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Rising Sales, Profits at Unilever Spur Shareholder Value 'Shakeup' - 20,000 Jobs to be Slashed

Posted to the IUF website 03-Aug-2007

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Spurred by rising sales and a 16% increase in second quarter profits, Unilever chief Patrick Cescau yesterday announced a coming "shakeup" to deliver even greater "shareholder value". The company plans to eliminate 20,000 jobs - 11% of its global workerforce - over the next 4 years, and the cuts will be centered on Europe.

According to the industry website just-food.com, a company spokesman elaborated on the job reduction program by saying that "The European business is more foods-biased than personal care, so the cuts would be of greater consequence to food than personal care." Unilever would "streamline or close down" up to 60 factories, with an estimated 40% of the job cuts taking place in production. Job cuts already underway in the Benelux, France and the UK, were "the first wave" of the massive European closures.

Under pressure from shareholders and ratings agencies, Unilever has over the last 7 years - in the course of which profits have steadily risen - closed or sold off over 125 factories, halving the global workforce to 179,000, of which 44,000 are employed in Europe.

In 2003, as part of its Path to Growth Program, the company confirmed it was close to reaching its already targeted elimination of 130 facilities, together with plans to increase outsourcing from 15 to 25% of volume. Last year's second quarter announcement of a 3.9% rise in sales failed to enthuse the investment banks and rating agencies: Credit Suisse commented that the results failed to suggest "a brave new dawn at Unilever". Yesterday's "shakeup", however, has generated a more favorable response. Just-food cites one analyst's note as stating that "There is now real evidence of sustained improvement in the group,"

Cash freed up by the job cuts will be used to finance 25-30 billion in dividends and sharebuybacks.

The shareholder value revolution is also sweeping Unilever's Indian subsidiary Hindustan Lever Limited (HLL), where a 29 per cent rise in second quarter net profit has boosted plans for a USD 156 million share buyback. - HLL's first ever. The announced share buyback followed the July 16 lock out of union workers at the company's large plant in Doom Dooma in Assam state, which employs 700 workers. Management is insisting that the union change its officers and its name as a condition for lifting the lockout.

Unilever also continues to refuse serious negotiations to resolve the over 700 redundancies arising from the illegal sale and closure of its Mumbai (Bombay) factory , the subject of an IUF complaint at the OECD. To rid itself of an effective union, the HLL organized the fraudulent sale of the plant to a shell company, stripped all machinery from the plant, compelled workers to pack laundry detergent by hand and then cited low productivity as the reason for the closure.