MGM Resorts International told employees Thursday it was eliminating 557 positions at the casino giant, the final wave of layoffs as part of the overall MGM 2020 plan, a company-wide cost reduction effort.
In a letter to employees from Chairman and CEO Jim Murren, MGM Resorts said this would be the final round of layoffs and job eliminations, which was expected to reduce labor costs by $100 million.
MGM Chairman and CEO Jim Murren
“I want to assure you the decisions of the last several months were made deliberately, carefully and with gravity,” Murren wrote. “Having done this foundational work, we will be stronger and better prepared for continued success and industry leadership in 2020 and beyond.”
During the company’s first quarter earnings call on April 30, Chief Financial Officer Cory Sanders said MGM would eliminate more than 1,000 positions as part of the MGM 2020 initiative. A week earlier, the company eliminated 254 positions.
Murren said in the letter the company offered laid-off employees other options in the company “if those existed” and provided a period where health benefits will continue and a severance package “to try and ease a life-changing transition.”
A spokeswoman for MGM said the positions eliminated were “overwhelmingly management” jobs. The health care benefits would remain in place for two weeks and laid-off employees would receive two weeks of severance for every year of service, up to 26 weeks for salaried and 13 weeks for hourly positions.
“I stand behind the decisions we have made and believe them necessary to assure our future, but I deeply regret the impacts they have on individuals and their families,” Murren said in the letter.
Sanders said on the April conference call 35 company executives took part in a voluntary retirement program as part of MGM 2020, including his predecessor, former CFO Dan D’Arrigo. In a presentation that went along with the earnings call, the company expects to save $100 million in labor costs, which includes $80 million in fixed costs and another $20 million in variable costs.
“The changes we are making today bring us closer to concluding the foundational work of MGM 2020, during which streamlined our operating model and reduced our salaried staff by over 12 percent,” Murren said in Thursday’s letter.
MGM executives have said the jobs cuts were companywide. The company, which is considered the largest employer in Nevada with roughly 77,000 employees, operates nine resorts on the Las Vegas Strip, and owns 50 percent of the CityCenter complex, which includes the Aria resort. The company has corporate offices off-site in Las Vegas and within several properties.
Sanders said MGM 2020 was not just about cost savings but is laying “the foundation” for a new corporate operating model that calls for a more centralized organization.
“We are creating a streamlined, nimble organization that empowers leaders to make faster decisions,” Murren said in April.
The overall goal of MGM 2020 will be to transfer some of the operating decisions made on the property level to the corporate level. Sanders said on the call the changes would lead to faster decisions, a better match of labor supply with guest demand and fewer layers of management.
Murren said MGM 2020 would also help the company reduce its long-term debt, currently $14.9 billion.
MGM Resorts has been under fire from activist hedge funds and investors wanting to see the stock price boost in value. Activist hedge funds, including Starboard Value and Canyon Capital Advisors, have built small positions in MGM Resorts since last year.
In January, the company formed an “ad-hoc” committee of the MGM board to evaluate the company’s real estate portfolio and “make recommendations.” The three independent board members – John Kilroy Jr., Keith Meister and Paul Salem – would work with management to assist in the evaluation. MGM said the three have “extensive real estate and financial markets experience.”
Meister, the managing partner and chief investment officer of hedge fund Corvex Management, was appointed to the MGM board in early January. Corvex acquired 3 percent of the company.
In 2015, MGM Resorts formed MGM Growth Properties, a publicly traded real estate investment trust. Nearly all the company’s resort-casinos are owned by MGM Growth and the operations are leased back to the casino operator. MGM Resorts owns 70 percent of MGM Growth and Murren said efforts are under way to reduce those holdings to below 50 percent.
MGM Resorts still owns real estate associated with the Bellagio, MGM Grand and Circus Circus in Las Vegas and MGM Springfield in Massachusetts.
Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgamingreports.com. Follow @howardstutz on Twitter.
