Cash strapped US grocery retailer Grand Union is axing 170 staff from its New Jersey and New York offices to reduce costs. The move will incur a $2m charge against the company's second quarter results, which were published as The Grocer went to press. "For Grand Union to become a successful food retailer once again, we simply have to get our costs down to more realistic levels," said chief executive Gary Philbin, describing the cuts as regrettable but "economically necessary". Grand Union is one of the largest food retailers in the north east, operating 206 stores in New York, New Jersey, Vermont and Pennsylvania, but increasing competition and disagreements over strategy have plunged the company further into debt since its financial reorganisation in 1998. Shares have dropped 98% over the last year, prompting a flurry of speculation over the company's future. Since the reorganisation, Grand Union has amended its credit agreement three times, hiring both an investment banker (Merrill Lynch) and an outside consultant (Alvarez & Marshall) to develop a strategic plan. It has also made a number of changes to its financial covenants with bankers. A disappointing set of results for the year to April raised the possibility of an outright sale, as some analysts felt the business was beyond repair. But Grand Union cfo Jeffrey Freimark told investors that bankers would have pushed for an immediate liquidation if they felt the retailer didn't have a future. However he admitted Merrill Lynch is exploring the possibility of an "exit strategy" that involves selling some or all of the stores as part of an assessment of the chain's viability. The company says the staff cuts, estimated to reduce overheads by $8m to $12m a year, are consistent with its long-term plans to streamline operations and improve efficiency. "Our strategy is to reinforce store operations and eliminate unecessary costs," said Philbin, "and that should translate into better customer service and value". {{NEWS }}