Andersen's future still uncertain despite job cuts

Arthur Andersen LLP announced plans to lay off 7,000 employees yesterday, and analysts said that if it survives the Enron scandal, it will be as a shadow of its former self.

Arthur Andersen LLP is the US division of Andersen Worldwide. It was Arthur Andersen LLP that audited Enron, the Texas energy giant that became the world’s biggest bankruptcy.

The job cuts announced in Chicago yesterday will strike hardest at audit and administrative staff in its headquarters and biggest US offices.

The cuts will slash its US work force of 26,000 by more than a quarter.

‘‘To take this step in our history is obviously a very painful and difficult step, but a necessary step given the market realities we are dealing with today,’’ said Grover Wray, an Andersen US managing partner.

The taint of the Enron scandal has driven away Andersen customers on an almost daily basis, and the firm has been hit by a barrage of lawsuits by Enron shareholders and creditors.

More than 100 customers have left Andersen since the US Justice Department indicted the firm on obstruction charges for allegedly shredding tons of Enron-related documents while the Houston energy trader was under investigation.

Industry expert Ashish Nanda said the slimming-down will not help Andersen survive unless it can agree on a settlement and succeed in selling its tax and consulting businesses to improve its bleak cash situation.

‘‘If they are able to arrive at an agreement with Justice, then they have a chance’’ to live on as a much smaller, audit-only firm, the Harvard Business School associate professor said.

The cuts will be felt most deeply in Chicago, where 5,300 people work at headquarters and another 1,200 at Andersen’s training centre in nearby St Charles, Illinois.