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MGM expects ‘multiphased’ plan to impress Japan officials in IR bid

TAGs: integrated resorts, Japan, MGM Resorts

The fact that MGM Resorts International would go on a multibillion-dollar shopping spree and then begin massive job cuts should impress Japanese officials. This is the position of the company’s president of global gaming development and former governor of Nevada, Brian Sandoval. He asserts that the reduction in its workforce will demonstrate to Japanese lawmakers and regulators that MGM is more flexible and adaptable, which would be positive traits as the company tries to secure one of the initial three integrated resort (IR) licenses to be awarded.

MGM expects its layoffs to impress Japan officials in IR bidThe staff reductions are part of MGM’s “MGM 2020” plan, conceived by its CEO, Jim Murren, as a way to cut costs and lower its debt. Part of that initiative involves letting go around 2,000 employees, some of whom could be replaced by robots. By the time the plan is done, MGM should have reduced its EBITDA (earnings before interest, taxes, depreciation and amortization) by $200 million, and a further $100 million before the end of 2021.

The Las Vegas Review-Journal quotes Sandoval as asserting, “The bottom line is if they’re aware of it, it’s about making MGM a stronger, more nimble company, and it’s actually going to benefit our work in Japan.” He added, “I’ve been to Japan four times, and I haven’t been asked once about MGM 2020.”

In a statement to CalvinAyre.com, MGM noted that Sandoval “was speaking about the MGM 2020 program as a whole and not specifically layoffs, which are just one component of a far-reaching, multi-phased initiative.”

However, Sandoval’s position isn’t equally shared by industry analysts. Many believe the move could have benefits in the IR bidding wars, but that it could have negative implications, as well. They highlight the company’s willingness to be transparent, but aren’t convinced that the action of eliminating jobs is going to change Japan’s perception. One, Union Gaming’s John DeCree, states, “I don’t think it would be a sticking point for a Japanese regulator.”

Another Macquarie Group Ltd. analyst Chad Beynon, explains, “It certainly sounds like you’re talking out of both sides of your mouth if you’re firing 1,000 people in a service industry and you don’t think it’s going to affect any service levels.”

Murren, whose compensation was $12.8 million last year, said of the job cuts in April, “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.”

Editor’s note: This article has been updated with the statement from MGM Resorts International.

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