical said this week. DuPont, based in Wilmington, Del., plans to trim 1,500 jobs after third-quarter profit trailed analysts' estimates.
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