Toolmaker posts first red ink in 4 years

Black & Decker to cut more than 2,000 jobs

January 30, 2002|By Kristine Henry | Kristine Henry,SUN STAFF

Power-tool giant Black & Decker Corp. reported its first negative quarter in four years yesterday and said it plans to cut more than a third of the work force - 450 positions - at its Easton plant. It will slash 2,000 more jobs worldwide as it contracts out some manufacturing and moves plants to countries with cheaper labor.

The Towson-based toolmaker lost $13 million, or 16 cents a share, in the fourth quarter on sales of $1.2 billion. The loss included a charge of $100 million related to the restructuring.

Black & Decker had sales of $1.3 billion in the corresponding quarter last year and earned $52.5 million, or 64 cents a share. This was the fifth quarter in a row in which the toolmaker's earnings were lower than in the year-earlier quarter.

The restructuring is "expected to result in the elimination of over 2,400 positions in high-cost regions" such as the United States and the United Kingdom, Nolan D. Archibald, the company's chairman, president and chief executive, said in a conference call with analysts. "We'll increase our head count in low-cost regions by approximately 1,900 for a net head-count reduction of over 500."

He said the reorganization is expected to save the company about $60 million annually beginning next year. Black & Decker has about 22,600 employees worldwide.

Maria Grimaldo and her husband, Rudy, temporary assembly-line workers at the Easton plant, are planning to move back to their hometown, Brownsville, Texas, after learning Friday that their jobs had been eliminated.

Hourly wages in Brownsville average about $2 less than the $7.35 that drew them to Talbot County.

"We didn't expect it. The reason we came here was because we heard there were a lot of jobs," said Maria Grimaldo, 20. "We've just been here since August."

Black & Decker is the largest employer in Talbot County. Officials there said they had not been notified of the cuts.

"If this turns out to be so, this is absolutely the biggest layoff we've ever had," said Durrie Hayes, Talbot's economic development director. "You have to understand that we have very few employers with 400 people, much less any that have laid off that many."

Wall Street analysts said the restructuring was the right thing to do.

Shares of Black & Decker, which traded as high as $65 in 1998, rose 95 cents yesterday to close at $40.

Although the earnings were in the negative column, the investment community was glad to hear that Black & Decker was able to reduce its inventory last year, meaning that it had less unsold merchandise taking up space and money in its warehouses. Inventory was at $712 million at the end of last year, $132 million less than at the end of 2000.

"I thought it was a good quarter considering the fact that they made so much progress reducing inventories," said analyst Eric Bosshard of Midwest Research. "We are in a recession, and the issue is how they position themselves for recovery rather than how much money they can make in a weak economy."

The company is closing three of its U.S. plants: an accessories facility in Beloit, Wis.; a power tool and home products reconditioning plant in Nashville, Tenn.; and a plumbing products plant in Pacoima, Calif.

The Easton plant, on Maryland's Eastern Shore, will lose about 450 positions over the next 12 to 18 months, 225 of which are filled by contract workers. The plant, whose 1,200 workers are not unionized, manufactures DeWalt products, Black & Decker's professional-grade line.

The production of corded products such as drills, jigsaws and grinders will be transferred from Easton to Black & Decker's plant in Reynosa, Mexico. Other functions related to those products will move to the plant in Fayetteville, N.C.

Under its new plan, Black & Decker is shifting work from its U.S. and United Kingdom plants to plants in Mexico, China and the Czech Republic, where labor and operating costs are lower.

Archibald said the proportion of Black & Decker products made at low-cost plants will increase from less than half to about 80 percent once the changes are implemented.

The company plans to contract out more work to cut costs further. Archibald said the toolmaker will do so "where significant cost advantages are present and quality can be maintained."

Black & Decker has about 1,400 employees in Towson and is one of Baltimore County's 10 largest employers. In the fall of 2000, the company announced that it had won a $9 million incentive package - loans, grants and tax credits - from the state and county to expand its headquarters on Joppa Road. The toolmaker had indicated that it might move its main offices out of the state if it didn't get an attractive financial package.

The Easton plant received work force training grants from the state of $11,600 in 1990 and $26,700 in 2000.

Black & Decker also reported yesterday that for all of last year, its sales were down 5 percent, to $4.3 billion, and that its net earnings dropped 61 percent, to $108 million.

For the year, earnings in the power tools and accessories segment were down 28 percent, to $252 million; hardware and home improvement profits fell 48 percent, to $59 million; and the fastening and assembly division's earnings declined 14.5 percent.

Sun staff writer Chris Guy contributed to this article.

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