Effects of HP's Restructuring, Job Cuts on South African Uncertain

Mergers, Acquisitions and Financial Results

HP's operations in SA are without a local head after the sudden resignation of country manager Oliver Fortuin last month, after just seven months in the job. A search for a replacement is under way.

Nor does the local subsidiary have an official spokesman to disclose any specific information regarding the local effect of the cutbacks.

Yesterday HP released a proposed restructuring plan for its Europe, Middle East and Africa region as part of an "ongoing global business transformation". The 5700 jobs to be lost in that region will reduce its 80000 employees by more than 7%.

In March, HP's vice-president for the region, Francesco Serafini, said Africa was a potentially huge market for HP since it presented a vast target market for its products.

However, any potential expansion plans now seem to have been overtaken by additional cutbacks. A more detailed breakdown of the positions to be lost in each country will be finalised in the coming weeks.

Many of the cuts will come in Germany and Scotland, as HP will relocate its production facilities from there to the Czech Republic to reduce its running costs.

Last week HP's chief financial officer, Cathie Lesjak, said the company expected to make a 2% cut in its headcount over the next 12 months.

That made yesterday's news worse than its employees had anticipated, but the news has been getting progressively worse for several months. In February, HP workers received a memo from CEO Mark Hurd saying he was imposing wide-ranging pay cuts in an effort to prevent further job losses. That followed a first quarter earnings report showing a 13% drop in profit and a double-digit slide in the sales of its printers, servers and PCs.

Hurd told employees there would not be any major workforce reductions for the foreseeable future, although there were pockets where restructuring was needed in a "workforce optimisation process".

Executive council members had their pay cut 15%, other executives 10%, and other staff took cuts of 5% or 2,5%. While this was implemented in the US, wage cuts in Europe were initially limited to leaders, who were asked to support the measure.

"In an environment like this, there's no margin for error and no tolerance for inaction," Hurd said.

"My goal is to keep the muscle of this organisation intact but we do have to do something because the numbers just don't add up."

In September last year Hurd had announced 24700 job cuts.

Business Day