Wheel maker Superior will close Van Nuys plant, cut 290 workers
Superior Industries International Inc., an aluminum wheel supplier to most major U.S. and foreign automakers, said Tuesday that it would close its plant in Van Nuys by the end of the second quarter and fire 290 employees, or 9% of its workforce.
The company, which expects to save $16.5 million annually in labor costs, said it was making the cuts because the slumping vehicle sales mean less demand for wheels.
Chief Financial Officer Erika Turner described employee reaction as “somber but not surprised.”
“Manufacturing has fallen in our Van Nuys plant in the last year,” said Turner, who noted that analysts have predicted a 25% decrease this year in Superior’s production. “Our employees were already concerned.”
The mood was much different when Superior opened in Van Nuys four decades ago. With lower wage-and-benefit packages than competitors, Superior’s ability to manufacture less-costly aluminum wheels appealed to automakers. With aluminum wheels one-third lighter than steel, Superior’s product appealed to drivers.
For the first nine months of 2008, however, Superior’s revenue fell 28% to $163.5 million compared with $227.6 million in the same period in 2007. Superior, with about 3,200 workers in five plants, lost $11.2 million from January through September, and shipments dropped to the lowest level in 10 years.
Severance and related costs for 2008 will total about $2.1 million, Superior said. Related asset impairment charges have yet to be determined but are expected to be recorded in the company’s fourth quarter ended Dec. 28. Superior hasn’t said when those figures will be released.
Like many auto-related companies, Superior is expected to face considerable challenges this year, according to a report from Brett Hoselton, an analyst at Cleveland-based KeyBanc Capital Markets. Hoselton projects Superior will lose 94 cents a share this year and 50 cents in 2010. His report indicated the company lost 46 cents a share in 2008.
Suppliers provide about 70% of the content in most automobiles, including seats, specialized bolts on the suspension and wheels. According to a Superior financial report, Ford Motor Co., General Motors Corp. and Chrysler represented about 78% of the company’s total wheel sales during the first three quarters of 2008.
“It’s really a function of the auto industry in general,” said Jim Hossack, vice president at AutoPacific, which provides marketing and product consulting for the industry. “Everyone knows sales are down substantially. In recent months, there has been continued pressure on everyone for lower costs and lower prices. You’d expect that as demand goes down, the least cost-efficient sources are the ones likely to be squeezed out.”
Superior has slammed on the brakes recently amid economic uncertainty.
It closed a plant and cut 600 jobs in Pittsburg, Kan., on Dec. 19 in addition to 155 positions at two plants in Arkansas, reflecting a broader effort to cut 29% of its U.S. workforce because of lower sales of pickups and sport-utility vehicles. The company fired 375 employees in 2006 at the Van Nuys plant and closed a plant and cut 500 jobs in Johnson City, Tenn.
Superior has five remaining plants, including the two in Arkansas, two in Mexico and a joint venture in Hungary.
The company’s stock traded at a record $53.12 a share on May 9, 2002, but its shares declined for five straight years from 2004 to 2008, including a 40% drop in the last year. Superior shares fell 7 cents Tuesday to $10.12.
“Losing many loyal and long-term employees makes this decision particularly difficult,” Chief Executive Steven Borick said in a statement. “Nevertheless, it is imperative to right-size our capacity in line with current and projected vehicle production while maintaining the leverage for future business opportunities.”
Turner acknowledged that the future didn’t look too bright.
“This facility unfortunately shrunk below profitability levels,” Turner said. “We don’t see a near-term pickup.”
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