Posted on: Thursday, October 10, 2002

4th quarter delivers the worst stuff - job cuts

By Steve Matthews
Bloomberg News Service

New York — The job cuts are coming fast and furious at U.S. companies, and labor experts say more are on the way.

AT&T Corp. will eliminate 1,700 jobs at its cable-television unit, drugmaker Abbott Laboratories will pare 2,000 jobs and General Electric Co. will trim 1,000 jobs at its jet-engine unit, the companies said yesterday.

U.S. companies still are overstaffed and these dismissals are precursors to even more before year's end, economists and labor analysts say. Companies putting together annual budgets want to lower expenses at a time when sales remain stagnant.

"The fourth quarter is a risky time for workers," said Rick Cobb, executive vice president of Challenger, Gray & Christmas Inc., an outplacement firm. "Companies are trying to figure out how lean they can get."

In four of the last seven years, the largest number of job cuts has been announced in the fourth quarter, according to Challenger, Gray. Between 1995 and 2001, about 30 percent of all firings came in the final quarter, the firm said.

A weakening labor market may increase the U.S. unemployment rate to 6 percent by the first quarter of next year, some economists said. The jobless rate last month was 5.6 percent.

"Companies have not seen the profit performance they had hoped to achieve," said Lynn Reaser, chief economist at Banc of America Capital Management. "The stock market has made company CEOs more cautious. Companies are trying to clear the decks for a ... more profitable performance in 2003."

The Standard & Poor's 500 Index declined 18 percent in the third quarter as Thomson First Call reported that component companies' profits, excluding certain costs, rose 5.5 percent and failed to meet forecasts. The index has lost almost a third of its value this year.

The U.S. job cuts are part of a global shrinking of work forces.

Fiat SpA said yesterday it will eliminate 8,100 more positions, primarily at its auto unit, to cut costs as sales plummet. The reductions come less than two months after the manufacturer said about 3,500 automotive jobs would be eliminated in Italy, where it is based.

On Tuesday, Deutsche Telekom AG, Europe's biggest phone company, said it may cut as many as 55,000 jobs through 2005, or about 22 percent of its work force.

"The economy is not getting any better," Procter & Gamble Co. CEO A.G. Lafley told reporters yesterday before the annual meeting of shareholders of the largest producer of U.S. household goods. "We know we are in for some tough times."

Lafley, who last year announced 9,600 job cuts, is negotiating to hire Electronic Data Systems Corp. to provide operations such as computer maintenance to cut back labor costs further.