Home / World Business
Wed, May 21, 2003 - Page 12 News List

Companies less efficient, cut jobs

DECLINING SALES Despite US government reports showing increasing productivity, big companies cut 300,000 jobs last year and expect more downsizing


Worker productivity at US corporations such as International Business Machines Corp, Delta Air Lines Inc and McDonald's Corp fell last year as they cut 300,000 jobs because of declining sales. Busi-nesses probably will fire more workers this year, investors said.

Standard & Poor's 500 Index companies had a 5.1 percent drop in sales per employee last year, while net income per worker plunged 73 percent, according to Bloomberg data.

During the same period, they lowered employment by 1.5 percent to 20.8 million from 21.1 million the year before.

Companies are stepping up job reductions amid few signs that economic growth will lead to higher sales and revived earnings.

IBM and Sun Microsystems Inc each announced plans to eliminate more than 4,000 jobs this year, exceeding last year's cuts, and investors say other corporations will need to trim payrolls.

"Big companies can continue to downsize," said Louis Navellier, president of Navellier & Associates, which manages US$3 billion in assets.

Some companies, such as Delta, retained more employees than needed because of union contracts. Others, such as Sun, delayed firing skilled engineers that might be hard to replace once the economy recovers.

Most S&P 500 companies release information on employment in their annual reports, usually about three months after the year ends.

The bloated workforces and the payrolls they required contributed to the 23 percent drop in the S&P 500 last year, paced by declines of 75 percent at Lucent and Sun, 59 percent at Delta, 39 percent at McDonald's, 36 percent at IBM, and 29 percent at Morgan Stanley.

"Firms cut, but they didn't want to cut too much," said Anthony Chan, chief economist with Banc One Investment Advisors, which manages about US$150 billion.

Job losses

1.IBM has announced plans to but more than 4,000 jobs this year

2.Sun Microsystems has said it will eliminate more than 4,000 jobs this year after shedding almost the same number last year

3.IBM is cutting 4,744 jobs related to its acquisition of PricewaterhouseCoopers LLP's business-consulting unit last year

4.Lucent plans to cut another 12,000 jobs this year

"Given the economic environment, it's not productive for firms to be hiring," he said.

The figures for the S&P 500 companies contrast with US government reports showing increasing productivity, or the amount of goods and services produced for each hour an employee works.

Last year, productivity rose 4.7 percent, the biggest gain since 1950 and more than double the average annual rise in that period.

Reductions in employment among telecommunications and computer companies didn't keep pace with sales declines.

At IBM, the world's largest computer maker, sales per employee dropped 1 percent and profit per employee fell 53 percent after the company eliminated about 4,000 jobs out of a total of 320,000.

Company spokesman Joe Stunkard said efficiency was hurt by "a difficult economy and the information technology industry had its first protracted slump in recent history."

IBM is cutting 4,744 jobs related to its US$3.5 billion acquisition of PricewaterhouseCoopers LLP's business-consulting unit last year, the company said in a regulatory filing.

Sun, which makes computers that run corporate networks, generated 25 percent less sales per employee and the company was unprofitable last year.

Sun cut almost 4,000 jobs last year in its first-ever firings.

Spokeswoman Diane Carlini said Sun has been reluctant to lose highly skilled, experienced workers. The company announced plans last October to cut 4,400 more jobs, leaving it with about 35,000 workers.

Sales per employee at Lucent Technologies Inc, the largest US telephone-equipment maker, drop-ped 5.2 percent and the company was unprofitable even though it slashed payrolls by 30,000 jobs.

This story has been viewed 2717 times.

Comments will be moderated. Remarks containing abusive and obscene language, personal attacks of any kind or promotion will be removed and the user banned.

TOP top