2 big firms plan deep job cuts Philip Morris, NCR seek lower costs

November 25, 1993|By New York Times News Service

Two blue-chip American corporations -- Philip Morris, the tobacco and food company, and NCR, the computer unit of AT&T -- announced yesterday that they plan to cut their payrolls by a total of as many as 21,500 workers, or as much as 8 percent at Philip Morris and 15 percent at NCR.

The two cutback announcements, to be sure, are separate cases, but both underscore corporate America's determination to remain competitive through retrenchment, despite a gradually improving economy.

Philip Morris Cos. Inc. is under pressure to pare back as sales from its old-line business of cigarettes erode in the face of health concerns and changing lifestyles. Company officials announced a restructuring plan yesterday to eliminate 14,000 jobs and close or reduce 40 factories in the next three years.

NCR is struggling to reduce costs as it moves to advanced microchip technology. NCR officials yesterday said an early retirement program would be offered to 25,000 employees, or nearly half the company's work force, to achieve a cut of 7,500 jobs.

Yet the rationale behind the moves at Philip Morris and NCR is similar in key respects. Both companies are making the cuts in the name of streamlining, faster decision-making and increased productivity -- doing the work with fewer employees. And the job losses will be across-the-board, as likely to hit white-collar management staff as blue-collar factory workers.

"These are strategic or structural cutbacks, and not really related to the economy," said Eric Greenberg, director of management studies at the American Management Association, a management-education organization. "And that's why these cutbacks are continuing even though the economy is getting stronger."

Indeed, the seemingly relentless wave of big-company cutbacks is likely to continue. "I don't see that we're at the end of this yet," said Labor Secretary Robert Reich.

In an interview, Mr. Reich said that despite an economy that has added 1.4 million jobs since the start of the year, much attrition of employment at large companies was inevitable.

Two forces prompting the trend, Mr. Reich said, are increased global competition and the advance of computer technology, which has reduced the need for layers of middle management in large corporations because much of their role was gathering, analyzing and dispersing information -- tasks made easier and less labor-intensive by personal computers.

As a third reason for cutbacks, Mr. Reich cited increased pressure on corporate boards by big institutional investors.

In the past two years, the big investment funds, like employee pension funds, have prodded several poorly performing companies to make changes in their top management, including those at General Motors and IBM.

"Chief executives are under the gun today more than ever before to eke out greater profits and cutting the payroll is the easiest way for an executive to try to increase short-term profits," Mr. Reich said.

Even within the business community, there are critics of such work force cutbacks. Corporate America's penchant for slicing payrolls, they say, is a management fad that began logically enough but has been carried to extremes, like the takeover frenzy of the 1980s.

"Job creation is being given a low priority by a lot of corporate executives today," said Robert Tomasko of Arthur D. Little Inc., a management consulting firm. "Now what you're applauded for is doing work with fewer people."

While lifting productivity should be management's goal, Mr. Tomasko and other analysts caution that cutting the payroll can backfire, by lowering employee morale. The intent of most so-called "downsizing" or "re-engineering" programs is to help reduce bureaucracy and foster a more entrepreneurial tTC environment. But a work force fearful of the next round of layoffs, analysts warn, is not apt to take risks or become more creative.

"Fear is not the handmaiden of innovation," Mr. Reich said.

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