Procter & Gamble Co (NYSE:PG) announced the closing of its Kansas City plant and is cutting back operations in Iowa as it is shifting its production to a new factory in West Virginia and Cincinnati. This plan is part of the company’s $10.0-billion cost-cutting measures, which will be followed by P&G layoffs. The shift will be completed by mid-2020, which will result in the closure of the Kansas City plant in the latter half of the year.
The Procter & Gamble layoffs are supposed to impact around 800 employees in 2020—about 280 full-time employees in Kansas City and 500 in Iowa City. The company’s officials said that in Cincinnati, local employees would take over the additional production duties so there would be no new plant jobs there. On the other hand, in West Virginia, 200 Kansas City jobs will be transferred.
“Decisions like this are never easy, but we are communicating this decision more than two years in advance to help our employees plan for the future,” P&G said in a statement. “We are committed to supporting P&G people through the transition in a manner consistent with our values and principles.”
Procter & Gamble’s $10-Billion Cost-Cutting Plan
For the last few quarters, P&G has been struggling very hard to increase its sales. The company’s shares gained just five percent in 2017, compared to the industry’s growth of about 14.2%. As a result, the company is focusing on restructuring measures like product improvement, packaging, marketing, and cost-saving plans to stabilize its budget. It has also closed or sold around 12 U.S. firms since 2013. Some of these measures led to Procter & Gamble layoffs.
Here is the list of changes:
- By 2020, Procter & Gamble will shift the dish care business production from Kansas City to the new place at Tabler Station, West Virginia.
- It will shift its chemical ingredient business production from Kansas City to the Ivorydale chemicals plant in St. Bernard.
- By late 2020, it will transfer its hair care production and personal cleaning business from Iowa to the new location at Tabler Station. Only “Oral Rinse” production will exist at Iowa.
- These changes will increase the jobs in the Tabler Station factory from 700 to 900, a net gain of 200 jobs.
A North American review of production operations that started in 2013 led to the implementation of these changes.
P&G completed its initial $10.0-billion cost-cutting plan in 2016. After this, David Taylor, the CEO, announced a plan to save another $10.0-billion in operating costs. P&G expects to save a significant amount in production costs by shifting the manufacturing unit to newer and more automated plants. The company also has plans to shutter a plant in Ontario by 2021. In recent years, the company has announced the closure of the plants in New Jersey, Georgia, and Puerto Rico.
As a part of restructuring efforts to save costs, companies try a variety of things to boost up their sales. These Procter & Gamble layoffs are a part of such a plan. Will it be successful in saving another $10.0 billion? Only time will tell.
“Procter & Gamble announces the closing of its Kansas City, Kan. plant,” The Kansas City Star, February 7, 2018.
“Procter & Gamble to close plant in Kansas City, make cuts in Iowa City,” USA Today, February 7, 2018.
“Procter & Gamble Navigates Soft Sales With Cost-Saving Plans,” NASDAQ, November 21, 2017.