H&B to Cut Workforce 120 Percent
NEW YORK CITY, N.Y. — [TheKnish.com] H&B will reduce its workforce by an unprecedented 120 percent by the end of 2010, believed to be the first time a minor corporation has laid off more employees than it actually has.
H&B stock (symbol: YUHNU) soared more than 12 points on the news.
The reduction decision, announced Wednesday, came after a year-long internal review of cost-cutting procedures, said H&B Chairman Shloima Chaim Buchbinder. The initial report concluded the company would save $1.2 million by eliminating 20 percent of its 100 employees.
From there, said Buchbinder, "it didn't take a genius to figure out that if we cut 40 percent of our workforce, we'd save $2.4 million, and if we cut 100 percent of our workforce, we'd save $6 million. But then we thought, why stop there? Let's cut another 20 percent and save $7.2 million.
"We believe in increasing shareholder value, and we believe that by decreasing expenditures, we enhance our competitive cost position and our bottom line," he added.
H&B plans to achieve the 100 percent internal reduction through layoffs, attrition and early retirement packages. To achieve the 20 percent in external reductions, the company plans to involuntarily downsize 20 non-H&B employees who presently work for other companies.
Among firms H&B has picked as "External Mitigation Targets," or EMTs, are Treif Delight, Partly Music and Reichler's. H&B's plan presents a "win-win" for the company and EMTs, said Buchbinder, as any savings by EMTs would be passed on to H&B, while the EMTs themselves would benefit by the increase in stock price that usually accompanies personnel cutback announcements.
"We're also hoping that since, over the years, we've been really helpful to a lot of companies, they'll do this for us kind of as a favor," said Buchbinder.
Legally, pink slips sent out by H&B would have no standing at EMTs unless those companies agreed. While executives at EMTs declined to comment, employees at those companies said they were not inclined to cooperate.
"This is ridiculous. I don't work for H&B. They can't fire me," said Shmeel Yankel Artscroll, a shlepper with Reichler's.
Reactions like that, replied Buchbinder, "are not very sporting."
Inspiration for the H&B plan came from previous cutback initiatives, said company officials. In January of 1998, for instance, the company announced it would trim two jobs over three years. However, just a year later, H&B said it had already reached its quota. "We were quite surprised at the number of employees willing to leave H&B in such a hurry, and we decided to build on that," Buchbinder said.
Analysts credited Buchbinder's short-term vision, noting that the announcement had the desired effect of immediately increasing H&B share value. However, the long-term ramifications could be detrimental, said Goldman Sachs analyst Shlomo Ganzfein.
"It's a little early to tell, but by eliminating all its employees, H&B may jeopardize its market position and could, at least theoretically, cease to exist," said Ganzfein.
Buchbinder, however, urged patience: "To my knowledge, this hasn't been done before, so let's just wait and see what happens."
Martin Bodek is short, dark, handsome, runs marathons (finishes them too!), can solve a Rubik's Cube in 1:47, is a big TED chasid, can whup your keister in Scrabble, loves halva, co-founded TheKnish.com, and writes books from 5-9: http://www.lulu.com/spotlight/mbodekatgmaildotcom
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