Global economy hit by massive wave of job cuts

[Naveed Yaseen]

THE HAGUE: The world economy was hit by a massive wave of job cuts on Monday with companies announcing plans to lay off tens of thousands of workers as US President Barack Obama warned of a crisis that could become “dramatically worse.”

Dutch banking and insurance group ING announced 7,000 job cuts and a deal for the Dutch state to assume 80 per cent of the risk on a 27.7-billion euro portfolio of troubled assets.But shares in British bank Barclays shot up by 75 per cent on unexpectedly strong profit expectations.

The deepening recession pushed the price of gold, seen as a safe haven in times of stress, up to $906 an ounce, the highest level for three and a half months.Meanwhile, British Prime Minister Gordon Brown insisted that the crisis should ultimately give birth to “a new global order.”

“We could allow this crisis to start a retreat from globalisation,” he said, according to the text of a speech issued by his office.“As some want, we could close our markets, for capital, financial services, trade and for labour, and therefore reduce the risks of globalisation. Or we could view the threats and challenges we face today as the difficult birth-pangs of a new global order, and our task now as nothing less than making the transition through a new internationalism to the benefits of an expanding global society.”

Nowhere is the transition likely to more painful than in the labour market, as the slowdown forces struggling enterprises around the world to slash their payrolls.Japan’s top 12 automakers expect to cut a total of 25,000 jobs between now and the end of March to cope with an industry slump, a survey said on Monday.

The companies plan to reduce their combined production by at least three million vehicles from their original target for this year, according to figures compiled by Jiji Press.Toyota accounts for about half of the reduced output, with a plan to make 1.5 million fewer vehicles, Jiji said.

In Europe, huge cuts were unveiled in The Netherlands and Britain. Dutch electronics giant Philips and banking group ING announced job cuts totalling 13,000 worldwide.The announcements by the two Dutch companies came ahead of confirmation that Europe’s second-biggest steelmaker, Indian-owned Corus, said it would cut more than 3,500 jobs around the world, most of them in Britain.

Philips said it would eliminate 6,000 jobs to cope with the global slowdown, which had pushed its results into the red and eroded sales.The company said it suffered a net loss of 186 million euros ($242 million) for 2008 after a fourth-quarter loss of 1.47 billion euros, largely owing to an adjusted valuation of its Lumileds diode light unit. For 2008, sales were down 1.5 per cent to 26.39 billion euros.

“The fourth-quarter results reflect the serious consequences of the global financial and economic crisis and the measures taken by management accordingly,” chief executive Gerard Kleisterlee said in a statement.

The announcement of the 7,000 job losses from ING was accompanied by a statement that its chief executive, Michel Tilmant, had resigned.“ING announced today that in light of the extraordinary developments over the past few months and given his personal condition, Michel Tilmant will step down from the Executive Board,” it said. Tilmant is to be replaced by Jan Hommen, currently chairman of the supervisory board.

The Dutch government injected 10 billion euros ($13.3 billion) into ING in October to help it weather the economic crisis.ING is one of the world’s top 20 banks by market capitalisation, with 85 million clients and 130,000 employees.

French banking giant BNP Paribas was also caught up in the maelstrom, announcing a fourth quarter loss of 1.4 billion euros, its first time in the red for some 10 years. It expected a 2008 net profit of three billion euros, compared with a net profit of 7.8 billion euros the previous year.

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