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OAK BROOK, Ill. -- McDonald's Corp., the largest fast food company in the world, said it would close about 175 restaurants worldwide and slash up to 600 jobs, forecasting a shortfall in 2002 earnings as it struggles to turn around its U.S. performance and trim worldwide costs.
The Oak Brook, Ill.-based company said the actions, which include restaurant closures in 10 countries, will reduce fourth-quarter earnings by $350 million to $425 million, according to Reuters.
The worldwide job cuts of 400 to 600 positions, including up to 250 in the United States, mark the company's third major round of layoffs in five years. They are the latest attempt by McDonald's to take costs out of an operation that has struggled with lackluster sales in the United States, weak economies in major markets such as Latin America, and the impact of mad cow disease outbreaks in Europe and Japan.
"These actions are the right things to do for McDonald's shareholders, the brand and our business," said Jack Greenberg, chairman and CEO of the hamburger chain. "We remain focused on growing our existing restaurants' sales and we're committed to making the changes necessary to succeed in the challenging worldwide economic and competitive environments in which we operate. Our brand presence will remain strong, with more than 30,000 restaurants around the world."
In recent weeks, McDonald's has returned to price discounting in the United States, its largest market, sparking increased competition in the fast-food industry. The effect of price-cutting has been blamed for weakening the value of the sale of Burger King Corp. by its parent, British drink conglomerate Diageo Plc.
McDonald's plans to close restaurants will result in the closure of business in three countries yet to be disclosed. The company will also change its real estate structure in four Middle East and Latin American countries, eliminating an ownership stake and any invested capital.
McDonald's said October sales improved compared with its third-quarter trends. October systemwide sales at McDonald's totaled $3.5 billion, up 3 percent before the impact of foreign currency. Comparable U.S. sales were down 0.6 percent, while those in Europe were off 2.2 percent.
"Sales improved compared with third quarter trends, particularly in the United States where our recent service and value efforts are clearly affecting the competition," Greenberg said. "However, we were targeting stronger results for entire fourth quarter. I remain very confident in our strategies, our brand, and our future prospects."
McDonald's first trimmed jobs at its headquarters in 1998. Last year, it shed about 700 employees in Oak Brook and in its regional offices as part of a domestic restructuring.