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Business

Corporate Layoffs Spread Beyond High-Growth Tech Giants

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The headline-grabbing expansion of layoffs beyond high-growth technology companies stands in contrast to historically low levels of jobless claims and news that companies such as

Chipotle Mexican Grill Inc.

and

Airbus SE

are adding jobs.

This week, four companies trimmed more than 10,000 jobs, just a fraction of their total workforces. Still, the decisions mark a shift in sentiment inside executive suites, where many leaders have been holding on to workers after struggling to hire and retain them in recent years when the pandemic disrupted workplaces.

Live Q&A

Tech Layoffs: What Do They Mean?

The creator of the popular layoff tracker Layoffs.fyi Roger Lee and the head of talent at venture firm M13 Matt Hoffman sit down with WSJ reporter Chip Cutter, to discuss what’s behind the recent downsizing and whether it will be enough to recalibrate ahead of a possible recession.

Unlike

Microsoft Corp.

and Google parent

Alphabet Inc.,

which announced larger layoffs this month, these companies haven’t expanded their workforces dramatically during the pandemic. Instead, the leaders of these global giants said they were shrinking to adjust to slowing growth, or responding to weaker demand for their products.

“We are taking these actions to further optimize our cost structure,”

Jim Fitterling,

Dow’s chief executive, said in announcing the cuts, noting the company was navigating “macro uncertainties and challenging energy markets, particularly in Europe.”

The U.S. labor market broadly remains strong but has gradually lost steam in recent months. Employers added 223,000 jobs in December, the smallest gain in two years. The Labor Department will release January employment data next week.

Economists from Capital Economics estimate a further slowdown to an increase of 150,000 jobs in January, which would push job growth below its 2019 monthly average, the year before pandemic began.

There is “mounting evidence of weakness below the surface,”

Andrew Hunter,

senior U.S. economist at Capital Economics wrote in a note to clients Thursday.

Last month, the unemployment rate was 3.5%, matching multidecade lows. Wage growth remained strong, but had cooled from earlier in 2022. The Federal Reserve, which has been raising interest rates to combat high inflation, is looking for signs of slower wage growth and easing demand for workers.

Many CEOs say companies are beginning to scrutinize hiring more closely.

Slower hiring has already lengthened the time it takes Americans to land a new job. In December, 826,000 unemployed workers had been out of a job for about 3½ to 6 months, up from 526,000 in April 2022, according to the Labor Department.

“Employers are hovering with their feet above the brake. They’re more cautious. They’re more precise in their hiring,” said

Jonas Prising,

chief executive of

ManpowerGroup Inc.,

a provider of temporary workers. “But they’ve not stopped hiring.”

Additional signs of a cooling economy emerged on Thursday when the Commerce Department said U.S. gross domestic product growth slowed to a 2.9% annual rate in the fourth quarter, down from a 3.2% annual rate in the third quarter.

Not all companies are in layoff mode.

Walmart Inc.,

the country’s biggest private employer, said this week it was raising its starting wages for hourly U.S. workers to $14 from $12, amid a still tight job market for front line workers. Chipotle Mexican Grill Inc. said Thursday it plans to hire 15,000 new employees to work in its restaurants, while plane maker Airbus SE said it is recruiting over 13,000 new staffers this year. Airbus said 9,000 of the new jobs would be based in Europe with the rest spread among the U.S., China and elsewhere. 

General Electric Co.

, which slashed thousands of aerospace workers in 2020 and is currently laying off 2,000 workers from its wind turbine business, is hiring in other areas. “If you know any welders or machinists, send them my way,” Chief Executive

Larry Culp

said this week.

Annette Clayton,

CEO of North American operations at

Schneider Electric SE,

a Europe-headquartered energy-management and automation company, said the U.S. needs far more electricians to install electric-vehicle chargers and perform other tasks. “The shortage of electricians is very, very important for us,” she said.

Railroad CSX Corp. told investors on Wednesday that after sustained effort, it had reached its goal of about 7,000 train and engine employees around the beginning of the year, but plans to hire several hundred more people in those roles to serve as a cushion and to accommodate attrition that remains higher than the company would like.

Freeport-McMoRan Inc.

executives said Wednesday they expect U.S. labor shortages to continue to crimp production at the mining giant. The company has about 1,300 job openings in a U.S. workforce of about 10,000 to 12,000, and many of its domestic workers are new and need training and experience to match prior expertise, President

Kathleen Quirk

told analysts.

“We could have in 2022 produced more if we were fully staffed, and I believe that is the case again this year,” Ms. Quirk said.

The latest layoffs are modest relative to the size of these companies. For example, IBM’s plan to eliminate about 3,900 roles would amount to a 1.4% reduction in its head count of 280,000, according to its latest annual report.

As interest rates rise and companies tighten their belts, white-collar workers have taken the brunt of layoffs and job cuts, breaking with the usual pattern leading into a downturn. WSJ explains why many professionals are getting the pink slip first. Illustration: Adele Morgan

The planned 3,000 job cuts at SAP affect about 2.5% of the business-software maker’s global workforce. Finance chief

Luka Mucic

said the job cuts would be spread across the company’s geographic footprint, with most of them happening outside its home base in Germany. “The purpose is to further focus on strategic growth areas,” Mr. Mucic said. The company employed around 111,015 people on average last year.

Chemicals giant Dow said on Thursday it was trimming about 2,000 employees. The Midland, Mich., company said it currently employs about 37,800 people. Executives said they were targeting $1 billion in cost cuts this year and shutting down some assets to align spending with the macroeconomic environment.

Manufacturer

3M Co.

, which had about 95,000 employees at the end of 2021, cited weakening consumer demand when it announced this week plans to eliminate 2,500 manufacturing jobs. The maker of Scotch tape, Post-it Notes and thousands of other industrial and consumer products said it expects lower sales and profit in 2023.

“We’re looking at everything that we do as we manage through the challenges that we’re facing in the end markets,” 3M Chief Executive

Mike Roman

said during an earnings conference call. “We expect the demand trends we saw in December to extend through the first half of 2023.”

Hasbro Inc.

on Thursday said it would eliminate 15% of its workforce, or about 1,000 jobs, after the toy maker’s consumer-products business underperformed in the fourth quarter.

Some companies still hiring now say the job cuts across the economy are making it easier to find qualified candidates. “We’ve got the pick of the litter,” said

Bill McDermott,

CEO of business-software provider

ServiceNow Inc.

“We have so many applicants.”

At

Honeywell International Inc.,

CEO

Darius Adamczyk

said the job market remains competitive. With the layoffs in technology, though, Mr. Adamczyk said he anticipated that the labor market would likely soften, potentially also expanding the applicants Honeywell could attract.

“We’re probably going to be even more selective than we were before because we’re going to have a broader pool to draw from,” he said.

Across the corporate sphere, many of the layoffs happening now are still small relative to the size of the organizations, said

Denis Machuel,

CEO of global staffing firm Adecco Group AG.

“I would qualify it more as a recalibration of the workforce than deep cuts,” Mr. Machuel said. “They are adjusting, but they are not cutting the muscle.”

Write to Chip Cutter at chip.cutter@wsj.com and Theo Francis at theo.francis@wsj.com

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Business

Kellogg Splitting Into Three Companies as It Shifts Focus to Global Snacks

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Kellogg Co.

K 1.95%

said it plans to break up its business into three companies, seeking to jump-start its larger, faster-growing snacks business while helping its namesake cereal brands regain their footing on supermarket shelves.

The move, which Kellogg said would separate snacks such as Pringles, Cheez-Its and Pop-Tarts from cereal-aisle staples including Frosted Flakes and Froot Loops, aims to create more agile, focused companies and marks a shift from the food industry’s decadeslong strategy of pursuing acquisitions and building scale.

“Bigness for bigness sake doesn’t make a lot of strategic sense,” said Kellogg’s Chief Executive Steve Cahillane, who will head the $11.4 billion snacking business, which accounted for 80% of Kellogg’s net sales last year.

The Covid-19 pandemic delivered a boost in sales for Kellogg and other food makers, as families prepared more meals in their kitchens as they stayed home from work and school. The grocery industry now is working to retain that momentum, but food makers over the past year have been battered by rising costs for fuel, labor, ingredients and packaging, creating what Mr. Cahillane called an unprecedented stretch of inflation.

Kellogg said it expects to complete the split by the end of 2023, with the North America cereal business potentially separating first, followed by its plant-based foods business as the third company. Kellogg said it also is considering selling the plant-based foods unit, which is predominantly composed of the

MorningStar

Farms brand. It has yet to name the individual companies.

Kellogg’s stock price rose about 3% on Tuesday. Shares were already up 4.8% this year as of Friday, bucking the broader market slump. The S&P 500 packaged foods and meat index on Tuesday was down about 3% so far in 2022.

Kellogg’s breakup plan follows splits announced last year by General Electric Co. and Johnson & Johnson. In the food sector, Kraft Foods orchestrated a similar split about 10 years ago, spinning off its North American grocery business to focus on its faster-growing snack brands including Oreos and Triscuits, a business it named Mondelez International Inc.

Sara Lee Corp. in 2012 split its business into two companies, one a meat-focused operation renamed Hillshire Brands Co., and an international coffee and tea business called D.E. Master Blenders NV.

Hillshire, D.E. Master Blenders and Kraft all later merged with other big food companies.

The largest of Kellogg’s three planned companies would be the global snacks business, which would include brands such as Pringles and Cheez-Its, and breakfast items including Eggo waffles and Pop-Tarts. It also would include Kellogg’s international operations—fast-growing noodle business in Africa and cereal sales overseas.

“The snacking business will have all household names with just the right level of scale,” Mr. Cahillane said. “And when you don’t have the ‘conglomerate effect,’ you can get a lot more done.”

Kellogg said it would use its international cereal supply chain and retailer connections to expand Cheez-Its and other snacks globally. In recent years, Kellogg’s Pringles brand has gained momentum in Europe and Latin America, which executives said paves the way for others in its portfolio.

Snacks have been a driver of Kellogg’s growth and an area of particular interest to Mr. Cahillane since he joined the company almost five years ago. In 2019, he sold off Kellogg’s nearly $1 billion Keebler cookies and fruit snacks business to better focus on Kellogg’s other snack brands, which were already getting more of the company’s marketing and innovation resources. Since then, Mr. Cahillane said, he has been calculating a bigger corporate split.

“The pandemic pressed pause on a lot of things,” Mr. Cahillane said. “The time is right, now.”

Mondelez, the biggest global snack company, for years has added brands through small acquisitions, and on Monday it said it would acquire Clif Bar & Co. for $2.9 billion plus the potential for more tied to earnings targets. That deal could increase competition against Mars Inc.’s KIND bar brand, which Mars bought in 2020, and Kellogg’s smaller RX Bar business, which it acquired in 2017.

Mr. Cahillane said Kellogg would continue to pursue snacking acquisitions following the split.

Other food companies have reshaped their own operations.

General Mills Inc.

took on a substantial pet-food business via acquisitions, and divested less-profitable brands such as Green Giant vegetables and Hamburger Helper.

Campbell Soup Co.

has faced investor questions about whether it would be better off splitting its snack business and soup operation in two, though executives have maintained that they are better off together.

Kellogg’s decision to spin off its North America cereal business, with about $2.4 billion in sales last year, comes as it seeks to reverse sales declines and boost profit margins.

Consumers for years have been moving away from breakfast cereals, and Kellogg’s operations more recently were disrupted by a strike among factory workers and a fire at one plant that knocked out production and cost the company market share.

Corporate titans General Electric and Johnson & Johnson both announced in late 2021 that they were splitting, two of the latest in a long string of conglomerate break ups. Here’s why big businesses divide and what it could mean for investors. Photo illustration: Tammy Lian/WSJ

Kellogg, the second biggest U.S. cereal supplier after General Mills, has regained 4 percentage points of market share this year, Mr. Cahillane said. Still, Kellogg’s North America cereal sales fell 10% in the three months ended April 2 from the prior year, largely because of to supply-chain problems, the company said.

“Frosted Flakes doesn’t have to compete with Pringles for resources,” Mr. Cahillane said. “Economists might say we can do that without splitting. But we don’t live in a textbook, we live in the real world.”

Kellogg’s plant-based foods business, with estimated 2021 net sales of $340 million, as a stand-alone company will first aim to expand in North America and eventually globally, Kellogg said.

Meat alternatives have found traction in grocery stores’ freezer aisles and meat cases, though competition has grown. Kellogg in early 2020 brought out a line of plant-based burgers and tenders called Incogmeato, part of an effort to compete against

Beyond Meat Inc.

and Impossible Foods Inc.

Mr. Cahillane said MorningStar’s Incogmeato can be more aggressive with investments in technology and its supply chain once it no longer is contributing to Kellogg’s bottom line.

Some Wall Street analysts said divvying up Kellogg could hurt each business’s ability to secure competitive prices using the larger conglomerate’s purchasing power.

Piper Sandler’s

Michael Lavery

said that it could cost some 2% of Kellogg’s current total sales for each business to take on their own sales force, distribution system and other previously-shared expenses. Analysts with investment research firm Morningstar Inc. said that Kellogg’s snacks business could thrive on its own, though the benefits for the cereal and plant-based operations were less clear.

Kellogg said the North American cereal and plant-based foods businesses would both remain based in Battle Creek, Mich. The global snacking business would be based in Chicago, Ill., with dual corporate campuses in Battle Creek and Chicago.

Moving the snack company’s headquarters to Chicago will locate it in a city that is home to other food companies as Kellogg looks to hire and expand the business.

Boeing Co.

and

Caterpillar Inc.

said in recent weeks they planned to relocate their Chicago-area headquarters to Arlington, Virginia and Irving, Texas, respectively.

—Will Feuer contributed to this article.

Write to Annie Gasparro at annie.gasparro@wsj.com

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Business

GE Cuts Larry Culp’s 2022 Pay After Shareholder Protest

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General Electric Co. said Chief Executive

Larry Culp

agreed to reduce his potential compensation by about $10 million this year, responding to shareholder concerns over changes that

GE’s

GE 0.88%

board made to executives’ pay packages in 2020.

In August 2020, the GE board revised Mr. Culp’s contract, extending it until 2024 and awarding him a special stock grant during the year that was valued at more than $100 million by the end of 2020. Asset managers called the awards poorly linked to the company’s performance, which they characterized as trailing that of GE’s peers.

Nearly 58% of GE shares were voted against the board’s compensation practices at last year’s annual meeting. It is rare for shareholders to withhold their support for such say-on-pay votes at major companies.

For 2022, Mr. Culp stands to receive a $5 million equity award, instead of the $15 million set out in his revised contract, if he and the company meet performance targets. Exceeding those targets or falling short would increase or reduce the award, respectively.

GE reduced Mr. Culp’s potential 2022 pay following discussions with most of its major shareholders last year, the company said in its annual proxy statement.

“There was shareholder concern around the timing, size and structure of the 2020 retention grant made as part of the extension,” GE said in its filing, along with shareholder support for Mr. Culp’s leadership. The company also said it doesn’t plan to make similar changes to its CEO’s pay in future years.

On Thursday, GE reported paying Mr. Culp $22.7 million for 2021, including a cash bonus of $4.2 million and salary of $2.5 million as well as a $15 million equity award. The equity award was made before the 2021 annual meeting, GE said in the filing.

His 2021 pay trailed the $73.2 million that GE reported paying him in 2020, but it roughly matched the $24.6 million paid in 2019, Mr. Culp’s first full year heading the company, securities filings show.

GE said in its proxy that the board would also limit its use of discretion when determining executive bonuses, after shareholders expressed concerns that GE used discretion in 2020 to award bonuses rather than pegging them to performance measures.

The company said Mr. Culp’s bonus for 2021 paid out at 112% of target, reflecting better-than-target free-cash-flow and margin-expansion figures, and worse-than-target revenue growth, as well as a penalty based on companywide safety metrics.

A GE spokeswoman said the company spoke with investors holding about half the company’s shares, and three-quarters of those held by institutional investors, after the failed say-on-pay vote.

Write to Theo Francis at theo.francis@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Appeared in the March 18, 2022, print edition as ‘GE Cuts CEO Pay After Shareholder Protest.’

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Business

Citigroup Sticks With Its Covid-19 Vaccine Mandate, While GE Drops Its Rules

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Citigroup Inc.

C -1.25%

is sticking with its Covid-19 vaccine mandate for its U.S. workers.

General Electric Co.

GE 0.68%

is not.

The two American companies are going in opposite directions after the Supreme Court blocked Thursday the Biden administration’s rule that big employers require their employees to get vaccines or submit to testing.

Citigroup, which has about 65,000 employees in the U.S., said it had reached 99% compliance one day before a Jan. 14 deadline the bank had set for U.S. workers to get vaccinated or request an accommodation for medical or religious reasons.

“Our goal has always been to keep everyone at Citi, and we sincerely hope all of our colleagues take action to comply,” the company’s human-resources chief Sara Wechter said in a LinkedIn post on Thursday after the high court’s decision.

The bank previously told employees anyone who was still unvaccinated would be placed on unpaid leave, according to people familiar with the matter. Their employment would terminate on Jan. 31, the people said. Saturday, after a wave of last minute vaccinations, around 150 employees were being placed on leave, one of the people said. They could keep their jobs if they comply by the end of the month.

General Electric suspended its remaining Covid-19 vaccine requirements.



Photo:

alwyn scott/Reuters

Citigroup and GE announced vaccine requirements for U.S. staff in October, after the Biden administration said large employers and government contractors would be required to enforce vaccination mandates. Both companies count the U.S. government as an important client.

At the start of 2021, GE had about 56,000 employees in the U.S. It originally told them they were required to get vaccinated or seek a religious or medical accommodation by early December. It suspended that policy in December after a court challenge temporarily blocked the rule for federal contractors.

The manufacturer still required U.S. employees to show proof of vaccination or submit to testing under the White House’s mandate for companies with more than 100 workers, until the Supreme Court blocked that policy on Thursday.

GE on Friday suspended its remaining Covid-19 vaccine requirements, a spokeswoman said. The company said most of U.S. employees are vaccinated and it was on track to comply with the federal contractor executive order before the court injunction.

Write to Thomas Gryta at thomas.gryta@wsj.com and David Benoit at david.benoit@wsj.com

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Business

GE Nears Deal to Combine Aircraft-Leasing Unit With AerCap

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General Electric Co. is nearing a $30 billion-plus deal to combine its aircraft-leasing business with Ireland’s

AerCap

AER 1.62%

Holdings NV, according to people familiar with the matter, the latest in a string of moves by the industrial conglomerate to restructure its once-sprawling operations.

Though details of how the deal would be structured couldn’t be learned, it is expected to have a valuation of more than $30 billion, some of the people said. An announcement is expected Monday, assuming the talks don’t fall apart.

The

GE

GE 0.29%

unit, known as GE Capital Aviation Services, or Gecas, is the biggest remaining piece of GE Capital, a once-sprawling lending operation that rivaled the biggest U.S. banks but nearly sank the company during the 2008 financial crisis. GE already took a major step back from the lending business in 2015 when it said it would exit the bulk of GE Capital, and a deal for Gecas would represent another big move in that direction.

It would also represent another significant move by GE Chief Executive Larry Culp to right the course of a company that has been battered in recent years by souring prospects for some of its top business lines and a structure that has fallen out of favor with investors.

With more than 1,600 aircraft owned or on order, Gecas is one of the world’s biggest jet-leasing companies, alongside AerCap and Los Angeles-based Air Lease Corp. It leases passenger aircraft made by Boeing Co. and

Airbus SE

as well as regional jets and cargo planes to customers ranging from flagship airlines to startups. Gecas had $35.86 billion in assets as of Dec. 31.

AerCap has a market value of $6.5 billion and an enterprise value—adjusted for debt and cash—of about $34 billion, according to S&P Capital IQ, and around 1,400 owned or ordered aircraft. The company has experience in deal making, paying around $7.6 billion in 2014 to buy International Lease Finance Corp. AerCap’s revenue last year was about $4.4 billion, down from around $5 billion in the previous few years.

The aviation business has been hit hard by the Covid-19 pandemic, which has resulted in a sharp drop in global travel and prompted airlines to ground planes. Some airlines have sought to defer lease payments or purchases of new aircraft. Gecas had an operating loss of $786 million on revenue of $3.95 billion in 2020. GE took a roughly $500 million write-down on the value of its aircraft portfolio in the fourth quarter.

Combining the companies could afford cost-cutting opportunities and help the new entity weather the downturn.

Separating Gecas could help GE with its efforts to shore up its balance sheet and improve cash flows. Despite a recent increase, GE’s share price remains below where it was before significant problems in the company’s power and finance units emerged in recent years.

The Boston company has a market value of around $119 billion after the shares more than doubled in the past six months as it posted improving results. Still, the stock has fallen by about three-quarters from the peak just over 20 years ago.

Mr. Culp became the first CEO from outside of GE in late 2018 after the company was forced to slash its dividend and sell off businesses. The former

Danaher Corp.

boss has sought to simplify GE’s wide-ranging conglomerate structure further, as other industrial giants such as Siemens AG and

Honeywell International Inc.

have done in recent years.

Activist investor Trian Fund Management LP, which has owned a significant position in the company since 2015 and holds a seat on its board, has supported such changes.

Early in his tenure, Mr. Culp said he had no plans to sell Gecas, a move his predecessor

John Flannery

had considered after the unit drew interest from private-equity firms pushing further into the leasing business.

Mr. Culp has sought to even out cash flows and refocus on core areas. Operations he has parted with include the company’s biotech business, which was purchased by Danaher in a $21 billion deal that closed last year. GE also sold its iconic lightbulb business in a much smaller deal last year, and previously said it was unloading its majority stake in oil-field-services firm Baker Hughes Co.

GE has cut overhead costs and jobs in its jet-engine unit while streamlining its power business. The pandemic continues to pressure the jet-engine business, GE’s largest division, however.

The company also makes healthcare machines and power-generating equipment, and the rest of GE Capital extends loans to help customers purchase its machines and contains legacy insurance assets too.

AerCap is based in Ireland and Gecas has headquarters there as well. The aircraft-leasing industry has long had a significant presence in Ireland due to the country’s favorable tax regime and the importance of Guinness Peat Aviation in the development of the sector. (A deal between GE and AerCap would reunite two companies that bought their main assets from GPA.) The industry has gotten more competitive as Chinese companies have gained market share, however, and the combination could help the new group stem that tide.

Shares in aircraft-leasing companies plummeted along with much of the market in the early days of the pandemic as demand from major airlines, who lease planes to avoid the costs of owning them, evaporated. But many of the major lessors’ stocks have recovered lost ground and then some in the months since as lockdowns ease and the outlook for travel improves.

AerCap’s Chief Executive Aengus Kelly said on its fourth-quarter earnings call this month that he expects airlines to shift more toward leasing planes as they rebuild their balance sheets, in what would be a boon to the company and its peers.

“Their appetite for deploying large amounts of scarce capital to aircraft purchases will remain muted for some time,” he said. “The priority will be to repay debt or government subsidies.”

—Thomas Gryta contributed to this article.

Write to Cara Lombardo at cara.lombardo@wsj.com and Emily Glazer at emily.glazer@wsj.com

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