CINCINNATI, JUNE 11 -- Procter & Gamble Co. today announced an $800 million restructuring of its manufacturing operations to consolidate its plants in the United States and abroad.
A pretax charge of about $800 million will be taken against fourth-quarter earnings to cover costs of the restructuring, the consumer products company said in a prepared statement.
After considering the estimated tax benefits, the charge will reduce net income in the 1986-1987 fiscal year by about $435 million, the firm said.
The company said the primary focus of the restructuring was consolidation of manufacturing operations with Procter & Gamble plants becoming more concentrated on single products or families of products.
For example, the number of U.S. sites producing granules for laundry products has been reduced from 12 to nine, and the number of sites producing shortening and oil is being reduced from seven to three.
As a result, some plant equipment and buildings no longer will be needed and will be available for disposal or to be converted to other uses, the company said.
The company said it expects to close relatively few plants out of a total of 120 worldwide.
"The company has always tried to base its decisions on the right course for the long-term health of the business," said John G. Smale, chief executive and chairman of the board. "Although this restructuring reserve will have a negative effect on current fiscal year income, it will result in a stronger, more competitive company and set the stage for more vigorous earnings growth in the year immediately ahead and in the future.
"This restructuring reserve will also have a positive impact on cash flow and thus will in no way inhibit the company's ability to pay dividends," Smale said.
Job reductions will be minimal, though the company announced no number. Most of those workers whose jobs will be eliminated will be absorbed into other Procter & Gamble operations, a spokesman said.
Smale said that in cases where the company is unable to accommodate employes affected by these plans, Procter & Gamble will provide severance and help with finding new jobs.
Procter & Gamble said acquisitions of other companies in recent years have opened opportunities to reduce costs through consolidations. The acquisitions of Norwich Eaton in 1982 and G.D. Searle's over-the-counter drug business and Richardson-Vicks Inc., both in 1985; added 35 factories, many in locations where Procter & Gamble had plants.
Procter & Gamble also said infringement of its cookie making technology has reduced sales and will require curtailment of plants in Jackson, Tenn., and Brockville, Ontario. The company said it would write off the capacity at those plants but will not close them.
Procter & Gamble said its decision to cut back its ready-to-serve cookie business is related directly to the infringement of its patented technology. The company alleged this has reduced Duncan Hines cookie sales. It has patent infringement suits pending against RJR Nabisco Inc., Keebler Co. and Frito-Lay Inc.