Global Economy Slowdown
Despite multiple rounds of monetary easing by the global central banks and zero interest rates, the global economy continues to slow down. Top global MNCs like Du Pont, Fedex, Dow etc. are forecasting a sharp cut in their sales and profit forecasts. The companies are reacting by firing thousands of workers and shuttering plants in order to protect their profits. Europe and China have been slowing down for quite a while now due to their muddle headed debt and investment related problems. Other emerging markets which are dependent on China and Europe are also facing slowdown if not outright recession. The stock markets are starting to reflect some of the reality despite the Fed induced money high. Global Trade and debt imbalances continue to be an overhang on the economy.
Unemployment has become one of the biggest global problems as structural changes in the labor market due to the Internet are combining with the cyclical slowdown. Wages are getting cut or remain stagnant even as food and energy prices continue to climb. The bargaining power has moved to global companies who continue to feast on a global pool of labor which is highly oversupplied. The advancement of communication technologies means that work continues to move to even lower cost locations to the detriment of workers globally.
DuPont slashed its earnings forecast, reported a lower-than-expected quarterly profit and announced 1,500 job cuts on Tuesday, signs that demand for the chemical company’s lucrative paint and solar products is slipping around the world.
Shares of DuPont, a component of the Dow Jones industrial average <.DJIA>, fell nearly 8 percent in morning trading.
The job cuts by the company, which also makes Kevlar bulletproof fiber and Corian countertops, marks one of the more extreme reactions to slipping demand and global economic uncertainty so far in this earnings season.
DuPont’s sales fell 9 percent to $7.4 billion in the third quarter, below analysts’ average forecast of $8.15 billion.
Dow Chemical Co, the largest US chemical maker by sales, will cut about 2,400 jobs and shut 20 manufacturing plants to reduce annual costs by $500 million in the face of slow global economic growth.
The facilities to be closed are in the US, Belgium , the Netherlands, Spain, the UK and Japan, the Midland, Michigan based company said in a statement released after it inadvertently e-mailed a draft copy to Bloomberg News earlier on Tuesday.
Corning said Wednesday that it will likely cut costs, which may include “modest” job cuts, to support profit in a weakening economy.
It’s the latest manufacturer to warn that the slowing global growth is hurting its business. Weaker global growth hurt Corning’s telecommunications and environmental technologies divisions, but the company said sales of its super-strong Gorilla glass, used in tablets, TVs and other devices, were much better than expected
The glass and ceramics maker’s stock slid 5 percent, or 67 cents, to $12.74 in premarket trading Wednesday.
US personal-care products giant Kimberly-Clark said Wednesday it was exiting its Huggies diaper business in much of western and central Europe, cutting up to 1,500 jobs.
Kimberly-Clark Corporation announced it would close or sell five manufacturing facilities and some production would be transferred to other plants.
UBS is about to cut 400 investment banking jobs, two sources familiar with the situation said on Wednesday, with more extensive lay-offs at the Swiss bank likely to follow as it withdraws from the riskier and more capital-intensive parts of its business.
Tighter capital rules and a dearth of deals are forcing many investment banks to slash costs, though big losses in the 2008 financial crisis and a rogue trading scandal last year have added to the Swiss group’s particular problems.