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Troubles at General Mills
By Bill Catlin
Minnesota Public Radio
April 26, 2002

Golden Valley-based General Mills has laid off about 500 more workers in Minnesota. Slowing sales are also forcing the maker of Cheerios cereals to say profits will fall short of earlier projections. This is the second time the company has disclosed problems since acquiring its Twin Cities neighbor Pillsbury last fall.

General Mills logo
General Mills, based in Golden Valley, has announced another round of layoffs - even as it warns of lower-than-expected profits. The company says some of this is due to its merger with cross-town rival Pillsbury last year.
(Image courtesy of General Mills)

General Mills spokeswoman Marybeth Thorsgaard says General Mills has eliminated about 2,000 jobs company-wide since closing on the Pillsbury acquisition six months ago.

"In Minnesota, there were approximately 1,000 positions that were eliminated. Of that number, more than half of them were done at the close, around Nov. 1, and the balance since then, including some this week," Thorsgaard says.

Further job cuts appear likely. The company increased its target for cost savings, or synergies over the next two fiscal years. Thorsgaard says not all savings come from eliminating jobs.

"We have synergy targets, but that is not just positions. That's also other synergies across the company in supply chain, in distribution, in sales, and marketing and general and administration," she said.

This is the second time in less than three months General Mills has had to tell investors its results would fall short of projections. Last February, the company said a one-time disruption from combining the Pillsbury and General Mills sales forces caused unusually weak sales volumes in December.

At the time the company said the situation was improving, but General Mills now says unit volumes will be down about four percent in the fourth quarter.

In a statement, CEO Steve Sanger says company officials are extremely disappointed. He says some of the problem stems from retailers reducing inventory, and the economy's affect on the company's food service business. But he also blames marketing problems.

General Mills CEO Steve Sanger
General Mills CEO Steve Sanger says he's hopeful the worst is behind his company - as it continues to adjust to its merger with Pillsbury. He told MPR's Bill Catlin the company has also struggled with the economic downturn and marketing problems within the company. Listen to the interview.
(MPR file photo)

The company is cutting its fourth quarter profit projection by about 40 percent, and is reducing next year's estimate by around 10 percent.

Still, Jean Kinsey, co-director of The Food Industry Center at the University of Minnesota, says the combined Pillsbury and General Mills has a lot of potential. She says it pairs General Mills' strong breakfast cereal presence with Pillsbury's strength after breakfast.

"They're very good at the rolls and the breads, and anything that's made from a dough, which is typically used more at lunch or at dinner or again sold in food service, so they're spreading out the ability or possibilities of capturing the consumer's dollar for all points in the day," Kinsey says.

General Mills CEO Steve Sanger is one of several industry executives serving on the Food Industry Center's advisory board.

The job cuts add to a what one state official says is a record year for big layoffs. Paul Moe with the state Department of Trade and Economic Development says layoffs in Minnesota involving 50 people or more will top 34,000 job cuts this year, close to double the record set last fiscal year. And he says more are likely despite indications the economy is improving.

"I'm not sure where we're at. I do know this - once the bottom of the recession is reached there will continue to be layoffs...for another four to six months. That's been the track record," Moe says.

Before General Mills' announcement Thursday, the company's share price plunged 8 percent after one Wall Street analyst reported the company had suddenly cancelled a meeting with investors and executives, were not returning calls.