Factories and Manufacturers and Manufacturing & Technology

Massive job cuts in Indiana help Swiss firm turn profit

August 6, 2013

The interim CEO of the parent company of a major manufacturer in Indiana said massive job cuts in the second quarter are beginning to make a difference.

OC Oerlikon Corp. interim CEO Juerg Fedier said margins are improving in the Fairfield Drive Systems division in Lafayette after the Swiss maker of textile machinery cut nearly 500 jobs at the unit.

“We have put out about 40 percent of the work force in the U.S.,” Fedier said Monday. “The effects are coming back into the business.”

The job cuts, which amount to about 480 of the 1,200 employees at the Fairfield business, helped improve overall company profitability in the second quarter, he said.

The large number of layoffs, however, was much higher than the company originally reported. On Feb. 28, the company said it planned to cut 150 workers at the Lafayette plant  “in response to the faltering economic recovery.”

An official at the Lafayette plant did not immediately return a phone message seeking comment.

Second quarter earnings before interest and taxes at the Drive Systems unit fell 62 percent on weaker demand for gears and axles for construction and off-highway vehicles in China and the U.S., Pfaeffikon, Switzerland-based Oerlikon said Monday. The unit had sales of $890 million last year, accounting for 28 percent of Oerlikon's revenue.

Fedier, Oerlikon’s chief financial officer, has served as interim CEO since Michael Buscher’s surprise exit on March 14. The executive has continued Buscher’s push toward more profitable businesses, such as coatings for airplanes and car parts, while exiting lower margin units. The company completed the sale of its natural fibers unit last month, a business with about 3,800 employees and annual sales of $1.08 billion.

Oerlikon is also exploring strategic options including a possible sale of its Advanced Technologies unit, people familiar with the matter said in June.

Second-quarter earnings before interest and taxes fell 8 percent from a year earlier to $96 million, Oerlikon said. Sales declined 3 percent to $776 million. The company reiterated that full-year order intake and underlying operating profitability should be around the levels achieved in the previous year.

Russian billionaire Viktor Vekselberg, the world’s 57th richest man, is the largest shareholder of Oerlikon, and is represented by three of six board members including Chairman Tim Summers.

Oerlikon shares rose 1.6 percent, to $13.42 each, Tuesday morning in Zurich. The stock has risen 23 percent in the past year.

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