View from City Road: Unilever slow but sure

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The Independent Online
UNILEVER is often accused of being a lumbering giant. Its insistence on continuity and consensus means that change is slow to occur.

Unilever's European reorganisation is a case in point. Its 1990 accounts included a giant provision - pounds 305m before tax - for realigning the group's activities ahead of the single market. (The provision was charged as an extraordinary item, something that would almost certainly be ruled out in today's stricter accounting regime.) More than a year later, some of that money has still to be spent. Last year the company utilised pounds 97m of the provision on moving factories, transferring production from one country to another, and other European reorganisation measures. And it has spent further substantial sums this year. But the provision will not all be utilised until next year, after the official start of the single market.

The time taken might seem wasteful. But it reflects the consultative approach required in the Netherlands and Germany and adopted by the Anglo-Dutch combine elsewhere. The benefit of this drawn-out process is that the company has to consider each measure in huge detail and be prepared to answer difficult questions from its workforce. As a result, its reorganisation plans have to be drawn up in great detail after an enormous amount of planning. The company believes they are easier to implement and more effective as a result.

Initially, Unilever expected to lose about 5,000 to 6,000 jobs or 5 per cent of its European workforce as a result of the reorganisation. Taking last year's average staff costs, that suggests Unilever might cut annual costs by about pounds 80m, a useful benefit of the exercise even if this was not the reason for it. If the eventual job losses are higher, so too will be the savings.

Because Unilever tends to announce its plans long before the results become visible it is easy to forget that change is under way. Its European reorganisation should, however, soon start to become apparent, which helps to explain why the shares have outperformed the rest of the stock market by 40 per cent in the past year.