Sunday, April 08, 2001

Workers at P&G ponder futures

Early-retirement packages available

By Randy Tucker, John Eckberg and Cliff Peale
The Cincinnati Enquirer

        Anxiety pervades the halls of Procter & Gamble.

        Two weeks after the Cincinnati company announced another round of job cuts — including 1,900 mostly white-collar jobs locally — workers are trying to decide whether retirement is worth it.

        P&G is offering an early-retirement package to eligible employees that includes a minimum of three months' pay, extended health benefits and help finding another job. The deadline for accepting is May 15.

        If employees decide the package is not worth it, they could be gambling with their future. After that date, P&G will decide who has to go next.

        The Enquirer attempted to talk to dozens of employees in the past two weeks about their plans. Many, however, said they were not ready to talk openly.

   Under the plan announced March 22, these are the primary dates that Procter & Gamble employees have had their eyes on:
   • March 29 — The window opened for eligible U.S.-based, nonplant employees to review early-separation packages and indicate whether they would accept the proposal.
   • May 15 — Deadline for declaring intent to accept or reject early-retirement packages. The company says it will extend a short grace period for employees to change their minds after the deadline.
   • June 30 — Company officials say they should know by then how many workers have opted for early retirement and how many will have to be laid off to meet job-cut goals.
        “So many of us came to Procter & Gamble expecting our jobs to last forever,” said a veteran P&G finance manager who asked not to be identified. “When suddenly you realize that likely won't happen, it takes time for you to recover. I know why the company has to do it. I seriously do. But don't be fooled. It still hurts.”

        As other employees weigh their futures, they also said they are not bitter. They know the company's management had to make tough decisions to make the company more profitable to satisfy shareholders.

        Donna Misch, a 33-year P&G veteran, faced being laid off or retiring early as part of P&G's Organization 2005, announced in June 1999.

        Ms. Misch, in her early 50s, could easily have directed her frustration at company officials.

        After all, they're the ones responsible for her premature decision to retire at the end of this year, at a time when she needs her job most.

        Durk Jager, then chief executive, promised that the reorganization would help the company develop and deliver products faster. The company's stock continued to climb, peaking at a split-adjusted $117.75 in January 2000.

        Ms. Misch said she understood the company's reasons for announcing 15,000 job cuts then — 7,200 of which have been completed through voluntary retirements or layoffs.

        The human resources worker specializes in helping foreign nationals relocate to the United States. She became her family's sole provider after her husband, Wayne, suffered a debilitating and near-fatal motorcycle accident in 1996.

        Then P&G's stock price started slipping after a series of earnings warnings. It bottomed at $53.63 in June 2000, and now stands at $61.68.

        The decline in the stock — which accounts for most of Ms. Misch's retirement benefits — means that she will forfeit much of the security she's worked for in the past three decades.

        “If I had retired two years ago, I would have been a millionaire,” Ms. Misch said. “Not anymore. This wasn't the way I envisioned going out. I was looking forward to enjoying some of the good life that I worked so hard for.”

No bitterness
        The job cuts didn't stop with Organization 2005. The maker of such household staples as Crest toothpaste and Tide detergent said March 22 it would expand the program to include 9,600 more job cuts — including the 1,900 in Cincinnati — to slice costs.

        Still, don't expect to hear harsh words or unflattering comments from Ms. Misch about the company or its management.

        “They (senior management) are doing what they have to do in the best interest of shareholders,” Ms. Misch said. “I know this has got to be painful for them. If they didn't have to do this, they wouldn't.”

        In Ms. Misch's case, the company moved her job as well as several hundred other jobs in her department to Costa Rica, where the cost of living and salaries are lower than in the United States.

        Rather than criticize the cuts, Ms. Misch, like several P&G workers interviewed the past two weeks, praised the company for the humanitarian way it has handled the reorganization.

        “At least this way I can still walk away with dignity,” she said. “They could have just handed me a pink slip and said, "Goodbye.'”

        Instead, the company has tried to help make the transition as smooth as possible by conducting “employee transition center” sessions throughout Cincinnati.

        The sessions were organized to help answer questions from employees apprehensive about the job cuts and how they might be affected.

Six-week window
        “Are people anxious? Yes,” JoAnn Hagopian, associate director of employee relations at P&G, said. “Are we trying to give them as much information as we can to help with that anxiety? The answer is yes.”

        Ms. Hagopian said the company hopes to achieve most of its work- force reduction through attrition, including its “employee initiated separation program.”

        She said the program has four main features:

        • Separation allowance: The amount of pay P&G employees will receive after they retire, based on years of service. The minimum payment that eligible employees will receive is three months' separation pay. The maximum is 12 months. Most people who are eligible for retirement would get one year's pay.

        • Medical benefits: P&G's early retirees will receive extended medical benefits for a period equal to the length of their separation allowance. For example, if they received a year's pay when they retired, they'd receive a year's worth of medical benefits.

        • Outplacement assistance: The company will provide free professional services to help displaced workers find jobs outside the company.

        • Retraining allowance: Under the early retirement plan, P&G employees can apply for a training allowance of up to $5,000 to gain new skills.

        Company employees have a six-week window, from March 29 to May 15, to review the package and indicate whether they would accept it.

        “After that, then we'll close the window ... and evaluate how many people have gone, and whether it was a success or not,” Ms. Hagopian said.

        The company then will proceed to lay off as many workers as necessary to meet its goals.

Smaller portfolios
        Tom Angus, partner in the Angus Group, a local executive search firm, said P&G employees offered the separation packages probably will take time to consider the offer.

        “They're trying to decide what to do,” he said. “P&G seems to be doing this very methodically.”

        Mr. Angus said his office had seen no uptick in its business from P&G employees looking for new jobs.

        “Sure, we've had a couple of people who said, "We may want to start thinking about a job,'” Mr. Angus said. “But there hasn't been a surge of activity at all.”

        Randy Phillips, senior portfolio manager at Fifth Third Bank, has spoken with dozens of employees at P&G and estimated that most who are eligible for a separation package have simply not decided.

        “One of the things they are looking at is the value of the P&G stock, and they're struggling when they look at that value compared to a year ago” before a decline, Mr. Phillips said.

        About 150 people, representing more than 75 households in Greater Cincinnati, have come to Fifth Third retirement seminars for P&G workers in the past month. Portfolios vary widely, but most average $1.2 million.

        Many calculate an annual depletion for living expenses after retirement of about 6 percent.

        “That's income of $60,000 before taxes, and while there's nothing wrong with that, that may not be enough to retire on,” he said.

        “If you have kids going to college, medical bills or maybe a child's wedding coming up, that might not be enough money for some people.”

        Another factor is that early retirement will mean that instead of having to maintain the fund for the life of a prospective retiree — say, 25 years — now it has to last for 35 years or longer.

"Sense of hopefulness'
        Debra Behler, 42, isn't worried about facing the ax.

        She said she plans to quit July 31 with a separation package at 50 percent of her salary to start an administrative services company in her Fort Thomas house.

        The 12-year veteran, who worked downtown, said she has received feelers from others at P&G who are thinking about starting businesses, to see whether she would do contract work for them.

        “I almost can't get out the door fast enough because the clients are already calling,” she said.

        She said it was an exciting time for her and that she understood how others might be worried.

        “There is a little loss of security,” she said. “My sense is that some people who are nervous (about retiring) have a general sense of hopefulness that this is one of the things the company needs to do to make the turnaround.”

"Good opportunity'
        Todd Ermi, a P&G senior account executive, said he and his wife, Lori — they've both worked at the company for more than a decade — will accept retirement packages so they can move to the Washington, D.C., area to be closer to family.

        He said he's “not as worried as you might think” about his future and that his early separation doesn't mean that he will be destitute.

        In addition to what he described as a generous severance, he, like many of his co-workers, will take with him the job skills and the cachet that comes with having P&G on a resume.

        “This is a good opportunity to take all the skills and everything I've learned at P&G, separate from the company and start my career search,” Mr. Ermi said.


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