Honeywell to cut 6,500 jobs
By Linda A. Johnson
Associated Press Business Writer
TRENTON, N.J. — With sales in key markets slumping and first-quarter profits down 92 percent, high-tech manufacturer Honeywell International Inc. has announced plans to cut 6,500 jobs to remain competitive.
The 6,500 job cuts, spread across Honeywell's businesses around the world, represent about 5 percent of its global work force.
On Friday, Honeywell reported first-quarter net income of $41 million, or 5 cents per share, down from $506 million, or 63 cents per share, a year earlier.
The disappointing earnings report likely will be the last for the Morris Township-based maker of aerospace, automotive and electronic products. By the end of this quarter, when those layoffs should be completed, Honeywell expects completion of its acquisition by Fairfield, Conn.-based conglomerate General Electric Co., the world's most valuable company and one of the most profitable last year.
Adjusted for one-time gains and losses, the company this quarter earned $415 million, or 51 cents per share. That fell short of a forecast of analysts surveyed by Thomson Financial/First Call, who were expecting earnings of 58 cents per share.
Honeywell shares closed down 38 cents to $47.22 in trading on the New York Stock Exchange.
"The forecast, unfortunately, was based on no facts," said Nicholas Heymann, electrical equipment analyst at Prudential Securities Inc.
Heymann said that Honeywell has given analysts and investors no guidance on its expected sales and earnings since the Oct. 22, 2000, announcement that it would be acquired by General Electric in a deal now worth about $41 billion, creating one of the world's largest industrial companies. The two companies' high-tech businesses overlap in many areas, yet there is little overlap in their products.
Honeywell's sales for the quarter ended March 31 dipped to $5.95 billion, down from $6.04 billion in the year-ago period.
"Clearly we're seeing downturns in some of our end markets ... and these actions are being taken to address these weaknesses," said Honeywell spokesman Tom Crane.
Sales of automotive products, from truck brakes and friction materials to replacement parts, antifreeze and other consumer auto products, were down as much as 25 percent, he said.
"We continue to see a decline in the do-it-yourself market,'' as well as in products sold to manufacturers, Crane said.
Heymann said Honeywell had to make the job cuts to keep its prices in key markets competitive and thus maintain market share, particularly given expectations that the global economy will be flat or down for the next few years.
The company said the decrease in earnings stemmed from a slowing economy and high raw material costs, particularly for natural gas, as well as cost-cutting measures as it works to close its deal with GE.
Highly diversified GE makes power plant parts, aircraft engines and appliances, and it owns the NBC television network. Since the 1990s, GE has been remaking itself into a powerhouse in financial services, business consulting and equipment maintenance, with 70 percent of sales coming from those businesses.
The merger still must be approved by U.S. regulators and the European Commission.
"We're confident that we'll get Justice Department approval in ... a couple of weeks," Crane said.
He said the companies are hoping for approval from the European Commission before July.
Shares of General Electric closed down 41 cents to $48.10 on the NYSE.
