Streamlining WM

WASTE MANAGEMENT INC. (WM), Houston, has eliminated about 600 jobs as part of a structural reorganization. Starting next year, the cutbacks will create an annual pre-tax savings of roughly $70 million, WM says. The company also will be divesting itself of underperforming or non-strategic assets, primarily collection businesses and transfer stations, across the United States, the company adds.

WM is organized into three layers. At the top of the structure is the corporate level. Below that are the firm's group offices, which oversee the company's 56 market areas, the bottom layer.

Lynn Brown, spokeswoman for WM, says the goal of the reorganization was to “streamline” the middle layer to “increase the line of sight between corporate leadership and the people out in the Market Areas. And it puts more of the day-to-day decision making with the Market Areas.”

Although the group level is the focus of the restructuring, job eliminations have occurred in all three of WM's layers, according to Brown. According to the 2005 Waste Age 100 that was published in June, WM had 51,000 employees before the restructuring.

The reorganization included the elimination of WM's Canadian Group office, which oversaw the firm's eight market areas in Canada. The Market Areas now report to the firm's Eastern, Western and Midwestern groups, based on location, Brown says.

WM estimates that the reorganization will result in a pre-tax restructuring charge of between $20 million and $20 million during third-quarter 2005. However, the firm says the moves will create a pre-tax savings of about $30 million for the remainder of the year.

The assets targeted for divestiture produce more than $400 million in annual revenue, the company says. WM says the sales are part of the company's plan to improve internalization rates and operating margins.

The reorganization and divestiture announcements were made in conjunction with the release of WM's second-quarter 2005 financial results. During the second quarter, the firm posted a net income of $527 million on $3.3 billion in revenue. In the same period in 2004, WM reported a net income of $216 million on $3.1 billion in revenue.

For the first six months of 2005, WM posted a net income of $677 million on $6.3 billion in revenue. During the same period in 2004, the company reported a net income of $368 on $6 billion in revenue.

The company attributes the higher net incomes in 2005 in part to an after-tax benefit of more than $310 million. The benefit was the result of tax expense reductions after audit settlements, WM says.