Business Contractions Follow One After Another Amid Economic Recession Outlook
[Asia Economy Reporter Yujin Cho] Following Silicon Valley and Wall Street in the United States, a wave of layoffs is now sweeping through the manufacturing sector. Amid growing fears of an economic recession due to high-intensity tightening policies and inflation impacts, manufacturers are also entering emergency management through workforce reductions.
On the 5th (local time), the Wall Street Journal (WSJ), citing sources, reported that U.S. food and beverage company PepsiCo has begun layoffs involving hundreds of employees. Sources indicated that the beverage division at the headquarters in Purchase, New York, as well as the snack and packaging divisions located in Chicago and Plano, Texas, will be the targets of these layoffs.
According to an internal memo obtained by WSJ, the company explained the reason for the layoffs as "an effort to simplify the organization for more efficient management." In particular, the beverage division at the headquarters is planning workforce adjustments through a voluntary retirement program, which could increase the scale of the layoffs, sources said.
As of the end of last year, PepsiCo employed approximately 129,000 people in the United States and 309,000 employees worldwide.
PepsiCo showed growth in both sales and profits last quarter by offsetting raw material cost increases due to inflation through consumer price hikes. However, the company has emphasized the need to respond to worsening macroeconomic conditions such as interest rate hikes and rising raw material prices, as well as pressure on profit margins.
Amid recession forecasts, big tech companies like Amazon, major Wall Street investment banks, and manufacturing and distribution companies such as Walmart, Ford Motor Company, and Gap are all scaling back their operations one after another.
Amazon, which greatly expanded during the COVID-19 pandemic with soaring performance, recently consolidated some teams including the Alexa division and carried out the largest restructuring in its history by cutting 10,000 employees, about 3% of its headquarters staff (1% including global workforce). Twitter reduced its workforce by half (3,700 employees), and other major tech companies like Meta and Microsoft (MS) have also continued workforce reductions.
Although the scale of layoffs is smaller compared to big tech, Wall Street has not escaped the wave of layoffs either. Citigroup and Goldman Sachs, both headquartered in New York, began layoffs in November and September respectively, and Credit Suisse and Morgan Stanley have also undertaken workforce adjustments. These firms have been hit hard as cash dried up in the market due to high interest rates and recession concerns. Citigroup’s investment banking division, including IPOs, saw market sluggishness, resulting in a 64% drop in third-quarter earnings compared to the same period last year.
U.S. major fashion company Gap conducted layoffs targeting 500 employees across all departments at its headquarters in San Francisco, as well as its New York and Asia offices in September. Facing years of stagnant sales growth and rising costs due to inflation, the company took workforce restructuring as a self-help measure. At the time, Gap’s interim CEO Bob Martin told employees, "The company’s recent spending is increasing faster than sales and is affecting profitability."
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