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WRAPUP 4-U.S. companies sharpen job-cutting shears as sales slow
October 23, 2012 / 3:05 PM / 5 years ago

WRAPUP 4-U.S. companies sharpen job-cutting shears as sales slow

* DuPont to lay off roughly 2 percent of staff
    * Dow to lay off about 5 pct of staff
    * DuPont, 3M, United Tech, UPS miss revenue forecasts
    * United Tech lowers full-year sales target
    * Whirlpool, Coach beat earnings expectations


    By Scott Malone
    BOSTON, Oct 23 (Reuters) - Faced with weakening revenue, three of the
largest U.S. companies warned on Tuesday that they would cut jobs to protect
profits.
    Dow Chemical Co said it would cut 2,400 jobs, about 5 percent of its
staff, and close 20 manufacturing facilities in a bid to save $500 million a
year in operating costs. The company said it would also cut back capital
spending and investments to save another $500 million on top of that. 
    DuPont Co said it planned to lay off about 1,500 workers - roughly 2
percent of its global headcount - as the chemical company grapples with
weakening demand from the construction and renewable energy sectors.
    United Technologies Corp did not specify the magnitude of the cuts
it was considering but said it would raise its full-year, restructuring budget
by 20 percent to $600 million as demand for its military equipment declines.
    Both DuPont and United Technologies, components of the widely watched Dow
Jones industrial average, reported weaker-than-expected sales for the
third quarter, following an overall trend. Of the companies in the broad
Standard & Poor's 500 index that have reported results, 63 percent came
in below analysts' revenue forecasts, well above the 38 percent sales-miss rate
in a typical earnings season, according to Thomson Reuters I/B/E/S.
    "Obviously, we're looking carefully at the macro environment," United Tech
Chief Executive Louis Chenevert told Reuters. "In Europe, the economy continues
to be very sluggish, and in North America it's a slow recovery." 
    Dow, DuPont and United Tech are by no means the only big U.S. companies to
begin cutting jobs. Chipmaker Advanced Micro Devices said last week that
it would reduce its workforce of 12,000 by 15 percent as it copes with weak
demand and a consumer shift towards tablet computers.
    Engine maker Cummins Inc, the PayPal arm of eBay Inc and
for-profit college operator Apollo Group Inc announced smaller rounds
of cuts earlier this month.
    While the U.S. unemployment rate ticked down to a four-year low of 7.8
percent in September, it remains one of the main roadblocks to a stronger U.S.
recovery from the recession. 
    Though not all of the cuts would come in the United States, more waves of
pink slips would not be good news for Democratic President Barack Obama, who is
locked in a tight re-election battle with former Massachusetts Governor Mitt
Romney, a Republican, who has criticized Obama's handling of the economy.
    The job cuts are one of the more extreme reactions so far this earnings
season to slipping demand and global economic uncertainty, and recent data
suggests more layoffs could be on the way. 
    The number of jobs cut at U.S.-based employers rose 5 percent in September
from August, when layoffs hit a 20-month low, according to Challenger, Gray and
Christmas, a consulting firm that tracks layoff data.
    "This may be a harbinger of things to come," John Challenger, the firm's
chief executive, said of DuPont's layoffs.
    The magnitude of cuts DuPont discussed do not compare with thousands of
layoffs by big U.S. employers during and after the recession. Most have kept
staffing levels low, leaving little room for more job losses.
    "Revenue has been slowing down, and you could see companies turning to
layoffs as another way to increase the bottom line," said Perry Adams, a
portfolio manager at Northwestern Bank in Traverse City, Michigan, whose
holdings include United Tech and 3M. "But they're running pretty lean and have
to be careful."
   
    
    REVENUE WORRY
    Companies across a range of sectors, including manufacturer 3M Co,
tech equipment and service supplier Xerox Corp and No. 1
package-delivery company United Parcel Service Inc reported
weaker-than-expected revenue in the quarter.
    The revenue misses reflect a sharp strengthening in the dollar's value in
the third quarter, a year after it dove when Standard & Poor's stripped the
United States of its AAA credit rating. A stronger dollar makes U.S. goods more
expensive overseas and reduces the revenue booked from foreign sales.
    3M and Xerox cut their profit forecasts for the remainder of the year, while
UPS held its steady. UPS shares closed up 3 percent at $73.73, while DuPont
finished down 9 percent at $45.25, Xerox closed down 5.1 percent at $6.67 and 3M
closed down 4.1 percent at $88.73.
    3M CEO Inge Thulin, who took the reins in February and has been focused on
controlling costs, said the company expects the economy to remain steady in the
fourth quarter, neither slowing dramatically nor materially improving.
    "We don't see any uptick, but we believe it's stable," Thulin told
investors. "There's many uncertainties."
    Among those uncertainties is China, whose economic slowdown has caused it be
a less reliable growth engine for multinational companies. 3M noted that its
sales in China were essentially flat in the quarter, with declines in demand for
industrial and transportation products offsetting growth in healthcare and
office supplies.
    Investors are also waiting to see what Americans do over the next two months
during the holiday shopping season, which is critical for retailers, consumer
goods companies and shipping companies. 
    UPS said on Tuesday that although there was some uncertainty around the
"magnitude" of the holiday shopping season, it expects to handle more than 500
million packages between the U.S. Thanksgiving Day holiday and Christmas, and
said it would release more estimates and holiday hiring plans within a few
weeks. 
    Companies that sell to consumers rather than corporate buyers sounded a
somewhat brighter note on Tuesday. Appliance maker Whirlpool Corp had
better-than-expected third-quarter earnings and raised its profit forecast for
the rest of the year as it succeeded in a campaign to raise prices. Higher
prices boosted its profit margins but weighed on sales, which fell 2.8 percent
in the quarter. 
    Coach Inc beat Wall Street's earnings expectations as consumers
proved ready to buy its handbags and other luxury leather goods that are more
affordable than those made by rivals such as France's LVMH Moet Hennessy Louis
Vuitton SA or Italy's Prada SpA.
    Price strategy also helped Coach expand sales in China, said CEO Lew
Frankfort. "Our price points are extremely compelling relative to the European
luxury brands," he said in an interview. 
    Investors sent Coach shares up 7.3 percent to a close of $58.15 and
Whirlpool shares up 8.7 percent to close at $93.81.
    Overall, though, investors remained worried that slowing sales growth would
dim corporate prospects. 
    "We're definitely seeing pressure on sales. Most are coming in below
expectations while earnings have been mixed," said Jeff Windau, an industrials
analyst at Edward Jones in St. Louis.  
    The overall decline left executives stretching for any positive indicators
to share with investors. DuPont vice president of investor relations, Karen
Fletcher, pointed out strong sales of cyanide as one of the company's bright
spots in the quarter. 
    While the company sells that chemical for use in gold mining, cyanide is 
commonly known for being highly poisonous.

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