Kraft looks set to axe another 8,000 jobs

01/02/06 Kraft Foods Inc. has announced an expanded restructuring program as part of its Sustainable Growth Plan, which includes the elimination of 8% of is workforce, despite reporting better fourth quarter results.

Kraft reported that building on the success of the 2004 restructuring program, the company has leveraged its business simplification initiatives and organizational changes to identify significant additional cost savings opportunities in an expanded restructuring program. Initiatives in this program include further organizational streamlining and facility closures, and the company expects to close up to an additional 20 production facilities and eliminate approximately 8,000 positions at all levels of the organization (about 8% of its workforce) through 2008.

Thus far, the company has announced its intention to close production facilities in Broadmeadows, Victoria, Australia and Hoover, Alabama. The company has reorganized management in the European Union to more effectively manage its business in this competitive environment, while also reducing overhead costs. Additionally, to reduce operational complexity and enable facility closures, the company will expand the SKU reduction program that has been in place since 2004. The company eliminated approximately 20% of its SKUs in the past two years and plans to eliminate an additional 10% in 2006.
The expanded restructuring program adds approximately $700 million in incremental pre-tax savings and $2.5 billion in pre-tax costs to the original initiatives. Capital expenditures required for the expanded program are included within the company's overall capital spending budget, which is projected to remain flat in 2006 versus 2005 at $1.2 billion.

Kraft's fourth quarter results (which included an additional week versus 2004) reflected solid momentum in several areas including better price realization, improved U.S. market shares, strong product mix and new product contributions. For the full year, the company delivered on its top-line growth and earnings guidance provided in October. Additionally, the company generated $4.0 billion in discretionary cash flow(1) plus divestiture proceeds in 2005 and returned approximately $2.6 billion in cash to shareholders through dividends and share repurchases.