Layoffs, low earnings hobble manufacturing, control fields

Many major and minor players in the control and automation fields announced thousands of layoffs in late July and August, following numerous reports of earnings shortfalls during 2001’s second quarter.

These events parallel similar declines in manufacturing, especially in the technology sector, as well as a recent downturn in the U.S. economy overall. U.S. Department of Labor reported that individuals collecting unemployment benefits swelled close to 3.2 million by mid-August—the greatest number since September 1992.

"In this market, no one is being spared. This slowdown in manufacturing really began at the end of 2000, and a lot of it is driven by inventories built up over last couple of years. Everyone was optimistic and got into spending cycles, which later hit the wall and caught everyone off guard," says Andy Chatha, president of the ARC Advisory Group (Dedham, Mass.). "We’re also in an environment in which market fluctuations, both up and down, are occurring much faster, so people need to beware when the market is up again.

"In control and automation, no big projects or plants appear to be planned, and most spending seems to be going to small projects. We’re looking at the market to recover early next year, and there’s even been some firming up in the past three months. As we move forward in the new economy, many companies are going to have to change their business models; find new ways to reach customers; and offer new services and not just products."

Some of the most significant rounds of layoffs and/or earnings declines include:

• Emerson (St. Louis, Mo.) reported a more than 11% decline in its fiscal 3Q01 earnings to $330.4 million, or 77 cents per share in three months ending June 30, 2001, from $373.8 million or 87 cents per share in three months ending June 30, 2000. The firm reported the shortfall was caused by slow sales and restructuring costs.

• Wind River Systems Inc. (Alameda,Calif.) announced July 31 that it expects revenue for 2Q01 of $79-82 million, a decrease of 19-22% compared to 2Q00. As a result, Wind River stepped up previously announced cost control measures. These include increasing layoffs from 12-15% to approximately 20% of its worldwide workforce, or a total of 400 employees.

• Rockwell Automation (Milwaukee, Wis.) reported July 24 that its fiscal 3Q01 earnings from continuing operations, before special charges, declined more than 80% to $18 million, or 10 cents per share, from $92 million, or 49 cents per share, from continuing operations in fiscal 3Q00. In addition, 3Q01 results from continuing operations include special charges of $69 million, which decreased to $45 million after taxes, or 25 cents per share. The charges were for consolidation and closure of facilities, realignment of administrative functions, and layoffs of about 1,200 employees, mostly in North America.

• In the wake of a $651 million charge, Honeywell International (Morris Township, N.J.) reported July 24 that it’s 2Q012 net income dropped almost 92% to $50 million, or 6 cents per share, in 2Q01 from $617 million, or 77 centers per share, in 2Q00. The company says the charge was caused by repositioning, customer contract losses, asset impairments, merger-related expenses, legal and environmental costs. However, observers say it was also related to Honeywell’s recently failed merger proposal with General Electric (Fairfield, Conn.), which was halted by European regulators. Even without the charge, Honeywell’s 2Q01 earnings per share (EPS) declined about 26% to $450 million, or 55 cents per share, from $605 million, or 75 cents per share, in 2Q00. More recently, Honeywell International Inc. (Minneapolis, Minn.) announced Aug. 28 that it plans to layoff 690 employees this fall.

• Due to an even more difficult than expected first half, Invensys plc (London, U.K.) is reporting weak sales for 2001 in its power systems division, its appliance, climate and related control systems businesses, and among its software systems and automation systems. As a result, Invensys states it’s reducing overhead costs, improving productivity, and has already cut more than 3,200 jobs in 1Q01. The company has also increased its planned layoffs from 3,500 to 6,000 for 2001. Also, following downgrades in its market sector by analysts, Invensys expects first-half 2001 operating profit about 30% below its initial expectation of

• Adept Technology Inc. (San Jose Calif.) announced July 26 that it will lay off 20% of its staff as part of a cost reduction program during 1Q02. The company also revised its financial outlook for 4Q01. Adept now expects fiscal 4Q01 revenue to be down approximately 13-14% from revenue of $23.9 million in 3Q01. This is lower than previous projections that 4Q01 revenue would be flat or down 10%.

• Citing difficult market conditions, ABB (Zurich, Switzerland) revised its outlook and initiated a cost reduction program July 24 that will eliminate 8% of its workforce, or 12,000 employees, over the next year and a half. ABB states about 1/3 of the job cuts are expected to come through "natural attrition." ABB added that revenues were flat, but up 7% in local currencies for the first half of 2001. Earnings before interest and taxes were down 21%, but up 4% excluding one-time capital gains, reflecting underlying improvements in operational performance.

Do you have experience and expertise with the topics mentioned in this content? You should consider contributing to our WTWH Media editorial team and getting the recognition you and your company deserve. Click here to start this process.