Job losses this week

Lucent: 20,000 ABB: 12,000 Invensys: 2,500 Reuters: 1,100 Fujitsu: 9,000 Arrow: 1,000

The gloom hammered stock markets on both sides of the Atlantic.

In New York, the Dow Jones Industrial Average shares index, reflecting the value of most of America's largest firms, closed down 185 points at 10,239.

The technology-dominated Nasdaq stock market, continued its recent falls, to stand 30 points lower at 1,958 at the close.

Earlier in the day, London's benchmark FTSE 100 index closing a fraction above levels it last touched in 1998, after it fell 85 points to close at 5,320.1.

Federal Reserve chairman Alan Greenspan told the Senate Banking Committee that another cut in interest rates may be on the cards if the US economy does not improve.

But Mr Greenspan told the committee that the bank's series of rate cuts are now working, and that monetary policy is still a useful tool to prod the economy.

"At the end of the day it does seem to be effective," he said.

Job losses

Reuters confirmed that it would be getting rid of 1,100 jobs, while the Swiss-Swedish group ABB plans to lay off a hefty 12,000 positions.

The UK electronics and engineering group Invensys also plans to cut 2,500 jobs worldwide, blaming "extreme trading conditions".

Similarly, the US telecom company Lucent Technologies, which has been struggling against tough business conditions for some time, says it will cut a further 15,000-20,000 jobs.

And Arrow, an American electronics company whose profits have dropped by more than 90% in the second quarter, said it would be cutting 1,000 of its 12,000 staff.

Mass layoffs

For Reuters, the job cuts, which amount to nearly 7% of its workforce, represent one of the biggest mass layoffs in the company's 150-year history.

Our goal to grow the business remains unchanged and we are taking action now to improve our competitiveness

Joergen Centerman ABB

In Japan, where the economy is flirting with yet another recession, chip maker Fujitsu has offered early retirement to 9,000 employees to weather a slump in the semiconductor market.

In the past, Fujitsu had avoided job cuts because of the controversy they have caused. Analysts said market conditions have now deteriorated so badly that the company was forced to take drastic action.

Staying competitive

The common aim for most companies is to improve their competitiveness and reap the long-term benefit of slashing operating costs.

"Our goal to grow the business remains unchanged and we are taking action now to improve our competitiveness," said ABB president and chief executive Joergen Centerman, explaining why job cuts were deemed necessary.

In the short term, however, staff redundancies can prove expensive, in terms of one-off charges.

The US financial services giant American Express, which announced last week that it was eliminating up to 5,000 positions, will take a $1.2bn charge for restructuring the company.

Time lag

The spate of recent job losses suggests, however, that some companies have been holding off from making mass cuts before now.

Marconi wants to cut 4,000 jobs across the world

The global economic slowdown first started to spark a flurry of profit warnings over six months ago.

Often there is a time lag between when companies begin to experience a downturn and when they cut jobs.

Tight cashflows can actually discourage companies from cutting jobs - unless absolutely necessary - because they do not want to incur redundancy costs while there is still hope of riding out a slowdown.

The other problem companies face is cutting too many people in haste.

After the Asian financial crisis in 1998, several US investment banks were forced to staff up quickly because they had overcompensated and laid off too many bankers.

This time round, banks such as Merrill Lynch are being more cautious, trimming their workforces in discreet dribs and drabs.

Last week's casualties

The latest cuts continue a recent spate of jobs being axed. Last week, Canada's Nortel Networks said 7,000 jobs would be cut during the next two months, the balance of the 30,000 job cuts it announced earlier in the year.

Previous job losses

Am Express: 5,000 Nortel: 7,000 Philips: 5,500 Marconi: 4,000 Ericsson: 12,000

Europe's biggest consumer electronics company Philips also announced last week that it expected to cut 4,500 to 5,500 jobs, or 3% of its work force, in its semiconductor unit.

In the UK, the beleaguered telecom company Marconi wants to cut 4,000 jobs across the world, despite the ire of UK trade unions.

Meanwhile, the Swedish mobile phone company Ericsson hopes to save 20bn kronor ($1.87bn) in costs through cutting 12,000 jobs and closing factories worldwide.