Indra Nooyi (Bloomberg)
Embattled PepsiCo CEO Indra Nooyi is considering laying off roughly 4,000 workers and ending the company’s 401(k) match in order to boost earnings, The Post has learned.
A final decision could be made in days, according to sources close to the situation.
“They are burning the furniture” is how one source described the proposed actions, referring to quick-strike actions undertaken after the usual means of accomplishing the goal of increasing profits have failed.
Nooyi has been testing the patience of company directors who are fretting over the lack of a clear heir apparent, a series of marketing missteps and a stock that is as flat as day-old Pepsi.
PepsiCo currently offers a pension plan and a 401(k) match and believes offering both is more generous than its peers, a source said. Eliminating the 401(k) match would save PepsiCo $75 million, the source added.
The New York company might cut the match for those with enough seniority to be eligible for the pension, an insider noted.
“It’s easier to stop the 401(k) match than to freeze the pension,” a former PepsiCo executive said. “You see the savings next week.”
The roughly 4,000 layoffs, amounting to a little more than 1 percent of its payroll, will include a modest number of workers at its Purchase, NY, headquarters, the insider said.
PepsiCo employs about 300,000 workers globally, 2,000 of whom are in Purchase; 900 work at its Somers, NY, bottling headquarters.
The Post reported last month that Nooyi was eyeing layoffs of about 1,000.
Consumer products giants including Procter & Gamble have cut thousands of workers over the past year.
PepsiCo is also mulling freezing raises for its salaried employees, a source close to the situation said. However, the insider noted, that budget move is considered less likely to occur than the other two moves.
Meanwhile, management still seems reluctant to split its equally large Frito-Lay snacks and beverage businesses, sources said.
PepsiCo brass is saying the international snack and food businesses are closely intertwined, making such a move difficult.
There are some board members, though, who want management to consider a split before it announces its 2012 strategic outlook.
Fitch in early December lowered its ratings on PepsiCo to A, citing deteriorating operating performance and how that affects its leverage.
“Indra will push all her levers to maximize earnings” so as not to disappoint investors, a consumer investment banker said.
A PepsiCo spokesman declined to comment on the proposed cuts.
On the first day of October 2006, the month Nooyi became chief executive and chairman, Pepsi shares closed at $65.20. They ended trading yesterday at $66.74, up a paltry 2.4 percent in the past five years and three months.