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P&G slashing 9,600 jobs
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March 22, 2001: 1:59 p.m. ET
Consumer products maker sees 9% work force cut improving competitiveness
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NEW YORK (CNNfn) - Procter & Gamble said Thursday it will slash 9,600 jobs, or 9 percent of its work force, as the maker of Crest toothpaste, Pampers diapers and other consumer products takes steps to spur its lagging growth rate.
The Cincinnati-based company said the cuts will come on top of 7,800 announced in 1999 as part of a broad-based restructuring. The latest job cuts had been widely expected.
During a conference call with analysts, CEO A.G. Lafley told analysts that P&G has been losing market share on key brands because prices are too high to remain competitive.
 "We are not getting these brands priced right. Over the last nine months we have worked methodically and systematically to get prices down on key brands," Lafley said.
To remedy this, the company has already lowered prices on such core brands as Bounty paper towels and Always feminine care products among to remain competitive.
The lower prices are one reason for lackluster P&G sales in recent quarters -- along with an underperforming food unit that includes Pringles potato chips and Sunny Delight beverages, overpricing, the economic slowdown in the United States, and currency volatility overseas.
"What these guys are saying effectively is that pricing is tough," Sanford C. Bernstein analyst Jim Gingrich said. "There's not a lot of growth, so you've got to get your cost structure in line to be able to play."
P&G (PG: Research, Estimates) stock, one of 30 in the Dow Jones industrial average, fell $1.59 to $61.61 in Thursday afternoon trading.
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Lafley told analysts that the job reductions are intended to improve competitiveness and brand loyalty rather than serve as a simple cost-cutting measure.
"The simple fact is this -- over the past year Procter and Gamble's performance is unacceptable," Lafley said. "We're not producing the kind of growth we're capable of. We're not winning consistently with consumers. Too often they're going for competitors' brands, and the most obvious reason is our pricing. The price increases we have taken over the last several years have not been consistent with product advantage."
But despite the restructuring, Lafley said continued economic uncertainty will make double-digit earnings per share growth in the next fiscal year "challenging" -- though the company added that it remains comfortable with previously stated guidance for the latest quarter and the remainder of the current fiscal year.
About 40 percent of the latest job cuts will be in the United States, mostly from back-office operations, with the rest coming in other countries. Procter & Gamble, which long has struggled to boost sales growth, turned to cost-cutting with its restructuring plans.
The company said it expects to save between $600 million and $700 million after taxes annually by fiscal 2003, and that the cuts likely will cost it $1.4 billion in fiscal 2001.
P&G also said it is continuing to review cost-cutting options, and expects further announcements before the end of the fiscal year that could result in $400 million to $800 million in after-tax charges.
Lafley said the company needs to focus on more strategic spending for initiatives with the most potential. 
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