Wednesday, April 15, 2009

New wave of job losses feared across Europe

New wave of job losses feared across Europe

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Mainland Europe is bracing itself for thousands more job cuts as Philips warned of further restructuring to staunch mounting losses and the German arm of Woolworths filed for bankruptcy.

In Switzerland the country's biggest bank, UBS, is reportedly planning to axe up to 10,000 more jobs as early as next week as it struggles to regain profitability – and credibility.

And as ArcelorMittal, the world's biggest steelmaker, confirmed it would cut output by half and mothball several plants, unions urged the group to retain the current workforce in readiness for any upturn.

Dutch group Philips, one of the earliest continental firms to report first-quarter earnings, said it had already axed 5,216 jobs this year and the number of its employees had fallen by 18,030 in a year, with 5,600 due to discontinued operations.

Warning that demand in the current quarter would be weak after slumping more than expected in the first three months, the world's biggest lighting business and Europe's biggest consumer electronics firm said: "Consequently, we will accelerate measures to further lower our fixed cost base."

According to Gerard Kleisterlee, Philips's chief executive, the group now expects to realise annual cost savings of €500m (£445m) by the end of this year compared with original plans to save €400m.

Pierre-Jean Sivignon, the group's chief financial officer, told reporters there were no immediate plans to announce more job cuts on top of the 6,000 set to go this year. But he failed to rule out more redundancies at a firm now employing 116,000 globally.

Reporting a 17% drop in sales to €5.1bn as the recession deepens, Philips said it had swung to an operating loss of €74m in the first quarter – a decline of €339m on a year ago when it made €265m.

Kleisterlee said there had been a significant further deterioration of markets. "While the effects were felt most strongly in our activities that cater to the consumer market and to the construction and automotive industries, our healthcare sales are now impacted as well. We expect no material change to this situation in Q2," he warned.

Healthcare sales fell 2%, notably because of lower demand in the US, but the biggest declines were in consumer lifestyle (down 25%) and lighting (down 19%). Sales of TVs and audio-visual multimedia slumped by a third.

In November, the UK arm of Woolworths went bust and today it emerged that the German arm had followed suit, putting at risk around 11,000 jobs after filing for insolvency on Saturday.

The German business, bought by British investor Argyll Partners from private equity firm Electra at the end of 2007, has 323 shops, of which US investor Cerberus owns around a third of the buildings.

Founded in 1926, the retail chain turned over about €900m last year and brought in a former Lidl manager, Stefan Rohrer, to run the business in March. He quit, after just four weeks, at the start of this month.

Frankfurt's district court said it had appointed Ottmar Hermann as administrator – just days after he took on the same role at the venerable car-parts supplier and designer Karmann.

Meanwhile, UBS staff, already facing 11,000 job cuts this year to bring the workforce down to around 75,000, fear more are on the way after the troubled bank shed 240 posts in the Asia-Pacific.

Analysts said between 5,000 and 10,000 more jobs are at risk, with Swiss media reporting that a worst-case scenario could become reality as soon as 22 April. "It's inevitable. [Oswald] GrĂ¼bel [the new CEO] has made that clear from the day he started," said Peter Thorne at Swiss broking house Helvea.

The European Metalworkers' Federation, stunned by new European production cuts at ArcelorMittal's continental plants, urged the group to avoid compulsory redundancies and to use the recession to invest in retraining and renovation.

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