Colgate to cut work force, India may emerge hub

The US-based oral care and personal products company Colgate-Palmolive Company is drawing a blueprint to restructure its operations.

The company plans to close about one-third of its 78 factories worldwide and cutting down its workforce by about 12 per cent of its 37,000 strong employee strength, said an international wire agency.

The move is part of a four-year restructuring plan for which it anticipates after tax-charges of $550 million to $650 million. Maker of well known brands such as Colgate, Ajax and Palmolive had issued its first earnings warning in September citing higher costs as one reason.

The winding up of manufacturing units indicates that it would heavily rely on the outsourcing model from centres which are cost competitive. However, it could not be learnt whether the Indian arm would undergo any restructuring of its manufacturing facilities.

Its two Indian facilities are located at Sewri (Mumbai) and Aurangabad in western state Maharashtra. It is setting up a new toothpaste manufacturing facility at Baddi in Himachal Pradesh. The new facility is scheduled to commence commercial production in April 2005.

Despite repeated attempts, the Colgate Palmolive India spokesperson was unavailable for comments as her mobile phone was not reachable.

However, Mumbai being identified as a high cost manufacturing site, FMCG companies have been closing down facilities here.

For instance, foods company Britannia has closed down its biscuit factory in Sewri. Hindustan Lever is hiving off its soap manufacturing facility in Sewri to a subsidiary. Godrej too has closed down its soap faclity at Vikhroli in Mumbai.

According to analysts tracking the sector, the Rs 969.11 crore Colgate Palmolive India would emerge as an outsourcing hub for the parent company. Most of the Multinational companies like Hindustan Lever, Procter & Gamble, Cadbury have become a sourcing hub for the parent on account of the cost advantages.

New York-based Colgate's last big restructuring charge came in 1995. At that time, Colgate took a charge of $369.2 million when it announced plans to slash 3,000 jobs, or 8.5 percent of work force, and close 24 factories out of 112.