Heinz eliminates 600 jobs, including 350 in Pittsburgh

| Tuesday, Aug. 13, 2013, 10:30 a.m.

The shakeup of H.J. Heinz Co. by its private owners moved beyond the executive offices on Tuesday with the elimination of 600 office jobs, more than half of them in Pittsburgh, as the food company moved to streamline its operations.

The cuts were tough on Pittsburgh, where 350 workers, or about a third of the local workforce, lost their jobs. Heinz said that it would consolidate many of the remaining local office workers into a single building Downtown at PPG Place, where its executives are based.

The layoffs are being made less than three months since Warren Buffett's Berkshire Hathaway and 3G Capital, a Brazilian investment firm, took control of the iconic ketchup maker in a $28 billion deal. Within weeks, the new owners pruned the executive ranks and replaced CEO William Johnson, who helped orchestrate the deal, and some of his lieutenants.

The restructuring and layoffs should come as no surprise as 3G Capital and the man it installed to run Heinz — former Burger King CEO and 3G partner Bernardo Hees — are known for slimming down companies they take over and retooling operations to improve performance and boost profits.

Hees was not available to comment, Heinz spokesman Michael Mullen said.

Mullen would not say how much the company expects to save from the layoffs, nor whether there would be more cuts. Standard & Poor's Ratings Services has said that 3G estimated it could cut about $225 million in Heinz expenses within three years.

“Heinz continues to examine every aspect of our business globally to ensure we are operating as efficiently and effectively as possible in order to reach our growth goals,” Mullen said.

Heinz employed 1,200 people spread across its headquarters at PPG Place, the Heinz 57 Center and a research center in Marshall. With the layoffs, 800 employees remain in Pittsburgh. Office workers will move into PPG Place and Heinz will sublease a portion of its space in Heinz 57 Center.

Employees learned on Tuesday morning that hundreds of their colleagues at three locations in Pittsburgh were let go, effective immediately. Outside the Heinz 57 Center, some Heinz workers who were milling around described the mood as tense since the takeover because employees were worried about their jobs.

“The writing's been on the wall. Everyone's been on eggshells for two weeks,” said a man wearing a Heinz employee badge while smoking outside the building on Sixth Avenue, Downtown, hours after the announcement. He would not give his name because he said he was concerned about his job.

Pittsburgh Mayor Luke Ravenstahl and the Democratic nominee to replace him, Bill Peduto, said in separate statements that they are disappointed by the layoffs.

“Heinz has a long and storied history in Pittsburgh and I will be reaching out directly to the new ownership group to guarantee that it is a part of our future,” Peduto said.

“My thoughts are with the Heinz employees and their families during this difficult time,” Ravenstahl said.

Chuck Perlow, a partner of McKnight Realty Partners, which owns the Heinz 57 Center, said the company plans to leave the building by the end of this year and has hired a real estate company to find a tenant.

But Mullen said Heinz “expects to maintain a presence at the 57 Center and sublease the rest of the space.”

All of the cuts affected staffing in Heinz's North American operations. Heinz eliminated 250 jobs at operations outside Western Pennsylvania and now has 6,000 employees in North America, Mullen said.

Analysts had predicted layoffs, citing the results of 3G's other deals with Burger King and Anheuser-Busch and a near tripling of Heinz debt, from about $5 billion before the deal to about $14 billion.

“That leveraged debt imposes discipline,” said Diane Denis, a professor of finance at the Katz School of Business at the University of Pittsburgh. The need to pay down debt makes new managers sensitive to unnecessary costs, she said, adding that the cuts don't just target jobs.

“These are people's lives we're talking about,” she said. “But the fact of the matter is, sometimes some restructuring is needed for the long-run health of the company.”

More than a dozen executives left Heinz when the sale closed in June, including CEO Johnson. At Burger King, Hees laid off employees and cut other costs, and consolidated employees in the fast food chain's Miami headquarters into large, open office spaces where he and other executives sat among workers.

“To foster increased collaboration and faster decision-making, the vast majority of Heinz's Pittsburgh-based employees will come together as one team in an open office environment in One PPG Place,” Mullen said.

Alex Nixon and John D. Oravecz are Trib Total Media staff writers. Reach Nixon at 412-320-7928 or anixon@tribweb.com. Reach Oravecz at 412-320-7882 or joravecz@tribweb.com. Staff writer Sam Spatter contributed.

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