Black Thursday
Paul Maidment, Forbes.com, 07.26.01, 9:00 PM ET
NEW YORK - It is a world of pink slips and red ink. Hundreds of thousands of jobs have been lost this year on both sides of the Atlantic and the Pacific--with more than 50,000 job losses announced July 26 alone--as America's economic slowdown spreads to Europe and Asia.
This week the layoffs have come thick and fast. Among the biggest cuts announced: Alcatel (nyse: ALA - news - people), the French telecommunications group, said it was laying off 14,000 workers--for a total of 20,000 for the year. ABB (nyse: ABB - news - people), a Swiss-Swedish engineering combine, and Ericsson (nasdaq: ERICY - news - people), the Swedish maker of mobile phones, both announced 12,000 job losses. Fujitsu, the Japanese chipmaker, said it was offering "early retirement" to 9,000 workers.
In North America, Lucent Technologies (nyse: LU - news - people), the troubled telecom-equipment maker, announced it was shedding another 20,000 off its staff, and JDS Uniphase (nasdaq: JSDU - news - people), the world's largest supplier of fiber-optic components, said it was relieving 16,000. Computer maker Hewlett-Packard (nyse: HWP - news - people) warned of lower revenue and said it would let 6,000 go.
U.S. companies have laid off more than half a million workers so far this year, according to Forbes.com's Body Count Update, which has tracked layoffs at the largest U.S. companies since January. That is already around as many they laid off in all of 2000.
More than 25% of job losses announced by international companies based in the U.S. have fallen beyond U.S. borders, according to research by Forbes.com and the Financial Times newspaper.
Globalization is turning out to be a double-edged sword. Some 5,000 of Alcatel's latest layoffs are at its U.S. operations, 1,000 in the Asia Pacific region, 4,000 in Europe and the same number in the rest of the world, according to Alcatel Chairman Serge Tchuruk. The company had already announced 6,000 job cuts in North America and the U.K.
Even South Korean companies are laying off workers on the other side of the world. This week Samsung, the electronics group, announced it was closing a plant in Portugal and therefore eliminating 300 jobs.
The wellspring of all these dismissals is the decline in earnings at American companies. This has been the gloomiest quarterly corporate earnings-reporting season in the U.S. since the recession of the early 1990s. As revenue has slowed or shrunk in the face of weak demand and rising inventories, companies have sought to boost their long-term competitiveness by cutting operating costs, particularly wage bills, and cutting back on spending, causing their suppliers to do the same, thus setting up a vicious spiral or redundancies.
The surge in jobs losses this week suggests that many companies had been holding off until now despite the flurry of profit warnings at the beginning of the year that presaged the current downturn. But the optimism that the slowdown would prove sufficiently short-lived for companies to ride it out has evaporated.
And indeed, companies may have been wise to hold off. The last time there was a major round of layoffs, after the Asian financial crisis of 1998, firms found themselves expensively rehiring shortly after firing indiscriminately from the hip.
In Europe, the delay can be further explained by the requirement of companies to consult with their workers before instituting layoffs. In Germany, officials at IG Metall, the powerful engineering industry labor union, say they will protest the 5,000 job cuts Infineon (nyse: IFX - news - people), a Munich-based chipmaker, announced this week.
In Japan, big companies have traditionally used their pyramid of mom 'n' pop supplier companies to absorb surplus labor. That system is now saturated, as Fujitisu's early retirement program attests.
Few believe the worst is past. Microsoft (nasdaq: MSFT - news - people) may have the luxury of only slowing new hiring, but officials at Siemens (nyse: SI - news - people), the German conglomerate that has already announced 8,000 layoffs this year, speak for many companies when they say there is more belt-tightening to come, and more job cuts inevitable. Ifo, a German research institute, says more than 500,000 Germans could lose their jobs before the year is out.
For Europe, the firing frenzy threatens to undo what was one of its unsung success stories: a revival of job creation after a quarter of century of decline. Last year, employment in the European Union was nearly 10 million higher than five years earlier, with 6 million of those new jobs in skilled white-collar or high-tech jobs.
The Largest European Layoffs As Of July 26
Company Industry Layoffs
Alcatel (nyse: ALA - news - people) Telecom 14,000
ABB (nyse: ABB - news - people) Engineering 12,000
Ericsson (nasdaq: ERICY - news - people) Telecom 12,000
British Telecom (nyse: BTY - news - people) Telecom 6,000
Philips (nyse: PHG - news - people) Electronics 5,500
Infineon (nyse: IFX - news - people) Semiconductors 5,000
Marconi (nasdaq: MONI - news - people) Telecom 4,000
Invensys Computer consulting 2,500
NTL (nyse: NLI - news - people) Telecom 2,000+
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