This morning CNNMoney.com paints a grim picture of layoffs:
NEW YORK (CNNMoney.com) — The final week of January began with a bloodbath for the job market, as over 71,400 more cuts were announced on Monday alone.
At least six companies from manufacturing and service industries announced cost-cutting initiatives that included slashing thousands of jobs.
More than 200,000 job cuts have been announced so far this year, according to company reports. Nearly 2.6 million jobs were lost over 2008, the highest yearly job-loss total since 1945.
“It’s all about the consumer, and the consumer’s been hit hard,” said Robert Brusca, chief economist at Fact and Opinion Economics. “It’s a vicious circle as weakness begets layoffs, which beget more spending weakness.”
Here are the ten companies who are laying off the most companies in 2009:
| Company | Layoffs |
| Circuit City | 30,000 |
| Pfizer | 26,000 |
| Caterpillar | 20,000 |
| Alcoa | 13,500 |
| Sprint Nextel | 8,000 |
| TDK Corp. | 8,000 |
| Home Depot | 7,000 |
| ING | 7,000 |
| BHT Billiton | 6,000 |
| Intel | 6,000 |
A quick check (Source: Morningstar.com) of these companies revealed that with rare exceptions, e.g. Circuit City, these companies had made money in 2008 and were continuing to pay dividends in 2009. Indeed, in a number of cases the announcement of layoffs was accompanied by an announcement of an increase in the dividend.
I continue to believe that the primary fiduciary responsibility of managers is to increase shareholder value. However, shareholder value and maintaining the quarterly dividend are not synonymous and I don’t equate reducing the productive capacity of a company with increasing its value but rather with reducing that value.
What has become of entrepeneurship? Where is the creativity and risk-taking? I don’t believe there’s an example in the history of the world in which a company has cost-reduced its way to robust growth.
Managers should take great care. When companies that continue to make money lay off employees, especially in lock step, they may aggravate the very conditions that are producing decreased sales, reinforcing the problems they’re trying to cope with.
At the very least it will put additional stresses on individuals, families, communities, cities, and states. Don’t expect all of those to be passive.
Update
The hits keep right on coming. This morning Corning announced that up to 4,900 jobs will be eliminated to cut costs:
NEW YORK (Reuters) – Corning Inc posted weaker-than-expected quarterly results and outlook on Tuesday due to a significant decline in demand for glass for televisions and computer monitors, and said it would eliminate up to 4,900 jobs to cut costs.
Corning’s shares fell about 7.5 percent after the company, whose glass is used for flat-panel displays and fiber-optic cables, said fourth-quarter net income fell to $249 million, or 16 cents a share, from $768 million, or 49 cents a share, a year earlier.
Excluding special items, profit was 13 cents a share, a 70 percent drop from one year ago. Analysts were looking for profit of 19 cents per share, according to Reuters Estimates.
3,500 of the jobs were said to be full-time permanent employees, about 13% of Corning’s workforce. Another example of a company that’s not losing money laying off people.
Here’s the thing to be concerned about: what if Steve Balmer is right? What if the economy is adjusting permanently (or for the foreseeable future, which amounts to the same thing) to a lower level of activity?
