Smith International to Lay Off 700 at Firm’s Tool Division in Irvine
Smith International Inc., the troubled oil services firm, has plans to lay off approximately 700 workers on Feb. 8 at its Irvine-based tool divison, a company spokesman confirmed late Thursday.
Newport Beach-based Smith International has been hurt by the worldwide slump in its oil- and gas-drilling business, triggering the layoffs at the company’s Smith Tool division, its largest subsidiary and the nation’s largest manufacturer of drill bits.
The spokesman, who asked not to be identified, said the cutbacks would involve employees in assembly operations and “certain white-collar functions.” He added, “We hope it’s a temporary thing” but said he could not be certain when employees would return to work.
Smith says the company had only recently begun calling back workers laid off during the fall of 1983.
“All or nearly all” of the layoffs would be at the tool division’s Irvine headquarters and are not expected to spread to the company’s other divisions, which employ approximately 9,000 worldwide, according to the spokesman.
“It’s the first division to be affected by changes in drilling activity,” the spokesman said. The layoffs are a direct result of a “downturn in drilling activity which reduces the demand for our product.”
The spokesman said domestic drilling has dropped off 15% within the past month, and “we anticipate it heading lower before it bottoms out.” Drilling activity serves as a reliable gauge to measure future demand for drill bits, he added.
Despite the need for a work-force reduction, the division remains profitable, he said.
Slump Adds to Woes
The recent slump in the oil industry only adds to the company’s recent financial woes.
Smith International reported in December that it expected to report a loss for the year as a result of a hostile nine-month battle to take control of Gearhart Industries Inc., the Fort Worth-based high-technology oil services company.
Smith International purchased 5.3 million Gearhart shares for $159 million before its April tender offer became mired in a lengthy federal court battle that has yet to be resolved.
Gearhart’s stock has plummeted in price since the takeover attempt began, forcing Smith to take a one-time charge against earnings in the fourth quarter, which ended Dec. 30.
While fourth-quarter figures have not been released, Smith posted third-quarter profits of $3.57 million on revenues of $192.9 million. In the quarter a year ago, the firm recorded a net loss of $90.8 million on revenues of $169 million, attributed mostly to a write-down on assets.
