Kimberly-Clark to Cut 6,000 Manufacturing Jobs Nationwide

Jul. 23–Kimberly-Clark Corp. announced plans Friday to cut 6,000 jobs, or 10 percent of its workforce, and to sell or close 20 plants worldwide, adding to a recent rash of jobs cuts by U.S. employers.

The cuts will be made over the next three years, and could affect everyone from manufacturing workers to employees at the consumer-products giant’s Irving headquarters.

Many of the people who lose their jobs will be told over the next six months, said Mark Buthman, Kimberly-Clark’s chief financial officer and senior vice president.

He declined to identify which of the company’s worldwide plants would be closed. In addition to its Irving headquarters, which employs some 100 people, Kimberly-Clark has plants in Fort Worth, San Antonio, Del Rio and Paris, Texas, as well as facilities in Oklahoma and Arkansas.

While some plants are closing, seven others will expand production and four will be streamlined.

Thomas J. Falk, Kimberly-Clark’s chairman and chief executive, described the cuts as part of a plan to boost spending on several key product lines; streamline production; fuel spending on research and development; and expand in emerging markets.

“These are tough decisions, ones we don’t take lightly,” Mr. Falk said on a conference call with analysts. “But they are absolutely necessary to improve our competitive position.”

Investors and analysts largely agreed. Kimberly-Clark announced the cuts along with generally positive second-quarter financial results. Shares rose $1.53 to close to $64.38.

“The only way they can maintain any sort of margin is to cut costs,” said Marc Heilweil, who manages investments at Spectrum Advisory Services Inc. in Atlanta, including a large chunk of Kimberly-Clark shares. “This is the next stage of transforming Kimberly-Clark.”

Kimberly-Clark — which makes personal care products including Kleenex tissues and Huggies diapers — earned $421.8 million, or 88 cents, including a one-time charge for repatriating earnings of certain foreign subsidiaries.

Before unusual items, the company earned 95 cents, higher than in the same period last year and a penny ahead of market forecasts.

Sales rose 8.1 percent to $3.99 billion.

Kimberly-Clark executives argued the job cuts are needed as the company shifts from a basic paper and consumer products operation to a firm capable of churning out innovative, more profitable goods. Research and development spending will rise by 50 percent in the coming years.

“It’s about freeing up funds to invest in our business, so we can grow our global brands and develop new innovations,” Mr. Buthman said.

The cuts will result in after-tax charges of between $625 million and $775 million by the end of 2008. But they will generate annual pre-tax savings of $300 million to $350 million by 2009.

Consumer products companies have lost much of their ability to set prices on basic goods to the rising power of large retailers such as Wal-Mart Stores

Inc. This year, rising commodity prices — especially for energy — have further dented profits.

Finally, more spending on research and development is needed to bring unique, innovative products to market. Kimberly-Clark has long faced fierce competition from the likes of Cincinnati-based Procter & Gamble Co. and others.

Kimberly-Clark will also invest in winning over new consumers in developing countries like China, India, Brazil, Russia, Indonesia and Turkey, in an effort to duplicate its success in Mexico, where Kimberly-Clark’s affiliate is a multibillion-dollar concern.

“Disposable income [in those developing countries] is increasing at a very rapid rate. In China, disposable diapers are a very new phenomenon,” he said. “The opportunity is to develop a market like we have in Mexico.”

The Kimberly-Clark news marks the latest example of a large U.S. company cutting jobs despite generally strong profits and a relatively health economy.

U.S. employers announced nearly 111,000 job cuts in June, more than in any month since January 2004, according to Chicago-based outplacement firm Challenger, Gray & Christmas Inc.

Many of those cuts came from struggling U.S. automakers like General Motors Corp. and Ford Motor Co. Another big portion came from bankrupt grocer Winn-Dixie Stores Inc. of Jacksonville, Fla.

Rick Cobb, executive vice president at Challenger, Gray & Christmas, said the cuts at Kimberly-Clark are part of what is seen as a credible restructuring plan.

“A reduction purely to respond to the quarterly bottom line tends to require more and more cuts. It’s like an addiction,” Mr. Cobb said. “Companies that make cuts as part of a strategic plan tend to do well.”

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