10 Companies With the Heftiest Job Cuts Since the Financial Crisis

Cost-cutting is masking a lack of organic growth
One factor that seems to be prominent throughout many of these companies — at least in cases where there were profits to be made — is that job cuts served as a way for them to reduce costs and artificially boost profits to mask a lack of organic growth.

Right now, we’re seeing HP shed some 29,000 jobs under CEO Meg Whitman in order to reduce its annual expenses by $3.5 billion. While a streamlined workforce helps margins and efficiency, I fail to see how HP is expecting to grow its business moving forward with 29,000 fewer workers.

Heavy construction machine manufacturer Caterpillar is in a similar bind. Global commodity prices have pulled well off their highs and demand for heavy machinery is way down, causing the company to cut jobs in order to reduce expenses and boost its earnings per share.

The concern with both of these scenarios is that job cuts are a short-term solution and it doesn’t address how a company is expected to achieve long-term growth. While HP and Caterpillar are both bringing in hefty amounts of cash flow and reducing expenses, neither have any near-term catalysts that would suggest their business is about to turn around.

The lesson here is to be wary of companies that are using job and cost-cutting as their exclusive tool to boost margins and their bottom line. Cutting costs can only take EPS growth so far and is absolutely no replacement for top-line organic growth.

The article 10 Companies With the Heftiest Job Cuts Since the Financial Crisis originally appeared on Fool.com.

Fool contributor Sean Williams owns shares of Bank of America and Dell, but has no material interest in any other companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.The Motley Fool recommends and owns shares of Amazon.com, Bank of America, and Wells Fargo. It recommends General Motors and owns shares of JPMorgan Chase and (NYSE:JPM) Citigroup. 

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