Media told of hundreds of Fonterra job cuts hours before staff

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Fonterra Cooperative Group [NZX: FCG], the world's largest dairy exporter, only told staff about the potential for hundreds of jobs losses several hours after chief executive Theo Spierings told media.

Spierings fronted up to the media yesterday morning after widespread conjecture over an underway review involving business management consultant McKinsey & Co, and criticism over the cooperative's underlying management performance.

He said hundreds of jobs were likely to go as part of the review that began last December, though the final numbers are still being worked through.

Fonterra employs 18,000 staff globally and 11,500 in New Zealand. A staff email was sent out late yesterday afternoon reaffirming the prospect of job cuts, without quantifying how many.

The email also outlined why Spierings had commented to the media ahead of talking first, as promised, with Fonterra’s staff and farmer shareholders on anything relating to the review. It's understood his rationale was that there had been too much public conjecture circulating that he wanted to set straight.

Fonterra said Spierings had already told staff about the prospect of job losses during regular global conference calls that any worker can dial into. It was first raised in March after the weak interim results were released and Jacqueline Chow was appointed to the newly created role of chief operating officer – Velocity, tasked with boosting performance across the cooperative and driving the value-add strategy harder.

However, yesterday's media comments were the first time Spierings had put any figure on the likely number of lay-offs and where they might come from.

Chow said the question of redundancies has come up on multiple occasions during the open question and answer sessions that form part of the global all-staff calls.

"Management has always responded as openly as possible and made it clear that everything is in scope.

"Our business review will result in us becoming leaner. We can't quantify what this will mean until the consultation process with our staff is complete," she said.

Spierings said yesterday that the bulk of the job losses were likely to be support function roles at the Auckland head office and elsewhere.

"It's a shift of people and capabilities – and that will have some consequences," he said. "We're not talking tens of people but hundreds of people and having less in support functions and more in market."

Fonterra's farmer suppliers have made no secret that – with the global decline that’s seen dairy prices tumble in the past year and virtually halved the cooperative's forecast farmgate milk payout this season – some of the support function roles fell into the "nice to have" rather than “necessary” category. There has also been concern expressed about the 17 people within the group earning over $1 million a year, although Fonterra has said that was down from 29 five years ago.

A topline plan from the management team leading the review will go to the Fonterra board next week and the final detailed plan introduced from August, Spierings said.

(BusinessDesk)

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