Coca-Cola Lays Off 6,000 EmployeesAired January 26, 2000 - 2:19 p.m. ET
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NATALIE ALLEN, CNN ANCHOR: Well, as we've reported, Coca-Cola is handing out 6,000 pink slips, more than one of every five Coke workers worldwide.
CNN's Greg Clarkin looks at what's behind the software (sic) giant's move.
GREG CLARKIN, CNN CORRESPONDENT (voice-over): They're the most dramatic changes in Coke's 114-year history: 6,000 jobs, or 21 percent of the company's workforce will be eliminated. The job cuts are part of a restructuring brought about by slowing sales and profits, and what some believe was a bloated corporate staff at Coke's Atlanta headquarters.
CAROLINE LEVY, ANALYST, SCHRODERS: What seems to have happened is that corporate got too involved, too many decisions were having to be made in Atlanta, slowing up the process and not allowing these local bottlers to compete effectively.
CLARKIN: Now Coke is taking responsibility away from the corporate level and giving it to executives on the local level in the hopes of allowing them to act quickly to changing market conditions.
The moves come as Coke tries to bounce back from one of its most difficult years. There were product recalls in Europe and economic slowdowns in many countries where Coke is sold. Those slowdowns, as well as softening sales in the U.S., kept Coke's stock under pressure. It's up just 4.7 percent over the last year. But Coke executives are optimistic.
JACK STAHL, EXEC. V.P., COCA-COLA: We have very much taken a ground-up approach to this. And we believe if we're going to grow the business effectively we need to focus our resources on marketing and that we do have the right structure in place now to move ahead.
CLARKIN: Coke will take a write-off of $800 million to cover the restructuring. The company hopes to save $300 million a year once it's implemented.
Incoming CEO Douglas Daft told Wall Street analysts previous earnings and volume growth targets were too high. He promised more realistic figures in the months ahead. Analysts said this merely confirms what they've known: that Coke hadn't adjusted for the changing in world in which they operate.
Greg Clarkin, CNN Financial News, New York.
LOU WATERS, CNN ANCHOR: Joining us now, Dean Foust, the Atlanta bureau chief for "Businessweek" magazine who keeps a close eye on Coca-Cola.
This is a big move. Flesh out this business of adjusting to new world for Coca-Cola and this heavy-at-the-top regional Coca-Cola operations needing to have a firmer hand.
DEAN FOUST, ATLANTA BUREAU CHIEF, "BUSINESSWEEK": With this bombshell announcement this morning, the new CEO of Coke, Doug Daft, signaled that it's a new day at Coke and he is charting a new course for the company.
Look, there was no company in the world that benefited more from the global boom of the '80s and '90s, the fall of communism, the opening of markets in Russia and China and Eastern Europe than the Coca-Cola Company, and they were first into every market, spending billions of dollars, sparing no cost to build bottling plants in every one of these factories.
The bottom line is, it didn't pay off. In the aftermath of the global economic crisis the past couple years, demand dropped and it never came back.
WATERS: Too much supply.
FOUST: Too much supply and not enough appetite. Coke believed its headlines. They believed that there was a room for a vending machine or a kiosk or cooler in every corner of the world, and it didn't -- it wasn't the case.
WATERS: So how are we to interpret this? Is this a constricting by Coca-Cola or is it just a redoing of the company?
FOUST: Immediately, Daft -- what Daft is doing by laying off 20 percent of the workforce -- and this is a big deal for Coke, you know, probably the last paternalistic company in the country -- he's -- it's going to become a smaller workforce. He is pushing decision-making down to the local markets. It will not be -- decisions will not be dictated, you know, in Coke's corporate headquarters, but at the local level, pricing what products to offer and how to market it.
WATERS: There were apparently some problems in that regard when, as I recall, there were some health concerns about Coke products that needed to be recalled. This was in Europe, and those operations could not react effectively. Was that part of the decision process?
FOUST: That was part of the former CEO, Doug Ivester -- it was probably part of his undoing. Last summer, there was the contamination scare in Belgium and Coke's managers there said, we can handle it from here. Coke -- and it blew up into a much bigger scandal than it ever should have. And part of what the new CEO, Doug Daft, wants to do is, again, is make Coke a local company in each of the 200 countries in which it operates, and give them more decision- making.
I think one of the things we're going to see from Coke is that, you know, up till now, they have worshipped the god of soda, and I think they're going to start pushing into more alternative beverages tailored to each individual market.
WATERS: Right. And I see Coke is down 2 9/16 right now, so, initially, at least, folks don't really know what to make of all of this.
FOUST: You know, if I could figure out, interpret every move of every stock on Wall Street -- look, Coke's stock has run up in past months in anticipation of this move, but the bottom line is, looking forward, analysts are a lot more optimistic about Coca-Cola today than they were six months ago. It's in the 60s; they're predicting it could rise above 80 percent -- 80 by the end of the year.
WATERS: All right, Dean Foust, thanks so much.
Atlanta bureau chief of "Businessweek" magazine. Appreciate it.
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