Callaway Golf Company reported late Friday that its new Top-Flite Golf Company subsidiary has inked a fresh five-year collective bargaining agreement with the Boilermaker's Union Local 1851. The union represents the production and maintenance employees at Top-Flite's golf ball manufacturing facility in Chicopee, MA.
“This agreement provides the foundation to secure and grow our manufacturing operations in Chicopee and become the world's best golf ball manufacturer,” said Bob Penicka, the newly appointed president and COO of Top-Flite.
In related news, the San Diego Union-Tribune reported early last week that Callaway has started moving pieces of the Callaway golf ball business to the Chicopee facility, a move that we predicted here (SEW_0328) after the acquisition was first announced.
The paper said it obtained an internal memo by Ron Drapeau, Callaway's CEO, that indicated that “the company will immediately move portions of its golf-ball manufacturing operation to Chicopee, Mass., while keeping others at its Carlsbad headquarters”.
Drapeaus memo reportedly said Callaway's golf ball research and development unit will be moved to Chicopee, in addition to production of Callaway's two-piece balls.
“Moving production of two-piece balls and inserts to Top-Flite Golf allows us to take advantage of lower production and material costs in that facility,” Drapeau said in the memo obtained by the paper. “Because the volume of golf balls made in that factory is many times the capacity of the Carlsbad ball factory, those two products can be manufactured much more inexpensively there.” The paper said Drapeau did not discuss layoffs in the memo, but the announcement has caused anxiety at Callaway's golf-ball plant, which has about 500 employees during peak production periods.
The memo reportedly went on to say that no decisions had been made on the future of Top-Flites club-making operation, but “he expected it to be centered in Carlsbad”. Plans for the Ben Hogan operation in Fort Worth, TX were not discussed in the report.
The acquisition is expected to increase Callaways ball output by about seven million dozen a year. Top-Flite has the number two share position in golf balls behind Acushnets Titleist and Pinnacle brands and produces approximately 225 million balls a year.
Top-Flite had sales of around $250 million last year, $175 million from golf ball operations.
ELY generated $55 million in revenue from balls in 2002 and had an estimated 5% market share in the category. The combination with the Top-Flite brands gives Callaway roughly 25% of the ball market.
Callaway took a $70 million charge to “consolidate its golf ball and golf club manufacturing and R&D operations” and “write down equipment we won't need in the consolidation.”
Analysts estimate the company has spent $170 million building the Carlsbad ball factory and from continued operating losses. The ball business has lost about $90 million since 2000 and $10 million this year alone.