Kimberly-Clark has announced a multi-year program to improve its competitive position by reducing its global workforce and shutting down a score of global facilities. The planned initiatives will result in cumulative after-tax charges of approximately $625-$775 million over a three-and-a-half year period beginning in the third quarter of 2005. Annual pretax savings are expected to increase to $300-$350 million by 2009.
These savings will allow the company to focus on areas positioned to achieve the greatest success. Specifically, the company will invest to strengthen its leadership position in baby and child care, adult care and family care. In particular, investments to support "grow" businesses, such as light-end incontinence, child care and mid-tier diapers, will be ramped up. Also a focus will be accelerated growth in developing and emerging markets by focusing on the high growth BRICIT (Brazil, Russia, India, China, Indonesia and Turkey) countries as well as improved positions of regional strength in feminine care-the Americas and parts of Asia-while improving returns for the business worldwide.
In support of these initiatives and to help improve brand equity and market share, the company plans to reinvest significant funds in strategic marketing, raising spending levels as a percent of sales by more than 100 basis points from 2004 to 2009. These investments go hand in hand with strategic cost reductions aimed at streamlining manufacturing and administrative operations primarily in North America and Europe, creating an even more competitive platform for growth and margin improvement.
Continuous productivity gains over the last several years along with investments in state-of-the-art manufacturing capacity are enabling the company to consolidate production at fewer facilities. Cash costs related to the sale, closure or streamlining of operations, relocation of equipment, severance and other expenses are expected to account for approximately 45 percent of the charges. Noncash charges will consist primarily of accelerated depreciation and asset write-downs.
By the end of 2008, it is anticipated there will be a net workforce reduction of about 10%, or approximately 6000 employees, while approximately 20 manufacturing facilities, or 17% of the company's worldwide total, will be sold or closed, and an additional four facilities will be streamlined. In addition, seven other facilities will be expanded as some production capacity from affected facilities is transferred to them to further improve the scale, productivity and cost position of those operations. There is a particular focus on Europe aimed at improving business results in the region. The company intends to consolidate and streamline manufacturing facilities, further improve operating efficiencies, and reduce selling, general and administrative expenses while reinvesting in key growth opportunities there.