Procter & Gamble To Cut 13,000 Jobs, Close 30 Plants In The U.s., 4,000 Jobs Will Be Lost. The Company Says It Is Healthy But Is Restructuring To Create A "Leaner" Organization.

Posted: July 16, 1993

CINCINNATI — Procter & Gamble Co., seeking to streamline its operations and preserve its healthy balance sheet, said yesterday it would eliminate 13,000 jobs and close about 30 plants throughout the world.

Edwin Artzt, chairman of the consumer-products company, said the restructuring should not be considered a sign that P&G was in trouble.

"This is definitely not our situation. We have a healthy, growing business, a strong balance sheet, a very positive cash flow, terrific state- of-the-art products and a well-stocked technology pipeline with plenty of opportunities for growth," he told industry analysts.

The company said it would cut 4,000 jobs in the United States, including

2,000 in Cincinnati, where P&G employs 14,500.

P&G has operations in 54 countries with a total of 106,000 workers worldwide in the United States, Britain, Russia, Hungary, France and other European countries, as well as Japan and China. Its U.S. work force totals 47,500.

Artzt declined to identify any of the plants to be closed. He said the final decisions will not be made until November and that not all of the closings would be announced then. Workers who refuse transfers or cannot be reassigned will be offered up to one year of severance pay, job retraining and placement.

P&G established a $1.5 billion after-tax reserve to pay for the consolidation and restructuring of its business and the reduction of overhead expenses. The company said the move would contribute to a loss for its just- ended fiscal year.

However, P&G said it was raising its annual dividend by nearly 13 percent.

"We wanted to take our company apart brick by brick and put it back together again - into a leaner, faster-moving, more financially fit organization," said Artzt.

P&G said the moves will be made over the next two to four years. The number of jobs to be cut represents 12 percent of the company's work force of 106,000.

Artzt said he hoped most of the reductions will come through attrition and by reassigning or transferring people, encouraging early retirements and voluntary departures with buyouts, and reducing recruiting.

P&G is trying to get new products to the market faster and to compete with discount consumer products. Its current products include Ivory soap and other beauty and health items, detergents such as Cheer and Tide, and beverages.

P&G wanted to review and streamline its operations while it is financially healthy, Artzt said. The company's net earnings for fiscal 1991-92 were $1.9 billion, up 6 percent from the year before.

Artzt told industry analysts he expects earnings for fiscal 1992-93, which ended June 30, to exceed a record $2 billion after taxes - but that's before the $1.5 billion reserve and another $925 million are set aside to cover the effects of accounting changes. The creation of the reserves will result in a loss for the year that just ended, P&G said.

P&G is adopting mandatory financial accounting standards related to retiree-health benefits and deferred taxes.

P&G began reviewing its operations last year, so some changes were expected. Jay Freedman, an analyst with Lincoln Capital Management in Chicago, said, "the only surprise was the size of the manufacturing realignment."

Artzt said the company has never before overhauled operations to this extent. P&G has affected or eliminated about 19,000 jobs in the past 20 years by closing or consolidating plants, he told reporters. It should not need to do such an overhaul again before 2000, he said.

Artzt said he expects the changes to generate $500 million in after-tax savings by 1995-96.

Artzt told analysts the company's goal is to improve P&G's rate of profit growth, either through improved profit margins or lower product prices that increase sales and market shares in the United States and overseas. He said P& G needed to reorganize because of its expansion into 29 new countries in 10 years and the duplication in some operations.

A task force of about 100 P&G employees interviewed thousands of fellow employees to gather suggestions for improving operations, Artzt said. That produced recommendations that P&G will use to eliminate some management layers, streamline work systems and centralize purchases of raw materials, he said.

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