Colgate to Cut 4,400 Jobs, Close Factories

Colgate-Palmolive Co., the consumer products giant behind brands like Ajax detergent and Irish Spring soap, plans to cut its worldwide workforce by about 12%, or about 4,400 jobs, and close one-third of its factories as part of a four-year plan aimed at boosting its sales and profit. Its stock climbed 8%.

The moves announced Tuesday come as the consumer products industry has been grappling with higher costs in raw materials, gas and packaging, all of which have put more pressure on profits.

Colgate-Palmolive also faces increasing competition from larger rival Procter & Gamble Co., which has taken big bites of the market with an increased focus on skin-care, beauty and pet-care products.

In September, Colgate-Palmolive issued a rare warning that its profit would fall short of expectations as it faced tougher competition and increased expenses as it headed into the last quarter of the year.

New York-based Colgate said Tuesday that it would reduce its global workforce from its current level of 37,000 and close a third of its 78 factories worldwide during the course of the four-year restructuring effort. The savings from those closures would be invested in sales and marketing initiatives.

Chairman and Chief Executive Reuben Mark said the job cuts would come mostly from manufacturing, and that notifications were being issued Tuesday. He didn’t identify the facilities.

The news sent Colgate’s stock up $3.78 to $50.07 on the New York Stock Exchange.

Burt Flickinger III, managing partner at Strategic Resource Group, a New York-based industry consulting firm, said the new plan was a “strong initiative but it is too little, too late.”

“Colgate has been milking its worldwide brands for far too long, for both its sales and marketing,” he added. “As Colgate’s brands have been undermarketed, it is much easier for retailers’ private label and other rival brands to undercut Colgate.”

Colgate said Tuesday that the plan would result in charges against earnings of $550 million to $650 million after taxes over the four years, but would generate savings of $250 million to $300 million annually by the fourth year of the program.

In 2005, the charges are expected to amount to $200 million while the savings should amount to $45 million.

Colgate plans to accelerate marketing innovations and new products, especially in markets that it believes have high potential such as Eastern Europe, Russia and China.