Pulte Homes Reduces Workforce by 16% or 1,900 employees
It looks like there is a major retrenchment going on at Pulte Homes. The Michigan company is reducing it’s payroll by 1,900 jobs or 16 percent as a slow housing sales environment is causing the company to reduce overhead. The company expects to save over 200 million a year with this move.
My only question is why did it take so long for the company to start reducing headcount. If you are a real estate industry watcher you know that the marketplace has been slowing dramatically. These cuts should have started a year ago and be concluding right about now.
Odds are that by the time the company completes the reduction in force, or firings, they will need to start rehiring some of the same people.
Pulte said it expects to take pretax charges of $40 million to $50 million for the restructuring, mostly in the second quarter of 2007.
Bloomfield Hills-based Pulte reported losses of $85.7 million, or 33 cents a share, and revenue of $1.9 billion in the first quarter of 2007. It earned $262.6 million for the same period last year, or $1.01 per share, on revenues of $3 billion.
It had about 11,900 workers before the cuts, down from 12,400 employees in 2006 and 13,400 in 2005.
“At the conclusion of this reorganization, we expect to employ just over 10,000 people,” Pulte spokesman Mark Marymee said in an e-mail message Tuesday evening.
Pulte operates in 50 markets and 26 states, delivering 41,487 homes in 2006, according to its Web site. via MSNBC.com.
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Comment by Anonymous on 30 May 2007:
You don’t know much about the residential construction business. Hiring is driven by projects in the pipeline. It’s a labor-intensive business up and down the line, from land acquisition and zoning through sales and closing. You don’t start firing knowledge-based, projects-based people until the pipeline runs dry. It’s now running dry.
Conversely, you will not start hiring again until the pipeline starts to fill up. Pulte can’t see the pipeline filling up again in the near future. You should try to appreciate the lead time and planning that goes into a new residential community. When those projects disappear from the drawing boards, as they are now, it will take years to bring them back. Also, Pulte and all the other major home builders have a deep and worsening financing problem. Their credit and access to capital stinks. There are many more layoffs to come at Pulte homes. There are lawsuits and bond covenant agreements to work through before this company gets back on its feet.
Comment by Tom on 30 May 2007:
Anonymous
You are right, this is not my forte, but I have led restructuring efforts in the past and the writing has been on the wall. You can not be telling me that all of the projects in the pipeline ran dry today.
As these projects ran dry, to use your term, and the companies saw that new work was not going to be entering the pipeline, they should have been reduce the workforce as time went along. I can not for one minute believe that the folks at Pulte Corporate thought that their would be a huge rebound this quarter.
So that leads me to believe that they are in deep trouble and may not come out of it because management had rose color glasses on, or that the company is cutting very deeply to appease Wall Street with action.
Either way they will have one heck of a brain drain in the company the coming years.
And Anonymous, thanks for the comments, they have been very insightful.
Comment by Anonymous on 30 May 2007:
I’m not a real estate expert. I’m a “content analysis” expert. That means — I study trends in what people are publishing.
This is not just another real estate cycle. It is the mother of all real estate cycles that we have known in several lifetimes.
What makes it even more “over the top” is the amount of systematic RICO fraud that went on in the last two years of the up cycle. I don’t know if Pulte Homes was a big, little or non-participant in the fraud. I just feel that the reaction to the fraud is going to be profound, like the guy who spiked the toothpaste in China, but on a bigger scale. The American public will want to see real estate types strung up before this is all over. So, Pulte Homes and others are pulling back in part to reduce their liabilities, and in the hopes that they can survive after all the lawsuits and criminal suits are over as a smaller company. It’s really the smart thing to do. The smaller you are, the less of a target you will be.
Public companies like Pulte Homes = deep pockets. The greatest liabilities that home builders face lies in their dealings with mortgage brokers and lenders to deliberately falsify mortgage applications of people who did not earn enough money to afford expensive new homes. Those applications are “smoking guns.” They will make great trial theater in front of juries.