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 - ALL EDITIONS The Arizona Republic Sunday, May...
ALL EDITIONS The Arizona Republic Sunday, May 10,1981 uture-cir uture-cir uture-cir .Continued from CI Armour & Co., a subsidiary of the Greyhound Corp. since 1970, has not - been put on the auction block. But i charting a course for the Phoenix- Phoenix- , based meat company has been diffi- diffi- i u Rented fresh-meat fresh-meat fresh-meat business so it WeVe r'eaJly gone fuU circle." the jt year, Armour lost $5.7 milUon could focus on consumer brand-name brand-name brand-name spokesman said. Now, we re back on revenueg $2 5 biUion. goods, including processed meats, a where we started as. a supplier of fa Spokesman said. It sold its oil and, fresh meat , - historically profitable processed- processed- gas properties and used some of the jn February, General Host Corp. ? fc hot $1,1 bilhon in proceeds to help fund of Stamford, Corm announced plans , me ham Swu-t's Swu-t's Swu-t's employee pension program. to divest itself of the ftesh-meat ftesh-meat ftesh-meat Qew m mentt .-Swift's .-Swift's .-Swift's fresh-meat fresh-meat fresh-meat division was portion of its Cudahy Food La. ion Punched an ambi- ambi- incorporated as a free-standing free-standing free-standing com- com- subsidiary. tious program that involved promot- promot- Eany, Swift Independent Packing Co. Host, which .acquired Cudahy in . rtg prmium brand-name brand-name brand-name ast month, it went public. Esmark 1971, is negotiating the sale of its at the expense of private- private- : retained 40 percent ownership to f0Ur Cudahy slaughterhouses to Cu- Cu- DUBineBtf Celling in bulk to ehsure a supply of meat for its Swift, dahy President Timothy Day of firmg that use . their own brand processea-meai processea-meai processea-meai cuvisiuu. . rnoenix. names. ytZmm 1. -I., -I., i. n 1.114 mam, ' .JWWIf . ..J 1' " 1 , Wjr " '" " " : . h - -.t -.t r I v s f " ' . f : - -1 -1 - l !J'rs. i ' f If . I " , - ,' - ,- ,- ' - -aMiirfMifnrfiDiwiiiiMiMiwiiiMMwiimiTtfnii-r- -aMiirfMifnrfiDiwiiiiMiMiwiiiMMwiimiTtfnii-r- -aMiirfMifnrfiDiwiiiiMiMiwiiiMMwiimiTtfnii-r- -aMiirfMifnrfiDiwiiiiMiMiwiiiMMwiimiTtfnii-r- -aMiirfMifnrfiDiwiiiiMiMiwiiiMMwiimiTtfnii-r- dv ' . " UMaMWIIMMMUHBHilMHRMiMHMifrt Republic With fringes, average pay for members of the United wages from eating up earnings by building automated Food and Commercial Workers union is about $17 plants that operate on an assembly-line assembly-line assembly-line basis and by per hour. Some packers- packers- have managed to keep dealing only in boxed meats to increase productivity. Frustrated Armour insiders say the rug was pulled out from under them before the plan had a chance to . succeed. Greyhound's explanation is that Armour was losing too much money too fast A decade ago, meatpacking companies companies were "the darlings of Wall Street," said Maurice McGill, a partner in Touche Ross & Co. and director of meatpacking-industry meatpacking-industry meatpacking-industry serviced for the accounting firm. "Now, it's the fashion to get out of the business," McGill said. "The conglomerates that bought the meat companies suddenly woke up." There are three reasons a publicly held company might want to get out of the meat business, he said. First, the return on equity is low. Second, earnings are not steady and controllable. Finally, the business requires, a lot of attention from top management ' "The meat business is mercurial, volatile, unstable," said Roger Spencer, Spencer, an analyst for Paine Webber Mitchell Hutchins. "That doesn't sit well with stockholders, who want , earnings to be stable." . Of course, there are exceptions. . Last week, General Foods Corp. shelled out $465. million for the privilege of merging with a leading processed-meat processed-meat processed-meat firm, Oscar Mayer & Co. Oscar Mayer, which had earnings of $20 million on sales of $1.8 billion last year, is regarded as a plum because of its profit record, its history of packaging innovations and its name. Another exception, and a name that elicits awe, fear and envy in many quarters, is Iowa Beef Processors Processors Inc. IBP, founded in 1961 in Dakota . City, Neb., broke traditions left and right and has emerged as- as- the No. 1 beef supplier in the nation. The company built modern, automated automated slaughterhouses close to the source of cattle. It paid for them out of earnings. IBP specialized in beef alone and began selling it in boxed form, a boon to wholesalers. Although some of its plants have . unions, IBP pays considerably less than the $17-per-hour $17-per-hour $17-per-hour $17-per-hour $17-per-hour industry standard standard paid by companies that have master contracts with the United Food & Commercial Workers, AFL-CIO. AFL-CIO. AFL-CIO. In 1980, IBP reported profits of $53 million on revenues of $4.6 ' i , if:,,, - - - ' ii u ii f Z.. . ....iwi "..in......... --1 --1 --1 t I ' ; . , - " " J Kathleen Reeves Republtc Though some meatpackers are packing it in, industry observers predict no shortages for cohsumers. "As long as there are people eating (meat), there have got to be people supplying (it)," one retailer says. billion. It slaughtered 18 percent of all commercial beef in the United States. Respect for IBP's success comes even from unions. "IBP did the intelligent thing," said Dennis Davison, secretary-treasurer secretary-treasurer secretary-treasurer secretary-treasurer of the meatpackers' union local 488 in Phoenix. "They created as-, as-, as-, sensibly lines that are very fast, very labor intensive and very profitable. profitable. ... They are running the old-line old-line old-line packers out of business." .The IBP system has been copied widely. But selling beef in boxes, is not going to save companies that operate antiquated plants with expensive expensive labor, said a former. Cudahy executive' who asked not to be identified. ' "It's too late for Cudahy, Wilson,, Armour to turn it around," the executive said. "During the 1980s, the companies with master labor contracts are going to go out of business." The contracts are one reason the conglomerates are dumping their meat subsidiaries, said Spencer and another analyst, Tim Sullivan of Amhold & S. Bleichroeder. . McGill said old-line old-line old-line companies have been stuck with the union because "the union knows they won't take a strike." But by closing plants and paying off union workers or spinning off costly divisions into new companies-that companies-that companies-that can hire inexpensive labor, the packers can gain some competitive edge. Lewie Anderson, international vice president of the union, said companies companies can try those things. "But we're reasonably certain they won't get away with it," he said. The average hourly pay rate for the 185,000 members of United Food and Commercial Workers is $10. Add fringe benefits and pension-fund pension-fund pension-fund liabilities and some companies end up paying about $17 per hour. "There are multiple forces in play here that could result in plant closings, contracts or no cbntracts,"-Anderson cbntracts,"-Anderson cbntracts,"-Anderson said. "We think it is irresponsible for any- any- packer to say labor rates are the reason." He said competition from companies companies like IBP and the need for gigantic capital investments for new "superplants" are hurting 'the packing packing industry. In addition, conglomerates conglomerates that acquired meat companies 10 years ago "have bled the packing subsidiaries dry." Not all the old-line old-line old-line packers are losing money. . In its prospectus, Swift Independent Independent Packing Co. reported 1980 earnings earnings of $19.9 million on revenues of $2.08 billion. The fresh-meat fresh-meat fresh-meat division had been profitable in the two years before as well. Even with ideal conditions, however, however, the business is wildy erratic. , Wilson's profits bounced from $17 million in 1976 to $1 million in 1977. dollars, and the consumers are feeling r

Clipped from
  1. Arizona Republic,
  2. 10 May 1981, Sun,
  3. [First Edition],
  4. Page 30

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