Kimberly-Clark to use savings from tax cuts to pay for layoffs

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Kimberly-Clark — maker of brands such as Kleenex, Scott and Huggies — said the savings it receives from the new tax-cut law will help them pay for a restructuring program that includes layoffs.

The company said the restructuring initiative, which the company was planning to undertake regardless of the tax law’s passage, will involve reducing its number of employees by about 5,000 to 5,500 people, or 12 to 13 percent of its workforce. Kimberly-Clark also said it plans to close or sell about 10 manufacturing facilities. 

The announcement contrasts with other businesses, such as Starbucks and Walmart, that have said that they will increase wages or issue bonuses in the wake of the tax law. President Trump signed the law in late December.

Senate Minority Leader Charles Schumer (D-N.Y) highlighted Kimberly-Clark’s announcement in a floor speech Wednesday as an example of “evidence that big corporations are not turning their new tax cut into jobs for the middle class.”

In an earnings call Tuesday, Kimberly-Clark said it expects its effective tax rate to be between 23 and 26 percent in 2018 because of the new law, lower than in 2017. 


“We also anticipate ongoing annual cash-flow benefits from tax reform,” Kimberly-Clark Chief Financial Officer Maria Henry said on the call. “That provides us flexibility to continue to allocate significant capital to shareholders, while we also fund increased capital spending and our restructuring program over the next few years.”

Kimberly-Clark’s restructuring program comes amid increased competition and lower birth rates than it expected in the U.S. and South Korea, which impacts diaper sales.

The company had been considering the restructuring program for much of last year, before Congress approved the tax legislation.

“Kimberly-Clark, a company with a long history of supporting American workers and manufacturing, is undertaking a restructuring program to retain its leadership in a rapidly evolving global marketplace by streamlining its operations and reducing costs in order to continue investing in its brands and long term growth,” the company said in a statement. “The decision to undertake this restructuring program was made independently and not as a result of the recently passed tax reform legislation.”

“Kimberly-Clark remains committed to American manufacturing, plans significant capital investments into its ongoing U.S. operations, and will remain a significant employer with more than 12,000 employees in the U.S.,” the company added.

The company said it expects to spend about $1.5 billion to $1.7 billion by the end of 2020 to implement the restructuring program.

-Updated 2:08 p.m.

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