(SBU) U.S. CORPORATIONS LIMITING LAYOFFS DESPITE GLOBAL

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E.O. 12958: N/A
TAGS: BEXP CH EFIN ELAB ETRD
SUBJECT: (SBU) U.S. CORPORATIONS LIMITING LAYOFFS DESPITE GLOBAL
CRISIS


1. (SBU) Summary. Major U.S. corporations are limiting
layoffs, even though they are feeling the effects the economic
downturn, said the chief Shanghai representative of the
U.S.-China Business Council. U.S. corporations are handling
layoffs differently in China than they would in the United
States, with managers quietly approaching employees. U.S.
corporations are feeling indirect pressure from Beijing to keep
layoffs to a minimum, but also wish hold onto professional staff
who have not been easy to recruit in recent years. U.S.
corporations are having difficulties determining what
opportunities current Chinese government efforts to stimulate
the economy may offer them, said our contact. End summary.

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Keeping Workforce Largely in Place
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2. (SBU) The major U.S. corporations that comprise the
U.S.-China Business Council are limiting layoffs even though
they are feeling the effects the economic downturn, Godfrey
Firth, Chief Shanghai Representative of the U.S.-China Business
Council told Econoff on February 10, 2009. In contrast to 2001
when--following the burst of the tech bubble--U.S.-based
multinationals did not include China operations in their
planning for worldwide workforce downsizing, over the past
several months China operations have been part of the
calculation, Firth said. Nonetheless, the layoffs have been
limited, said Firth, in the range of hundreds of employees out
of a workforce of thousands for a typical company.


3. (SBU) U.S. corporations are handling layoffs differently in
China than they would in the United States, said Firth. In
China, companies do not announce job cuts, and then send out
pink slips. Instead, managers quietly go around to employees
and discuss options--for instance, early retirement.



3. (SBU) Firth suggested that U.S. corporations are feeling
indirect pressure from Beijing to keep layoffs to a minimum. He
cited high-profile press coverage given to Premier Wen Jiabao's
State Council meeting on employment of college graduates as an
example of signaling this message to Chinese and foreign
enterprises.


4. (SBU) While local governments are clearly aligned with the
top leadership's employment concerns, said Firth, they had "done
a 180" on national energy efficiency goals. Whereas a
year-and-a-half ago, local governments were insisting that new
foreign investment should meet high energy efficiency targets,
these days "they could care less," said Firth. Environmental
issues are also "out the window," he said.

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Employee Retention Less of a Problem
============================


5. (SBU) Firth said that U.S. corporations are seeing at least
one silver lining to the current crisis, in that a top concern
in recent years--hiring and retention of qualified professional
staff--has been alleviated. Companies are less concerned that
employees will be poached by competitors, and can spend more
time grooming and training employees, said Firth. And companies
tell Firth that they believe their workforces will demand
lower--or no--bonuses this year.


6. (SBU) In this way, government pressure to support
employment, and company and employee preferences are aligned,
said Firth. Companies want to hold onto their staff, as they
are loath to slice into the talent pool that they have spent

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such great effort to build up in recent years.

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Mixed Outlook for Benefits of Chinese Fiscal Stimulus
============================


7. (SBU) U.S. corporations are having difficulties determining
what opportunities current Chinese government efforts to
stimulate the economy may offer them, said Firth. There is
little public information on which projects local governments
are pushing forward as their part of the stimulus package, let
alone the recently announced support programs for various
industries, said Firth, such as automobiles and textiles. On
the other hand, U.S. corporations may find now a propitious time
to ask for reinstatement of higher value-added tax rebates,
which were trimmed over the past couple of years as concerns
about China's global trade surplus grew.
CAMP