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Closures & Layoffs (Oct. 26-Nov. 1): Fortune 500s Sharpen Their Axes

A Weekly Report on Future Corporate Downsizings
October 30, 2008
In this week's issue:
  • Fortune 500 cutting staff, contemplating new round of closings, consolidations.

  • Plus we report on company closures and layoffs in: California, Florida, New York, Oregon, Virginia and Wisconsin, which includes 48 new announcements in California.

Fortune 500 Cutting Staff, Contemplating New Round of Closings, Consolidations

While news of layoffs across the financial services spectrum have become commonplace from the implosion of Wall Street investment banks this year, the past week has produced a stunning array of new cutbacks across the rest of corporate America.

The new layoff announcements come following release of weak third quarter earnings from companies in manufacturing, automotive, technical services, pharmaceuticals and consumer goods. Included in the list is a who's who of Fortune 500 companies: Chrysler, General Motors, Merck, Qwest Communications, Terex, Verizon, Whirlpool, Wyeth and Yahoo!

In the past week, these corporations alone have announced layoffs of more than 21,000 positions. At 250 square foot per person, that would represent a loss of more than 5 million square feet of occupied space. The relationship between jobs and occupied space is important because as many of these companies acknowledged this week, with the announced layoffs comes the beginning of the process of undertaking facility rationalization studies. Many are analyzing their facility operations with an eye toward consolidation, transfer or sale of some properties. These changes could come next year.

In many cases, the new round of cutbacks are in addition to actions already taken this year and are preliminary to another round of cutbacks still to come.

In addition each round of cutbacks is likely to have ripple effects among companies that supply product and services to these corporations. Take for example what happened in the case of General Motors.

General Motors announced that is planning to cease production at its Janesville, WI, facility by Christmas. While that will result in the layoff or reassignment of just 92 workers, the ripple effect of that decision is already showing up in other ways in the Janesville area. Logistics Services Inc. is closing down and laying off 159 workers there and Flint Special Services is also closing down. Both companies stage materials for the GM assembly line at Janesville. Allied Automotive Group, based in Atlanta, also filed notice that it will close its terminal in Janesville and eliminate 117 positions.

(Editor's Note: There is also word on the street from where I am based in Youngstown, OH, that GM could eliminate its third shift at the GM Lordstown (OH) plant after the start of the new year. No official notice has come from GM regarding any such decision.)

Meanwhile, Chrysler LLC this week said it would eliminate one shift at its Toledo (OH) Jeep plant and accelerate the closure of its sport utility vehicle factory in Newark, DE, because of the slowing global economy and a continuing shift toward smaller vehicles.

About 825 workers at the Toledo North Assembly Plant will be laid off indefinitely as of Dec. 31. The Newark closure also will be effective at the end of the year and affect about 1,000 jobs.

The Toledo factory makes the Dodge Nitro and Jeep Liberty. Both have been selling slowly this year due to high gas prices and a slowing U.S. economy. The Newark plant makes the slow-selling Dodge Durango and Chrysler Aspen sport utility vehicles. It originally was expected to close at the end of 2009.

General Motors, this week, has been pursuing financing from the U.S. Treasury to aid it in its efforts to takeover Chrysler Corp. If such a merger were to occur, Anderson Economic Group, a Michigan consulting group, estimated this week that it could result in the loss of from 25,000 to 35,000 automotive jobs.

With the automotive production cuts Stockholm, Sweden-based SKF, which manufactures automotive seals products, announced this week that it would be closing its facility in Elgin, IL, and moving those operations to Mexico. The consolidation process is expected to take place over 12 months and will affect about 160 employees.

The latest round of layoffs is also indicative of how the ailing economy and credit crunch have impacted commercial real estate. New construction starts have been dwindling all year.

As such, Terex Corp., a Westport, CT-based manufacturer of a broad range of equipment for use in various industries, including construction and infrastructure, announced this week that it is taking a series of actions to reduce costs and inventories "aggressively."

In its construction segment, Terex has adjusted production lines to short-time workweeks and cut 141 workers. The company said further reductions of 17% are expected to occur in the next three to six months.

In its roadbuilding segment, it reduced its workforce by 98 people and has cut additional positions in others segments too.

In addition to letting go full-time employees, Terex has also cut its use of temporary agency employees and independent contractors - numbers that don't always get counted in the workforce reduction numbers.

Terex, also like others, has also undertaken temporary shutdowns of its manufacturing facilities as a way of reducing production output. That practice, it said, will continue through the use of an extended winter shutdown and shortened workweeks.

Among tech firms, Denver, CO, Qwest Communications International Inc. said it expects to reduce its workforce during the fourth quarter by approximately 1,200, or a little more than 3% of the total workforce as of the end of the third quarter.

The telecommunications business has been going through an industry consolidation for the past three years as Verizon Communications chairman and CEO Ivan Seidenberg explained to investors this week.

"If you watched over the past three or four years we've had a steady decrease in employee headcount in those portions of the business that's going through the biggest transition," Seidenberg said. "You can see steady quarter over quarter and year over year transformation of the headcount reduction in the Telco. I think it would be fair to say that with that we'll continue to work on reducing other headcount in the Telco."

"Of course you know we continue to add headcount in wireless where we need it. Overall you should expect the headcount number to come down in those parts of the company in which we're transforming the business and as technology keeps eating away at the access line base moving many of those lines to Wireless you will see us continue to transform the base," Seidenberg said.

Denny Strigl, president and COO of Verizon added, "I would just add one, this is down in the weeds a bit but we have numerous real estate consolidation occurring. This should save us money into 2009."

Internet search giant Yahoo! also has begun implementing a series of cost CUTS. The company expects to reduce its global workforce by at least 10% during the fourth quarter. The new layoffs, Yahoo's second major round of cuts this year, amount to at least 1,500 employees.

Yahoo! also plans to implement additional cost-cutting measures. Some of these actions might include relocating some operations to lower cost geographies, consolidating real estate, improving procurement and standardizing our global technology platform.

In the pharmaceutical industry, Madison, NJ-based Wyeth said it would undertake a reduction in workforce of approximately 6% about 3,000. About half of Wyeth's workforce is based in the U.S.

Wyeth's cuts will come primarily in research and development operations where it is overhauling its early-stage research by halving the number of therapeutic areas and diseases for which it will pursue new medicines.

Merck & Co. Inc. in Whitehouse Station, NJ, outlined the next steps in its ongoing efforts to reduce costs this past week too. As part of the plan, Merck expects to eliminate approximately 7,200 positions - 6,800 active employees and 400 vacancies - across all areas of the company worldwide by the end of 2011. About 40% of the total reductions will occur in the United States.

The restructuring effort will involve all areas of the company. For example, the company said it would make greater use of outside technology resources, centralize common sales and marketing activities, and consolidate and streamline its operations.

A lot of Merck's cuts are going to come from its management layers, the company said. Merck will reduce its total number of senior and mid-level executives by approximately 25%.

These cuts add to the growing number of jobs cuts this year. From January through September, companies have announced 14,811 mass layoff actions affecting 1.51 million workers. The national unemployment rate was 6.1% in September. All of the cuts are taking their toll on the consumer spending side of the economy.

"We are in the midst of a rapidly changing and very challenging economic environment. We have seen a sharp drop in demand in North America and Europe during the third quarter, and we do not expect demand conditions to improve in the near term," said Jeff M. Fettig, Whirlpool Corp. chairman and CEO. "The global credit crisis has had a profound negative impact on what was already a weakening and very fragile global economy. Declining home values, rising unemployment and very low consumer confidence levels will likely prolong a negative demand environment at least through the middle of 2009."

In anticipation of this environment, Benton Harbor, MI, Whirlpool announced substantial cost and production capacity reductions. The company said it would reduce its global workforce by approximately 5,000 positions by the end of next year.

In addition Whirlpool said this week it would close its Jackson, TN, facility and transfer production to Findlay, OH.

Since January, Whirlpool has closed plants in LaVergne, TN, and Oxford, MS.

Read Closures & Layoffs First

Receive notice when a new Closure & Layoffs column is published by receiving The Watch List newsletter. The Watch List is a powerful one-two-combination of both top-down macro analysis and bottom up micro real estate news, as well as valuable leads about companies expanding and contracting and property and loan investment opportunities. It is available for free by e-mail, which is the quickest way to review all of the news in the column as soon as it is published and link directly to the news and features you want. Just e-mail me your name, title, company, company business, city, state, and e-mail address. You can reach me by clicking on the byline above or e-mailing me at Mark Heschmeyer

Closures & Layoffs

The following future closings and permanent mass layoffs were reported in California.
  • Actel Corp. at 2061 Stierlin Court in Mountain View is undertaking a 10% reduction in its workforce. Approximately 60 positions are being eliminated.

  • Activision Blizzard is laying off 6 employees on Nov. 7 at 4247 S. Minnewana Ave. in Fresno and 20 employees on Nov. 7 at 6060 Center Drive, 5th Floor, in Los Angeles.

  • AIGM and 21st Century Insurance Co. is closing down and laying off 106 employees on Dec. 26 at 1800 E. Imperial Highway, Suite 100, in Brea.

  • Americam Airlines Inc. is laying off 28 employees on Nov. 1 at North Terminal-Baggage Service Office in San Francisco.

  • American Airlines Inc. is laying off 53 employees on Nov. 1 at 400 World Way in Los Angeles.

  • American Eagle Airlines Inc. is closing down and laying off 84 employees on Nov. 2 at 903 and 835 Airport Drive in San Luis Obispo.

  • AT&T California is laying off 48 employees on Nov. 23 at 2600 Camino Ramon in San Ramon.

  • Avery Dennison Corp. is closing down and laying off 22 employees on Nov. 30 at 10721 Jasmine St. in Fontana.

  • California Fraternal Order of Police Fundraising is closing down and laying off 103 employees on Oct. 31 at 4660 Spyres Way in Modesto.

  • Calsonic Kansei is closing down and laying off 57 employees on Oct. 31 at 9 Holland in Irvine.

  • Castaic Brick is laying off 64 employees on Nov. 26 at 32201 Castaic Lake Drive in Castaic.

  • Chase Home Lending is closing down and laying off 58 employees on Dec. 5 at 2633 Camino Ramon in San Ramon.

  • Conagra Foods Inc. is closing down and laying off 25 employees on Nov. 22 at 200 Boysenberry Lane in Placentia.

  • CP Meilland LLC is laying off 181 employees on Oct. 31 at 631 Walker St. in Shafter.

  • Ebay Inc. is laying off 184 employees on Nov. 1 at 2145 Hamilton Ave. in San Jose.

  • Exel Inc. is laying off 102 employees on Dec. 8 at 601 Kinetic Drive in Oxnard.

  • First Collateral Services Inc. (Citigroup Inc.) is closing down and laying off 26 employees on Dec. 31 at 1855 Gateway Blvd. in Concord.

  • Gate Gourmet is laying off 325 employees on Nov. 2 at 6701 W. Imperiasl Highway in Los Angeles.

  • Goodrich Aerostructures Inc. is laying off 87 employees on Nov. 19 at 850 Lagoon Drive in Chula Vista.

  • Greene Tweed is closing down and laying off 13 employees on Nov. 4 at 7101 Patterson Drive in Garden Grove.

  • Heller Ehrman LLP is closing down and laying off 76 employees on Nov. 28 at 333 S. Hope St. in Los Angeles; 68 employees on Nov. 28 at 4350 La Jolla Village Drive in San Diego; 404 employees on Nov. 28 at 333 Bush St. in San Francisco and 134 employees on Nov. 28 at 275 Middlefield Road in Menlo Park.

  • Hemet Valley Skilled Nursing Facility is closing down and laying off 104 employees on Nov. 30 at 1117 E. Devonshire Ave. in Hemet.

  • Hemosense Inc. is closing down and laying off 29 employees on Dec. 2 at 651 River Oaks Parkway in San Jose.

  • Homecomings Financial LLC is laying off 21 employees on Oct. 31 at 1650 Corporate Circle, Suite 100, in Petaluma.

  • Indymac Bank is laying off 56 employees on Nov. 12 at 1 Banting in Irvine.

  • International Paper Co. is closing down and laying off 86 employees on Dec. 5 at 10555 Iona Ave, in Hanford.

  • Johnson Controls is closing down and laying off 36 employees on Dec. 7 at 1900 Prairie City Road in Folsom.

  • Kmart Store #4240 is closing down and laying off 89 employees on Dec. 14 at 19600 Plummer St. in Northridge.

  • Land America is laying off 130 employees on Nov. 14 at 275 W. Hospitality Lane in San Bernardino.

  • Maxim is laying off 78 employees on Oct. 26 at 3725 N. First St. in San Jose.

  • Nexframe is closing down and laying off 72 employees on Nov. 24 at 4819 File Court in Stockton.

  • NYK Logistics (Americas) Inc. is laying off 142 employees on Dec. 1 at 2417 E. Carson St., Suite 100, in Long Beach.

  • Perotsystems is laying off 58 employees on Nov. 5 at Building 233a M/S 233-1 NASA Ames Research Center in Moffett Field.

  • Ralphs is closing down and laying off 55 employees on Nov. 15 at 12625 Frederick St. in Moreno Valley.

  • Riverside Cement Co. is laying off 85 employees on Dec. 10 at 1500 Rubidoux Blvd. in Riverside.

  • Science Applications International Corp. is laying off 89 employees on Nov. 1 at 10260 Campus Point Drive in San Diego.

  • Sconza Candy C. is closing down and laying off 82 employees on Nov. 14 at 919 81st Ave. in Oakland.

  • Siemens Healthcare Diagnostics Inc. is laying off 151 employees on Dec. 30 at 5700,5716,5722,5736 W.96th St. & 9625 Bellanca St. in Los Angeles.

  • Smurfit-Stone Container Corp. is closing down and laying off 108 employees on Nov. 16 at 19635 E. Walnut Drive in City of Industry and 114 employees on Nov. 23 at 2525 S. Sunland Ave. in Fresno.

  • Symantec is laying off 172 employees on Nov. 1 at 350 Ellis St. in Mountain View.

  • The Boeing Co. is laying off 58 employees on Nov. 28 at 2401 W. Wardlow Road in Long Beach.

  • The Western Union Co. is laying off 54 employees on Nov. 30 at 100 North Point in San Francisco.

  • United is laying off 59 employees on Oct. 31 at 1 World Way in Los Angeles; 107 employees on Dec. 7 at Los Angeles Int'l Airport in Los Angeles and 499 employees on Dec. 7 at San Francisco Int'l Airport in San Francisco.

  • Washington Mutual is laying off 51 employees on Dec. 31 at 9200 Oakdale Ave. in Chatsworth.

  • West Marine Products Inc. is laying off 390 employees on Dec. 25 at 500 Westridge Drive in Watsonville.

The following future closings and permanent mass layoffs were reported in Florida.
  • Federal Reserve Bank Of Atlanta is laying off 57 employees at 800 Water St. in Jacksonville by Nov. 30.

  • Rockwell Collins Inc. is laying off 60 workers at 7235 Corporate Center Drive, Suite E, in Miami by Christmas Eve.

Harris Interactive Inc. at 60 Corporate Woods in Rochester, NY, will reduce headcount at its U.S. facilities by approximately 30 full-time employees. The company expects to complete this workforce reduction this month.

US Marine has begun laying of 174 workers at its manufacturing plant at 133 Weyerhaeuser Drive in Roseburg, OR, as part of a pending plant closure.

The following future closings and permanent mass layoffs were reported in Virginia.
  • General Dynamics Electric Boat is laying off 23 people at 702 5th St. inPortsmouth on Dec. 5.

  • Therma-Tru Doors is closing down and laying off 231 workers at 3000-3010 Mine Road in Fredericksburg on Dec. 12.

The following future closings and permanent mass layoffs were reported in Wisconsin .
  • Marinette Marine Co. will be laying off 137 employees at 1600 Bly St. in Marinette. The company blames the layoff on the failure to win one military contract and the postponement on the decision of another. The layoffs may not be permanent, if the postponed decisions is eventually made. The company laid off 89 employees at that location in September.

  • SPX is laying off 169 workers at 100 South CP Ave. in Lakes Mills over a seven-month period beginning Dec. 18. The facility is expected to close.

  • Tecumseh Power Co. is closing down and laying off 70 workers at 900 North St. in Grafton by July 14, 2009. It is doing the same at 1604 Michigan Ave. in New Holstein affecting 20 workers.

  • Wick Builders plans to layoff 63 workers at 2301 E. 4th St. in Marshfield beginning on or around Christmas Eve.

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