U.S. Food cutting 700 jobs nationwide

Parent company, Ahold, says restructuring goal is to save $100 million

December 31, 2005|By PAUL ADAMS | PAUL ADAMS,SUN REPORTER

The owner of Columbia-based U.S. Foodservice said yesterday that it is eliminating about 700 jobs at its unit as part of a nationwide restructuring plan aimed at cutting costs by $100 million.

A spokesman for Royal Ahold NV, the Netherlands-based food marketing conglomerate, said it was too soon to say how many of the jobs will come from the Columbia headquarters. But it is estimated that up to 500 of the cuts will be to administrative jobs spread throughout its 70 divisions nationwide.

U.S. Foodservice officials confirmed two weeks ago that an unspecified number of employees had already been laid off in Maryland as part of the restructuring plan revealed Nov. 29. The company employs more than 29,000 people nationwide and is the second-largest food distributor behind Houston-based Sysco Corp.

"We have to say this with some pain, but when you are rationalizing your business and trying to make sure 700 jobs are otherwise repositioned, this will mean that some job losses will take place at the headquarters," said Nick Gale, an Ahold spokesman in Amsterdam.

"But significant is too strong a word, and the pain will be divided across the nation," he said when asked if a large number of the job losses would be in Columbia.

The company will take a $50 million to $60 million charge in the fourth quarter to reflect the cost of the layoffs. Ahold's shares closed down a penny to $7.53 per share in U.S. trading yesterday.

The company, which also owns the Giant and Stop & Shop supermarket chains, announced Nov. 29 that it would split U.S. Foodservice into two divisions and cut administrative costs. The plan marked the company's latest efforts to regain its footing after being rocked by an accounting scandal nearly three years ago.

One of the U.S. Foodservice units will deliver bulk food and equipment to institutional buyers, such as hospitals, schools and prisons. The other will focus on fast-food restaurant chains.

"This will only help to make U.S. Foodservice and the position of the current work force ... even stronger because we will cut down to what it takes to make us most effective," Gale said.

U.S. Foodservice was at the center of Ahold's accounting scandal disclosed in February 2003, and the division has been in restructuring mode ever since. The company said it had inflated earnings by improperly booking volume discounts paid by suppliers over the course of several years. A number of company executives and vendors face trial on a variety of charges, including securities fraud. Ahold recently agreed to pay $1.1 billion to settle a securities fraud class action lawsuit related to the scandal.

U.S. Foodservice remains a cash cow for Ahold, generating 2004 sales of $18.8 billion. But many industry analysts think Ahold will eventually sell the business to raise cash and improve its credit rating.

paul.adams@baltsun.com

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