More bad news for Illinois. As should have been anticipated, Heinz is starting to lay off its Chicagoland staff:
Kraft Heinz on Wednesday laid off 700 workers at Kraft’s corporate headquarters in north suburban Northfield, part of a cost-cutting plan that will slash the combined company’s head count in the U.S. and Canada by 2,500 jobs.
Employees affected by the cuts, which have been expected for months, will get “generous” severance benefits that last at least six months and outplacement services, said Michael Mullen, Kraft Heinz’s senior vice president of corporate and government affairs. The cuts took effect immediately.
Many of the remaining workers will be commuting to downtown Chicago:
H.J. Heinz completed its purchase of Kraft Foods Group in July, forming Kraft Heinz, now the third-largest food and beverage company in the U.S. and the fifth-largest worldwide.
A few weeks later, Kraft Heinz announced it would move one of its headquarters, which encompasses some 700,000 square feet in north suburban Northfield, to less than a quarter of that amount of space in downtown Chicago. Kraft’s lease at Aon Center, which starts Jan. 1, is for 170,000 square feet over five floors.
Sadly, that won’t do much for the city other than adding another thousand people to the morning commute. Chicago doesn’t have a city earnings tax and doesn’t have the power to impose one. While the Kraft Heinz workers may be working in Chicago, they’ll undoubtedly still live on the North Shore and do their shopping there.
And, of course, there isn’t much joy in Pittsburgh, either:
Heinz, which is based in Pittsburgh, cut more than 7,000 jobs — about 20 percent of the workforce — in the 18 months after it was acquired in 2013 by Berkshire Hathaway and private-equity firm 3G Capital.
Other snack companies cutting costs include Mondelez, which was created in 2012 when Kraft split into two public companies. The maker of Mini Chips Ahoy and Oreo cookies said last month that it will cut half of its 1,200 jobs at a bakery on Chicago’s Southwest Side over the next year, as it moves some of its production to a plant in Mexico.
That’s mnore economic growth for Mexico so at least that’s something. Creative destruction. We could use a little creative construction to go along with it right about now.
Has there been a recent merger that resulted in more jobs? How long did it take to happen? There seems to be a pretty consistent pattern. Big fees for the lawyers who set things up. An increase in pay for new management since they are now managing a larger corporation, and layoffs.
Steve
Private equity: saving the American worker one layoff at a time!
…
Wait, that’s not right….
I have no knowledge whatever of the merits of the layoffs. I will note that layoffs are the sugar high of reorganization. You get a quick jolt to the bottom line from the cost reduction but they might not actually pay off in the long run. My experience has been that the worse the employee the more likely they are to hang on for dear life during layoffs.
I also want to point out my belief that no company in the entire history of the world has ever cost-reduced its way to greatness. The food industry and particularly the snack food segment of the food industry is in upheaval right now. Tastes are changing rapidly and the companies have been slow to respond. Basically, lots of American companies have gotten lazy and the workers frequently pay the price for what in the final analysis is bad management.
I read somewhere that they’re also going to end the free Jell-o in the cafeterias. Those are winning ways! Also looking to cut travel expenses, save electricity, and they’re really REALLY pushing for people to quit printing out stuff at the office unless absolutely necessary. (No, I’m not joking about any of that.)
This looks like the classic PE case: buy up the company, slash expenses, cut payroll, give themselves large bonuses for wrecking the company, and then unload it back into the wild.
…
As for bad management: that would hardly be a surprise. Is there any GOOD management in America these days? I mean, in the sense that the institution being managed thrives, as opposed to the managers getting large paychecks & bonuses.
We do them all the time, steve. It’s our reason to exist: grow. You are unable to differentiate large corporate M&A activity from mid-market. Large corporate is a world dominated by bloated, uncompetitive organization structures. Alternatively, their are requirements to be big for competitive reasons. If they don’t go through the rigors of “the market for corporate control,” painful as the process is, you go the way of the dinosaur. If you are unable to understand the distinctions you don’t know much about business.