Black & Decker Corp. said yesterday that it would pull the plug on its struggling U.S. household products unit and eliminate 3,000 jobs companywide in a cost-cutting plan intended to boost profits.
The Towson-based company plans to sell the business that brought the Dustbuster and SnakeLight into millions of American homes.
Black & Decker said the other job cuts -- 10 percent of its work force -- would come mostly from international operations.
Black & Decker's 2,700 Maryland employees are not expected to be significantly affected.
The moves are part of a two-year restructuring that will cost $250 million and ultimately eliminate more than a fifth of Black & Decker's jobs worldwide.
The company said the plan will result in annual savings of $100 million.
"This comprehensive plan represents a fundamental 'retooling' of Black & Decker," said Nolan D. Archibald, chairman and chief executive officer.
Within six months, Black & Decker plans to sell its household product businesses in North America, Latin America and Australia, as well as its profitable glass-making machinery and True Temper golf club shaft businesses.
The company said the divestitures should net about $500 million.
The three businesses on the block account for about $800 million in sales -- about 16 percent of the company's $4.94 billion annual sales. Black & Decker does not plan to sell its European household products operation, which has strong Dustbuster sales.
The restructuring plan will leave Black & Decker focused on its main hardware business with power tools, Price Pfister plumbing products, a range of lock-set brands and fastening and assembly systems.
"When the divestitures are completed, we will be in a position to focus exclusively on core businesses to better leverage our competitive advantages in new product development, brand management and global distribution," Archibald said.
"We believe a repositioned Black & Decker can grow sales at an average annual rate approaching double digits."
4 plants to close
Black & Decker said it will close four power tool plants, including one in Brockville, Ontario, that employs about 350.
That work will be shifted to plants in Easton, Md.; Fayetteville, N.C.; and elsewhere.
Company officials would not name the other three plants because workers had not been notified.
Nineteen of Black & Decker's roughly 50 plants worldwide are power tool factories.
The company will also purchase up to 10 percent of its 95 million outstanding shares of common stock over the next two years as part of the restructuring plan.
The announcement came as Black & Decker reported that strong U.S. power tool sales boosted fourth-quarter earnings about 7 percent to $97 million, or $1.02 per share.
Sales for the three months ended Dec. 31 rose 4.4 percent to $1.5 billion.
For the year, net earnings slid 1 percent to $227.2 million, or $2.40 a share. Sales were up 1 percent, to $4.94 billion.
The restructuring plan calls for the company to take a $200 million charge -- 80 percent of the total cost -- in the current quarter.
Investors greeted the plan enthusiastically, driving Black & Decker shares up $4.50, more than 10 percent, to $47.31.
Nicholas P. Heymann, a Prudential Securities analyst, raised his rating on the stock from "hold" to "buy" and set a 12-month target price of $52.
Heymann said it makes sense for a power tool company such as Black & Decker to sell its marginally profitable household products business and other, unrelated businesses.
"They just want to make sure they're not playing basketball and baseball," he said.
"These guys are the Michael Jordan of the power tool business."
Decline of SnakeLight
The household products business, based in Shelton, Conn., has struggled since the decline of the SnakeLight.
The flexible flashlight, the most successful product in Black & Decker's history, accounted for about $100 million in annual sales after its introduction in 1994.
But the product faltered in 1996, largely because its life as a hit product had run its course.
"That's the problem with the household products business," said Cliff Ransom, an analyst for NatWest Securities. "You've got to create an elephant product every year."
Ransom estimated the operating margins of household products including vacuums, irons, toasters, blenders -- at about 6 percent, or half the roughly 12 percent generated by power tools and accessories.
The company got into household products in the middle 1980s, when it bought part of General Electric Co.'s business.
"Black & Decker has tried a lot of things to fix this business and they never could," Ransom said.
Don Graber, a former president of Black & Decker's household products division and now chief executive officer of Huffy Corp., said the household business is tough for two reasons:
Far East competitors have glutted the market, and retailers use household products in advertisements to generate traffic, putting pressure on manufacturers to sell them for low prices.