Brunswick Corporation is taking a series of actions to cut costs, better utilize overall capacity, and improve general operating efficiencies. In total, the company will release approximately 645 employees, close portions of two boat manufacturing facilities, realign its bowling products distribution, and suffer approximately $25 million to $28 million in one-time costs.
“Given current market conditions, we have planned for flat to declining production volumes in 2007. With that assumption, we must take appropriate actions to cut costs and capitalize on the productivity improvements we are realizing. This will create headroom in our cost structure so that we can continue to invest in strategic initiatives critical to achieving our long- term objectives and to help mitigate the effect of inflation on our costs,” explained Brunswick Chairman and Chief Executive Officer Dustan E. McCoy. “We have undertaken a review of our manufacturing footprint as well as carefully scrutinized all processes and activities throughout our organization with an eye toward not only how we perform our tasks, but the benefit of the tasks performed. We are taking advantage of the more productive work processes we have introduced and employed in the past few years, along with ongoing integration efforts, to improve operations across the entire organization.”
“Our cost-reduction efforts include consolidating certain boat manufacturing facilities, sales offices and distribution warehouses, and making reductions in our global work force. In recent years, a large part of our strategic focus in marine has been to acquire a wide selection of products and services that will enable our dealers to provide unmatched customer service to virtually every type of boater,” McCoy added. “This included buying boat brands and establishing the industry's leading and most efficient boat parts and accessories (P&A) business. Now with the domestic acquisition phase largely complete and our integration efforts well under way, we are increasingly turning our attention toward how to best manage and employ the assets we have assembled to provide high-quality, innovative products at competitive prices.”
The consolidation of boat production will affect Lund-Canada in Steinbach, Manitoba, and US Marine in Cumberland, Md. Lund boat manufacturing will be transferred to its plant in New York Mills, Minn., with Lund-Canada's sales, marketing and customer service functions remaining in Steinbach. US Marine will transfer production of certain Bayliner runabouts from one of its two Cumberland, Md., plants to its operations in Pipestone, Minn. Cumberland's remaining plant will continue to produce Trophy boats. A phased shutdown of the Steinbach and Cumberland facilities will commence in the current quarter and be completed in 2007.
“In addition to the boat plant closures, we will be realigning distribution for our bowling products business, streamlining some sales operations and eliminating select positions throughout our company; cutting across all functions and all levels. All of these actions combined will result in a reduction of 430 hourly and salaried production employees and 215 salaried positions in various corporate and division staff functions out of the company's worldwide work force of 28,500. The work force reductions will take place between now and the middle of next year,” McCoy added.
The company said that severance, asset write-downs and other costs associated with the plant closures and distribution realignment will reduce operating earnings by approximately $25 million to $28 million. Approximately 80 percent of these costs will affect the fourth quarter of 2006, with the balance being recognized in 2007. The company's previously announced 2006 earnings estimate of $2.40 to $2.46 per share does not include any expenses associated with these cost-reduction efforts. The company added that anticipated savings of approximately $26 million in 2007 due to these actions will support continued investments in strategic initiatives as well as to help offset the effect of inflation on wages, benefits, insurance and health care costs, and higher material, energy and other operating expenses expected next year.
“As we look ahead, we will continue to identify additional opportunities, and take the appropriate actions, to ensure that we operate our business as efficiently as possible, while building long-term value in the company during a period of weak market conditions for marine products,” McCoy added.