Sony to Cut 8,000 Jobs Amid Global Downturn
Tuesday, December 9, 2008; 6:33 AM
Several bellwethers of world industrial activity -- from chemical companies to the makers of basic consumer goods and electronics -- announced new layoffs and factory closings yesterday and this morning as they prepared for a prolonged economic downturn.
Following close behind last week's dismal U.S. jobs report, a wide variety of companies unveiled new retrenchment plans, suggesting the slowdown that started in the financial and housing sectors was rippling through manufacturing. The companies being hurt extended far beyond retailers most sensitive to consumer spending to the makers of industrial materials and equipment.
Economists said the announcements added new urgency to discussions about government stimulus measures, both in the U.S. and other major industrialized nations. They also raise questions about whether the type of large stimulus plan President-elect Barack Obama endorsed last weekend would be big or fast enough. Japan and other countries have also pledged to spend tens of billions of dollars to boost demand.
Dow Chemical announced yesterday that it would shut down 20 plants; temporarily idle 180 others; cut 6,000 contractors from its payroll; and lay off 5,000 of its own employees, equal to 11 percent of its global workforce. Dow Chemical's chief executive Andrew N. Liveris said in a statement that "the current world economy has deteriorated sharply, and we must adjust ourselves to the severity of this downturn."
3M, maker of products ranging from Post-it notes and Scotch tape to industrial sanding materials, said it would postpone pay increases, cut 500 workers worldwide and further trim costs in the face of what it called a "rapid volume slowdown" in November and the prospect of a weak economy for all of 2009.
Japanese giant Sony Corp., in response to "the acute downturn in the economic climate," said it would cut 8,000 employees worldwide over the next year, slash investment in its electronics business by 30 percent, and close roughly half a dozen of its 57 manufacturing sites around the globe. The job reductions amount to 5 percent of Sony's 160,000 workforce.
New data released in Tokyo today showed that the world's second largest economy is contracting faster than initially expected, the Financial Times reported. A new report from the United Kingdom's Office for National Statistics, meanwhile, showed the country's industrial production has now fallen for eight months in a row.
The new reports and announcements suggest that more and more companies are expecting the recession to last longer than recent downturns, when the economy rebounded quickly from temporary setbacks.
"Some are expecting a 'V'-shaped recovery -- we are not," the 3M company said in a presentation to analysts yesterday.
Anheuser-Busch InBev expects that people will have less money to drown their sorrows. The beermaker said yesterday that it would cut 1,400 U.S. jobs.
"We haven't seen all the pain yet," said Tobias M. Levkovich, chief equity strategist for Citigroup. "Financial conditions lead to real economic conditions." He said job trends could trail financial markets by as much as nine months, suggesting that employment weakness could continue through most of next year, at least.
"It's almost guaranteed that the unemployment rate will be up in the 8 to 9 percent rate by the end of next year," said Barry P. Bosworth, an economist at the Brookings Institution. "This is not an inventory cycle where it runs its course. This is a longer-term wealth shock, and the question is: How big is the effect of that on the economy?"