Coke to eliminate 6,000 jobs

Justin Bachman

Wednesday, Jan. 26, 2000 | 12:23 p.m.

ATLANTA -- The Coca-Cola Co. plans to eliminate about 6,000 jobs, or about one-fifth of its work force, as part of a major restructuring at the world's largest soft drink maker.

The job cuts announced today -- the largest in the company's 113-year-history -- will affect 2,500 positions at the company's Atlanta headquarters, 2,700 outside the United States and 800 jobs elsewhere in the United States.

The job eliminations represent about 21 percent of the company's 29,000-person worldwide work force.

It is the latest move by the Atlanta-based beverage company to improve its profitability since president Douglas Daft was designated to become chairman and CEO after its April shareholders' meeting.

Daft, who will succeed M. Douglas Ivester in the company's top posts, called the job reductions "painful both for those within the company who will be directly affected and for those responsible for making this decision."

Coke estimated that the cuts will save $300 million.

It will take an $800 million charge before taxes this year to cover costs of the realignment. Laid-off workers will be offered severance packages, outplacement and counseling, Coke officials said.

The announcement came as Coca-Cola reported fourth-quarter earnings that slightly exceeded Wall Street expectations.

But weak profits for the year have been a drag on Coke's stock price. In morning trading on the New York Stock Exchange, Coke shares were down $1.26 at $64.63.

Daft has made a number of personnel moves in recent weeks and is trying to decentralize Coke's operations so the company can react more quickly to local conditions.

Today, Daft conceded that a product recall over a health scare in several European countries last year had been "a wake-up call" that made company officials realize they were not well-prepared to respond to local situations.

The European recall was only part of Coke's worldwide problems in the past year. Coke's attempted takeovers of the French brand Orangina and Cadbury Schweppes' overseas brands either collapsed or were scaled back because of regulatory concerns in Europe. And in the United States, several former and current black employees have sued the company for racial discrimination.

The size of the cuts surprised many analysts who had predicted Coke would trim 2,000 to 4,000 jobs.

But Daft said the 6,000 figure was chosen after a six-month review of the company's entire operation.

"This was not a targeted number. There was no sense of saying we need to reduce x-number of positions," Daft said in a telephone interview this morning.

"The concept was what business structure do we need for the future? And once you do that ... then you come up with a new organizational structure and that's where you put your people, and then you come up with a number."

The jobs being cut are in areas such as human resources, information systems support and facilities management, company spokesman Ben Deutsch said. He said the company now plans to hire outsiders for some of that work.

The cuts will trim about 40 percent of the positions at Coca-Cola's Atlanta headquarters.

"There are redundant resources out of Atlanta that are not necessary now that those local business units are strong and resourceful and able to market the brand," Deutsch said. "We must be a pure marketing company and nothing else."

Caroline Levy, an analyst with Schroder and Co., said the cuts are an admission that Coke had overbuilt its international distribution system.

"There were too many pieces of equipment, too much infrastructure, too many plants, too many employees," she said.