Terex cuts 18% of AWP workforce and forecasts up to 40% AWP sales fall
By Murray Pollok23 October 2008
Terex's AWP division is to cut around 18% of its 5000 worldwide workforce over the final three months of the year in the face of continued weakness in its North American and Western European markets, with the brunt of the lay-offs at its Redmond and Moses Lake plants in Washington State, with 375 and 100 lay-offs, respectively.
The division saw sales fall by 9% in the three months to 30 September, and the company's chief executive officer and chairman Ron DeFeo forecast a 30 to 40% fall in Terex AWP sales for the year starting in October and a 25-35% fall in sales at its construction division. Both divisions are heavily reliant on sales to rental companies in North America and Europe.
Mr DeFeo said; "the current environment is challenging, marked by a continued global credit crisis and worsening economic conditions, particularly in the US and Western Europe...At this time, our price increases have not yet fully offset our total material cost increases. We are taking aggressive actions to better position the company for the expected reduced net sales levels of the next twelve months, in particular in the AWP, Construction, and Materials Processing businesses.
Revenues at Terex AWP, which includes Genie Industries, fell by 9% to US$513.5 million (a 12% fall if currency affects are removed) and gross profit halved to $78.6 million. Overall, Terex Corp revenues grew by 6% to $2.5 billion (stripping out the impact of currency changes and acquisitions) and net profits fell 38% to US$ 93.8 million. The increase was driven by strong sales at the cranes and materials processing & mining divisions but partially offset by lower sales at the AWP and construction segments.
Mr DeFeo forecast that Terex Corp's 2009 sales would be similar to the 2008 full year sales, "driven by continued strong results in Cranes and Mining, offset by lower net sales in AWP, Materials Processing and Construction. The Cranes and Mining businesses continue to grow, in particular in developing markets, where we expect current positive trends to continue.
The staff reductions at the AWP division follow a 6% reduction made during the third quarter of the year, as well as temporary shut-downs during the quarter. Tom Riordan, Terex president and chief operating officer, said; "We will re-evaluate our team member levels in the first quarter of 2009 based on customer order rates and production levels."
The company is planning other cost-reduction measures, including a realignment of its segments, with the Roadbuilding business now part of the Construction segment and Utility Products coming under AWPs. This means, for example, that the Genie Industries business will now be in the same division as the Terex utility truck mounted and digger derrick products. "This will enable us to capture market synergies and streamline our cost structure in the US", said Mr Riordan.
Terex also said it was reviewing its facility plans to "improve the utilisation of existing facilities through consolidation, transfer or sale". It said it would continue its investment in China, though the timeline may shift by three to six months. As for the facility in central Europe which the company has been considering, Terex said that it had not yet concluded where it would be located nor what its implementation timeline might be.
A spokesperson said, "We are seeing that demand in Europe and the U.S. has slowed significantly, while demand remains strong in Australia and Asia. Our goal is to become the most global aerial work platform manufacturer, with local production to meet local needs. China represents one of the biggest potential markets for us, and Asia will become a large aerial work platform market."
The comapny said "Demand from the rental channel has been increasing in China and Korea, for example, and Australia remains strong due to demand from the mining sector.
"However, growth in developing markets has not yet reached sufficient scale to offset the weakness in the developed markets, resulting in adjustments to production and staffing for the segment."