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Employment blues: US firms greet year-end with layoffs

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CIOL Bureau
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By Karen Padley

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CHICAGO: Tom Akin of New York became an unemployment statistic just days before Christmas, losing his job as a field technician with Verizon Communications during a season of housecleaning in the corporate world. After a year that will be remembered for accounting scandals, depressed earnings, investigations, lawsuits and a faltering economy, companies are looking forward to a fresh start in 2003.



To get there, they are cutting jobs, agreeing to costly legal settlements or announcing million of dollars in write-downs. And why not? Earnings already promise to be weak, and corporate America's public image isn't exactly at a high point.

"People are using the widespread knowledge of tough economic times to do what they might otherwise have wanted to do," said Milton Ezrati, senior economist and strategist for Lord Abbett & Co. The moves generally involve short-term pain with a payoff later. Take Citigroup Inc. and its decision this week to take a $1.5 billion charge to account for the settlement of Wall Street's stock-research scandal, losses in Argentina and problems related to energy trader Enron Corp.

Although its fourth-quarter results will be hurt, Citigroup, the world's biggest financial services company, clears many of the questions hanging over the world's biggest financial services company with the write-down, making earnings comparisons in future quarters appear stronger.

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The financial problems of UAL Corp.'s United Airlines and US Airways Group Inc., both in Chapter 11 bankruptcy reorganization, spread to three other companies that were forced to take charges -- Bank of America Corp. for $1.2 billion; Walt Disney Co. for $83 million and Pitney Bowes Inc. for $100 million.

Lord Abbett's Ezrati said layoffs and charges are typical at this stage of the economic cycle. "Business is skeptical of any kind of improvement," he said. "They play it safe ... effectively preparing for the worst, telling themselves they can always reverse field if things improve."

Job cuts



Many companies hope to bolster their bottom line with job cuts. Among those announcing cutbacks this month is health care provider Humana Inc., which plans to cut 2,300 jobs, or 17 percent of its work force, by the end of 2003.Both Delta Air Lines Inc. and UAL have announced major layoffs that go into effect next year, as the carriers struggle to survive since the Sept. 11 attacks battered the travel industry. Verizon is in the process of laying off 3,500 people before year end, down from the 8,500 it threatened to cut in July.

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The unemployed Akin, 37, who worked to restore phone service to the New York Stock Exchange after Sept. 11, said he assumed the layoffs would be averted through a last-minute compromise with the union. Instead, he lost his job after more than three years with the company. "It's not fun," he said glumly.

Verizon insisted it needed to make the cuts to cope with increased competition and the slow economy. "Obviously, we regret any layoffs at all, and Verizon has done a tremendous job of avoiding them up to now," said spokesman Eric Rabe.

Outplacement firm Challenger, Gray & Christmas, which tracks corporate layoffs, said this year's fourth quarter is shaping up to be the year's heaviest. "October and November were the second and third heaviest months of the year for downsizing," said John Challenger, whose company has monitored downsizing announcements for a decade.

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He noted that the largest number of job cuts were recorded in the fourth quarter in four of the last seven years. "Companies have their targets that they are trying to hit and this year the revenue line is not up to expectations," Challenger said. "They feel they have no choice."

Several companies also announced large legal settlements recently. Wall Street firms reached an agreement on stock market research. Halliburton Co., the world's second largest oilfield services company, agreed to pay $4 billion to settle asbestos claims.

Economists note that several geopolitical issues also loom. Worries about a possible war with Iraq and political troubles in Venezuela and North Korea may be partly responsible for such announcements, said Marshall Front, chairman of Front Barnett Associates, a Chicago-based investment counseling firm.

"Businesses and consumers (are) pulling in their horns, waiting to see what happens," he said. "You want to make sure you're not making any commitments today that you might regret a week or a month from now."

© Reuters

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