Eastman to cut 300 jobs
• Employee base pay to also be cut 5 percent as part of $100 million cost-saving plan.
By JEFF KEELING Press Business Editor email@example.com
KINGSPORT — Eastman Chemical Co. will shave its 2009 costs by another $100 million in a move that will include cutting employee base pay by 5 percent and reducing its global work force by up to 300 before May 1, mostly through layoffs. “We would anticipate the majority of the reduction in force would take place here in Kingsport,” Eastman spokeswoman Tracy Broadwater said Monday. Broadwater said the RIF may include a few early retirements, but that the majority of the reduction would involve layoffs. “Nobody likes doing these sorts of things, but if we’re going to come out of this period stronger, they’re necessary,” Broadwater said. She said the company hasn’t yet determined what positions it will cut. In a news release, outgoing Eastman CEO Brian Ferguson also forecast 2009 earnings per share of two to three dollars if, as hoped, demand for Eastman products increases modestly. The pending job and salary cuts are something the dean of East Tennessee State University’s College of Business understands in light of economic conditions, but Linda Garceau added that the local economy is likely to feel the impact. With its highly educated, difficult-to- •
• replace workforce, Garceau said, Eastman likely considered pay cuts a better option than more layoffs. “By reducing compensation, Eastman can maintain its human assets at the current level, being positioned to respond quickly when the market reasserts itself, while still addressing its cash flow needs,” she said. Eastman’s long-term gain, though, may cause a short-term blow to various local businesses, from restaurants and landscapers to auto dealers and realtors. “With consumer confidence at an all-time low, the reduction of salaries affects buying decisions,” Garceau said. She said jobs at companies such as Eastman are estimated to have a “multiplier effect” on the local economy of two to two-and-a-half times. “A reduction in payroll by Eastman of $1 million will have an economic impact upon our region of $2 to $2.5 million,” Garceau said. Using that same multiplier, estimating an average Eastman salary at $40,000 and multiplying by 6,000 local employees would create a payroll reduction of $12 million, or an economic impact of $24-30 million. Monday’s announcement follows a similar one in December and attributes the fresh cuts to continued sales weakness in the ongoing recession. In a news release, the company repeated a comment made by outgoing CEO Brian Ferguson last week that Eastman is committed to keeping its cash flow as strong as possible in today’s uncertain credit markets. “The severity of the current economic environment led to the actions we are announcing today,” Ferguson said. “Despite our expectation that sales volume will continue to be at depressed levels, we remain committed to taking the necessary actions to deliver solid operating cash flow in 2009 that will more than support both our dividend and capital expenditures.” In addition to the pay reductions and elimination of positions, the $100 million savings will come through reducing non-critical maintenance costs, reducing logistics costs and reducing discretionary spending beyond cuts already implemented in the first round of reductions. The actions, and Eastman’s general current strategy, are about keeping a strong cash position in an uncertain time, Ferguson said at a regional leaders’ breakfast last week and reiterated in the release. “While visibility into global demand continues to be limited, the actions we are taking to reduce costs position us to better weather the storm,” Ferguson said. The release states that Eastman also has lowered budgeted 2009 capital expenditures to the $300-350 million range, and that if the economy stays weak and raw material and energy costs stay near their current levels, the company should generate about $100 million in cash from working capital this year. Eastman employs about 10,500 people, with about 7,000 of those working at its Kingsport headquarters.