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Gillette cuts jobs, plants
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September 28, 1998: 6:49 p.m. ET
Actions blamed on launch of Mach 3, global weakness; $350M charge seen
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NEW YORK (CNNfn) - In a major reorganization, Gillette Co. plans to cut 4,700 jobs, close plants and warehouses and take a $350-million charge in the third quarter to cover the costs of the clean-up.
On a conference call, officials from the Boston-based consumer-products giant said the financial woes were attributed to troubles with the launch of the Mach 3 product line as well as economic problems in regions outside of the United States.
"We didn't fully appreciate the developing world impact," Chairman and Chief Executive Alfred M. Zeien said during the call. Zeien was joined by President and Chief Operating Officer Michael Hawley.
Shares of Gillette (G) were halted for trading, pending the announcement. During the regular session, the stock closed up 1-11/16 at 40 on the New York Stock Exchange.
Zeien and Hawley explained that Gillette had expected profits would be adversely affected by the $300-million advertising campaign associated with the launch of Mach 3 -- the world's first triple-bladed razor.
But even sales of non-Mach 3 product lines were down sharply due to the emphasis placed on the launch. Including the effects of currency fluctuations, sales will be flat and operating earnings will be 15 to 20 percent below last year.
The layoffs, which are equivalent to about 11 percent of Gillette's global work force of 43,000 employees, will take place during the next 18 months.
In all, the company plans to close 14 factories and 12 warehouses and to close or consolidate approximately 30 office facilities worldwide. Specific locations weren't immediately known.
These actions will result in a one-time charge of about $350 million, which will lower profits by 30 cents a share in the third quarter. When combined with the latest expectations for operating profits, the charge will cause the company to break even for the quarter.
Under the new structure that becomes effective Jan. 1, Gillette's six global business management units will be organized under two executive vice presidents: Edward F. DeGraan and Archibald Livis.
DeGraan, 55, is currently is executive vice president of the Duracell North Atlantic group, will lead three business management units: blades and razors; toiletries; and batteries.
Livis, 59, was recently named executive vice president for the diversified group, which includes Braun and Oral-B brands.
The consolidation will result in five groups based on geographic region: North America, Europe, Asia Pacific, Latin America and what's known as "AMEE," -- Africa, Middle East and Eastern Europe.
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Gillette
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