Furloughs, wage reductions, hiring freezes and shorter hours simply did not do enough. A year into this recession, companies across the board are resorting to mass job cuts.
Home Depot, Caterpillar, Sprint Nextel and at least eight other companies announced on Monday they would cut more than 75,000 jobs in the United States and around the world — a gloomy start to the workweek for employees anxious about holding their own as the economy sinks. Caterpillar, the maker of heavy equipment, is slashing its payrolls by 16 percent. Texas Instruments said late in the day that it would eliminate 3,400 jobs, or 12 percent of its work force.
Jobs began disappearing in home building and mortgage operations early in the recession, then across finance and banking more generally. Now the ax is falling across large swaths of manufacturing, retailing and information technology, taking out workers from New York to Seattle. Just last week, Microsoft announced its first significant job cuts ever.
Caterpillar, an economic bellwether and component of the Dow Jones industrial average, reported fourth-quarter earnings of $661 million, or $1.08 per share, on Monday, down from $975 million, or $1.50 per share, a year earlier. Overall sales rose 6 percent to $12.92 billion. Analysts, on average, expected earnings of $1.31 per share on revenue of $12.84 billion, according to a survey by Thomson Reuters.
Sprint-Nextel, to be fair is struggling with enormous debt racked up when Sprint bought Nextel, coupled with the unfortunately timing of the maturity of that debt, last November, when credit markets were their tightest and refinancing almost impossible.
Texas Instruments Incorporated today announced fourth-quarter revenue of $2.49 billion, net income of $107 million and earnings per share (EPS) of $0.08. These financial results include restructuring charges of $0.13 per share. Without the charges, EPS would have been $0.21, considerably better than the company's mid-quarter expectations.
Microsoft Corp. today announced revenue of $16.63 billion for the second quarter ended Dec. 31, 2008, a 2% increase over the same period of the prior year. Operating income, net income and diluted earnings per share for the quarter were $5.94 billion, $4.17 billion and $0.47, declines of 8%, 11% and 6%, respectively, compared with the prior year.
So, apart from Sprint, which doesn't report earnings until next month, ALL OF THESE COMPANIES EARNED MONEY IN THE FIRST QUARTER OF THIS HORRIBLE BUSH DEPRESSION!
A caveat: just because a company makes money, I am not advocating that all attempts to save money or improve efficiencies and/or earnings should cease. I do not have a crystal ball on any one particular company, nor do I know what their internal projections show. Indeed, some of these earnings listed here may have been inflated by one-off, non-operating revenues, like the disposal of a subsidiary or a currency exchange effect. I don't know. I'm going to address this in generalities, tho.
This leads me to the point of this article: loyalty. Specifically, the objectives of business in an economic downturn. Caterpillar withstanding, none of these businesses has been through a real economic doldrum.
The main objective of a business in America is to earn a profit. I think we can agree on that, and further, we can agree this is a good thing: profits mean more business, more business means more jobs, more jobs means more people eating dinner as opposed to starving.
Companies expect loyalty from their employees in exchange for providing a job: that means you won't up and steal their products to sell yourself, you'll show up on time to work, and focus on your work. That should be the minimum contract, right? They have you from 9 to 5, you promise to give them 100% during those hours.
As we all know, that's not how it works: you work overtime. Or you have to do your banking during work hours, because your banker is only available at that time. Your kid gets sick. Your boss needs you to skip lunch for a project.
At the end of the day, these should all balance out. At the end of the day, you should be able to go home knowing you have a job tomorrow morning because you did a good job today.
Ah, but the truth is, your loyalty is only part of the company's equation. The company has to obey society's laws, too, for example.
A more important loyalty lay someplace else, however: the stockholders. And here's the rub. So long as American society adjudicates a company based on its stock price and performance only, workers will have the short end of the stick.
If stockholders don't like the performance of a particular stock, they will sell those shares and buy one that performs to their expectations. In effect, your work decisions can be countermanned by any number of shareholders deciding that you are not working hard enough. The stock price drops, the company, despite earning a profit, looks to shore up that price, and the two quickest ways to do that are to cut expenses or buy their own shares back.
If you don't believe me, here's a prediction: of the five companies named in the article I linked to, only Sprint's shares will experience no rise today. They may not all finish up above their close of yesterday, but they will all spend some time above that share price.
Cutting expenses, in most industries, means cutting into the largest expense area: salaries. And that means job losses.
Never mind that your firm made $661 million dollars in just three months. Nevermind that $661 million probably more than pays the annual salaries plus benefits of every single employee about to be laid off. The market has decided that $661 million wasn't enough. You'll have to go.
And there's the basic unfairness of the worker-employee contract: when you quit, you're expected to give two weeks notice and help train, if possible, your replacement. If the company lets you go, it's considered a benefit (and possible waste of money, from the shareholder's POV) to find you a new job or at least help pay for you to train for a new job.
And in truth, it really should be an obligation.
No, it should be considered an obligation to do as much as possible to keep you in your job. That would be a fair employment contract.
Why? Simple. Your life pretty much revolves around that job. You sleep one-third of your life away. Similarly, you work one-third of your life to pay for your bed, and for whatever else you do with the final third of your day. That means you've invested, just like a shareholder, in your company.
Indeed, the more progressive companies consider shareholders and employees as equals, and group them together as "stakeholders".
How to change this? It isn't going to be easy, but President Obama's plan to push the Employee Free Choice Act is a hopeful sign.
That's right: unions. Now many on the right, and too many on the left, will talk about how unions are evil, inefficient creations. And there's some truth to this: unions have a pretty ugly history of corruption, greed, theft, and obstruction.
They also provided you with your two weeks' vacation, your paid sick days, health insurance, 40 hour work week, health and safety regulations, and so on.
Indeed, unions are about the only tool at the worker's disposal to make sure he or she gets a fair shake in the employment contract. Think about it: it's you versus this large, multiheaded hydra of life-sapping commerce. Who do you think is going to win, unless you find allies?
If business behaved in an ethical manner, well, we wouldn't be in this particular mess. CEOs of banks wouldn't be greedy, wouldn't be answering to shareholders about how the other guy is lending money hand over fist and earning much more, even if it's from people who's credit is less than prime risk. CEOs would merely point out to shareholders that they are protecting their investments.
Which they would now, of course, be perfectly within their rights to do. But barn door after the horse has run out.
And if businesses behaved in an ethical manner, the people getting laid off now probably wouldn't, since there's a higher loyalty, to the nation as a whole, that these businesses ought to recognize. Laying people off now, when you're making a perfectly good profit, is a bad idea. It's anti-American, it makes the depression that much worse by forcing people to go on the public dole, and it disrespects the government's attempts to help out the truly needy by dumping more of them on the pile.
This must change.
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