Zenith to cut U.S. work force 25 percent
Dec. 18, 1996
CHICAGO (AP) _ Zenith Electronics Corp. became the latest company to give workers an unpleasant holiday surprise, announcing Wednesday it will slash more than 1,100 jobs as it struggles to stay afloat before its digital-TV and computer products go to market.
The last-remaining maker of televisions in the United States, Zenith said it will eliminate 375 salaried positions and 800 hourly positions _ about 25 percent of its U.S. work force. The Glenview, Ill.-based consumer electronics company is controlled by a South Korean company and has 12,000 employees in Mexico, who are not affected by the retrenchment.
``Layoffs are always painful, particularly around the holiday season, but this is a necessary step to turn this company around,'' said Zenith spokesman John Taylor.
Zenith, which hasn't posted an annual profit since 1988, joins a growing list of companies in announcing job cuts just before the holidays.
Just last week, BankAmerica announced it would cut 3,700 jobs, Greenwich, Conn.-based chemical maker Witco Corp. said its payroll would be trimmed by 1,800, and children's book publisher Golden Books Family Entertainment Inc. of Racine, Wis., said it will eliminate 200 jobs.
Zenith said its hourly jobs will be eliminated in 1997, mostly through attrition, at the company's picture tube plant in Melrose Park, a Chicago suburb. The 30-year-old plant is being modernized and updated to produce about 1 million high-resolution picture tubes annually for computer monitors, Taylor said. First shipment is expected in mid-1997.
Layoffs of salaried workers at all levels should be completed by the end of the first quarter of 1997, the company said. The cuts will leave fewer than 1,500 salaried positions in the United States.
``Our fixed costs are simply too high for a company with sales at our levels and reporting such huge losses,'' Peter S. Willmott, the company's recently elected president and chief executive, said in a letter to employees.
The cuts are expected to reduce expenses by about $20 million next year, the company said. It will take a $25 million charge in the fourth quarter to cover the reductions. Zenith also said it is negotiating with its lenders to amend some loan agreements.
The company's stock fell 62 1/2 cents to close at $11.75 a share on the New York Stock Exchange.
Zenith is struggling to stay alive pending the expected 1998 launch of so-called high-definition television, or HDTV. Zenith will be one of the first manufacturers of the new digital technology. It also expects to make millions from licensing its patented technology to other television manufacturers.
Zenith, AT&T, the David Sarnoff Research Center, General Instrument, the Massachusetts Institute of Technology, Thomson Consumer Electronics and Philips Consumer Electronics developed the Grand Alliance system to produce HDTV after nearly nine years of research and compromise among TV broadcasters, TV manufacturers, cable companies, some computer companies and others.
Zenith also recently won a $1 billion contract with a consortium of Baby Bells and Walt Disney Co. to produce digital set-top boxes that sort out standard and wireless cable programming, video-on-demand and direct broadcast satellite programs.
Zenith is controlled by South Korea's LG Group, which makes Goldstar-brand electronics. LG Electronics Inc. owns 55 percent of the stock in Zenith, which continues to operate as a U.S.-based, publicly traded company.
The company ranks third in the American color television market behind RCA/ProScan and Magnavox, according to TV Digest, which tracks television sales and industry trends. Zenith's market share grew to 11.5 percent this year, from 11 percent a year ago and 10 percent the previous two years.
For the nine months ended Sept. 28, the company reported a loss of $108.4 million, or $1.67 a share, compared with a loss of $75.5 million, or $1.46 a share, for the nine months a year earlier.
Nine month revenue was $860 million, compared with $879 million in 1995.