Garrett to Close 4 Plants, Eliminate 465 Jobs in L.A. Over Next 2 Years
Garrett Automotive said Friday that it will eliminate 465 jobs in Greater Los Angeles over the next two years and will close four of its six plants in the area.
The company, which employs about 4,000 people in North America and Europe, said it also will cut 35 jobs elsewhere and shut three British plants.
Executives at Garrett’s Torrance headquarters said the cutbacks are intended to streamline operations and improve profits while it modernizes its remaining facilities. The company, a unit of Allied-Signal Inc., is the world’s leading producer of turbocharging systems, devices that boost the power of automobile and truck engines. They are used in diesel trucks and in some lines of Chrysler, Pontiac, Saab and Nissan cars.
Daryl Dickson, a Garrett spokeswoman, said the company plans to eliminate many positions through attrition but also expects to dismiss 200 to 300 employees to achieve the needed cutbacks. The Southern California plants slated for closing are in North Hollywood, Compton, Los Angeles (near Los Angeles International Airport) and in Torrance. The shutdowns will leave Garrett with two California plants, one in Torrance and the other in Harbor City, and six facilities elsewhere.
Company executives said laid-off workers will receive severance pay and job search assistance.
Research and Development
Analysts said the cost-cutting is a reaction to an increasingly competitive market. Garrett has about 50% of the world’s turbocharger sales, but Japanese firms--primarily Ishikawajima/Harima Heavy Industries and Mitsubishi Heavy Industries--are vying for more of the $750-million market.
Garrett wants “to tighten the manufacturing processes,” said Mary Anne Sudol, an analyst at Fitch Investors in New York. “Garrett has been one of the crown jewels of (Allied’s) automotive sector, and they want to maintain their position.”
Sudol said Allied has spent large amounts on research and development and predicted that the company would continue to do so to produce lighter, more fuel-efficient products.
Though profitable, Garrett’s earnings have disappointed Allied executives, said Eli Lustgarten, an analyst at Paine Webber. Allied has tryed to cut labor costs and modernize facilities since its 1985 acquisition of the Signal Cos., which included Garrett, Lustgarten said.
“The profitability has been very disappointing,” Lustgarten said. “Allied’s cost-cutting is long overdue.”
Garrett President Richard M. Bourgerie said Garrett is investing in advanced manufacturing systems and equipment to produce a new generation of turbocharging systems over the next five years. Much of that investment will be at the two remaining plants in the Los Angeles area, he said. The company is expected to begin to market lighter and more fuel-efficient ceramic turbocharging equipment some time next year.
“These moves are essential,” Bourgerie said, “if we are to keep our costs on a par with global industry standards so we can continue to prosper in the increasingly competitive international automotive marketing arena.”
Cost-cutting is part of a companywide trend at Allied, an advanced technology firm with automotive and aerospace operations. The company has already eliminated more than 1,400 jobs this year.
