WASTE MANAGEMENT INC. (WMI), Houston, made headlines in June with its announcement to cut approximately 800 jobs from its workforce. This is the second round of job cuts WMI has enacted this year.
“The job reductions were due to a span of control issues, [in an effort to make] the company more lean and efficient, and the need to drive down the company's selling, general and administrative costs,” says Sarah Simpson, director of corporate communications. The majority of cuts affected mid- and senior-level managers and contract workers in the information technology department. “The quality of our [IT] systems is such that we no longer need as many people to oversee these job functions,” she says.
The reduction in workforce are estimated to save $20 million in 2003 pre-tax cost reductions, and $50 million each following year. Earnings of approximately $20 million pre-tax will be recorded in the second quarter to cover severance and related costs.
On the heels of the layoff announcement, the company also completed its planned acquisition of collection assets in three states from Allied Waste Industries, Scottsdale, Ariz. WMI purchased Allied operations in Augusta, Ga., Myrtle Beach, S.C., and Pitkin and Garfield counties in Colorado.
“Each year, WMI budgets for acquisitions. For 2003, we have a $375 million acquisition budget,” Simpson says. “These ‘tuck-in’ acquisitions are strategic to our business because they immediately integrate with our existing assets. From a collection standpoint, these collection assets give us more volume, which in turn, increase our operational efficiency.”
To maintain competition among waste haulers, the Department of Justice, Washington, D.C., required WMI and Allied Waste Industries to divest commercial waste hauling and disposal assets in certain areas and agree to contract modifications. “The Department of Justice reviews any transactions in which WMI has a purchase price of $50 million or greater,” Simpson says. “WMI was required to divest of certain waste assets in the three states — Georgia, South Carolina and Colorado. These assets include specific routes and some waste hauling and transfer assets.”
In compliance with the Department of Justice's terms, WMI sold four of the Augusta routes it acquired from Allied Waste Industries, as well as routes in Myrtle Beach and Pitkin and Garfield counties.
These divestitures will enable customers in areas affected by the acquisitions to switch to other commercial waste haulers. Customers therefore will be given more choices, and competition among other waste haulers should increase. If the original proposal had gone through, it would have resulted in higher prices for customers for waste collection or disposal in those areas.