For 24 hours recently, it looked like the early 1990s again as Corporate America brandished pink slips with abandon.
Eastman Kodak Co. set the pace, with its announcement this month of 10,000 layoffs as part of the photographic film giant's broad restructuring. Underwear maker Fruit of the Loom Inc. was not far behind, giving 2,900 workers the ax. Electronic components company Kemet Corp. showed the door to another 1,000, while New York fashion house Donna Karan International Inc. sliced its payroll by 15 percent, or 285 employees.
Then came news that General Motors Corp. would take a huge charge, between $2 billion and $3 billion, for restructuring its operations and closing an unspecified number of manufacturing plants. It would be GM's biggest charge against earnings since 1990, when the automaker took a $2.1 billion hit. Though GM did not specify how many U.S. jobs would be lost, analysts expect a large number.
American workers, noting the record profits companies have been posting the past few years and, until recently, the ever-upward rise in their stock prices, might wonder why downsizing is back. That's especially true given that the nation's unemployment rate stands at 4.7 percent, its lowest in almost a quarter century.
Analysts and consultants who advise companies on strategic issues said the latest restructurings are different from the earlier era of massive downsizing.
Gary Neilson, a senior vice president at Booz-Allen & Hamilton Inc., said today's downsizings are more strategic in nature than those in the past. "The restructuring we see in this wave is a lot more repositioning for growth rather than retrenchment," he said.
"It's a lot more `Let's get our act together and focus on who we are going to be,"' Mr. Neilson said. "In the early '90s and late '80s there was more downsizing for survival."
And even though the numbers seem huge, they pale in comparison with some of the bloodletting of 1993, the worst year for layoffs. International Business Machines Corp., for instance, laid off 60,000 people that year; Sears, Roebuck and Co., 50,000; and Xerox Corp., 10,000.
Then, some of the companies were in dire financial shape, losing market share and even in danger of being also-rans in their business. Today, the restructurings reflect different business conditions.
In GM's case, the automaker probably will record a one-time gain of almost $4 billion on the sale of its defense arm of Hughes Electronics Corp. to Raytheon Co. The expected restructuring charges could be offset, in part, by the gain.
"They almost went broke the last recession," said David Healy, an analyst with Burnham Securities, a New York investment bank and brokerage. "They'd like to be sitting on a cash hoard when the next downturn comes."
General Electric Co. is enjoying record profits that have it on track to earn $8 billion this year. Yet, in the past week, it announced a deal under which it is selling back its stake in Lockheed Martin Corp. for certain Lockheed assets and a $1.5 billion payment. GE said it expects to record a $1 billion net gain on the deal, which it will use to restructure some of its industrial businesses.
The recent carnage was the worst one-day round of layoffs since November 1996, according to Challenger, Gray and Christmas Inc., an outplacement firm. "They've been surging since July," John Challenger, executive vice president of Challenger, Gray and Christmas Inc., said of cutbacks. "I think there is a real potential this is another wave."
Driving companies to continue their cost-cutting, according to First Union Corp. economist Mark Vitner, is an economic environment in which businesses have been unable to get price increases for products.
To make the same amount of money or more - as many firms hope given continuing pressure for earnings growth from Wall Street - companies must continually prune overhead, usually people, often one of a company's highest costs.
The recent weakness in Asian currencies could exacerbate the situation as foreign-produced goods become even more competitive against those made in this country, Mr. Vitner said.
"All these layoffs, to me the one thing they have in common is sort of the downside of globalization," he said.
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