Smith Laying Off 700 More at Tool Division in Irvine

Smith International, staggering under falling oil prices and a more than $200-million patent infringement judgment, is laying off about 700 more employees at its tool division in Irvine and consolidating six of its 10 worldwide divisions, according to company sources.

The Newport Beach oil services company refused to make any official comment Wednesday on pending layoffs.

However, employees at the corporation’s Smith Tool division in Irvine, which makes oil-drilling bits, said a notice about the upcoming staff reduction there was posted Friday. And over the weekend, 32 vice presidents in four divisions were laid off, according to sources within the company.

The latest job reduction follows the layoff of 357 employees at Smith’s Irvine-based tool division on Feb. 14 in what company insiders call “the Valentine Day massacre.” Smith Tool intends to lay off approximately half of its remaining Irvine work force, according to a company official who asked not to be identified. Within less than a month the total employment at the Irvine facility will have been slashed from 1,750 to about 690 workers.

‘Very Demoralizing’

“It is very demoralizing,” the company official said of the layoffs. He said that as of Tuesday some department heads were still deciding which positions to eliminate and that not all affected employees had been told. “This time the cuts will be deeper and impact more management than in the past,” he said.

The layoffs will occur in two stages, he said, with salaried employees scheduled to leave Friday and hourly employees a week later. He said all employees will receive severance packages ranging from three days to more than a month of salary, depending on position and length of service, and a 90-day extension of health benefits.

Meanwhile, a manager at Dyna-Drill, another Smith division in Irvine that manufactures oil drills, said that Dyna-Drill employees this week also were told to expect layoffs as the result of a corporate reorganization. The official said that this week Smith International announced to its employees that Dyna-Drill and three other Houston-based divisions--Servco, Datadril and Drilco--will be merged into a single division called Smith Drilling Systems. The newly consolidated division will be headquartered in Houston.

The source said he expects that “at least 50%” of Dyna-Drill’s 900 employees worldwide, which includes 144 in Irvine, will receive pink slips. He said staff cutbacks also will occur in the other consolidated divisions.

Tustin Unit Affected

The remaining employees affected by the layoffs will be notified Thursday.

Yet another Smith subsidiary, Tungsten Carbide Manufacturing, based in Tustin, will be combined with Smith Tool under the reorganization plan, a Smith source said.

The news of layoffs triggered a flurry of resume writing at Smith Tool and Dyna-Drill Tuesday. “There is a big waiting line for the word processor and Xerox machine,” one employee observed. A memo from management to Dyna-Drill employees blamed the layoffs on the sharp decline in the oil industry. “As each of you know, the oil industry has been going through the tightest times in its history,” the memo said. “The drop in the price of oil and the rig count has and will continue to affect our marketplace.”

Unofficially, others at Smith also blamed the most recent layoffs on a federal judge’s order last week for Smith to pay Hughes Tool Co. at least $207 million for infringing a Hughes drilling-bit patent. A company official who called the award “outrageous” and “ridiculous” said, “It really battered Smith International.”

Times staff writer Carla Lazzareschi contributed to this story.