Shifts winding down at Superior Industries in Rogers

by The City Wire staff (info@thecitywire.com) 41 views 

Auto wheel maker Superior Industries is in its final days of operation in Rogers with more production at the plant that once employed 500 expected to wind down as early as Thursday (Nov. 20), according to onsite security.

The closure is set for mid-December, but Kerry Shiba, chief financial officer for the Van Nuys, Calif.,-based company, said in the Nov. 3 earnings call that the Rogers’ plant production is already being shifted to other facilities in Fayetteville and Mexico. 

“The plant in Rogers will be decommissioned by end of year. It had an annual straight time capacity of 1.75 million wheels,” Shiba said.

Superior reported an 11.8 % drop in its third quarter wheel production with 2.624 million wheels shipped. This compared to 2.942 million shipments in the same quarter last year. The main reason for this weaker demand came from an 8% decline in production orders from Ford, Superior’s largest customer.

Shiba said the softer demand has allowed for quicker production shifts from the Rogers plant to the other facilities.

The company took a $4.2 million restructuring charge in the third quarter for the Rogers plant closure. That breaks down to $800,000 for severance, $250,000 for inventory write-downs and $3.1 million in accelerated depreciation costs. Shiba expects fourth quarter charges to include $1.5 million in severance and $3.1million in accelerated depreciation.

He said the plant and equipment had a book value of roughly $17.6 million at the end of the third quarter. The company has not yet disclosed it’s plans for the manufacturing center once it is shuttered.

“My thanks go out to all of the Rogers employees for their continued dedication during what understandably is a challenging personal transition. I also thank our customers for their cooperation and support in moving production programs to our other facilities,” CEO Don Stebbins said during the call.

He expects the Rogers closure will generate $15 million in cost savings year-over-year as the new $120 million plant in Mexico continues to ramp up operation in 2015.

There were about 500 workers at the Superior Industries plant in Rogers when the announcement to close was made earlier this year. Since that time roughly 10% of them have taken jobs with other local companies, according to Steve Cox, director of economic development for the Roger-Lowell Chamber of Commerce.

He said the plant has conducted rolling layoffs, which continue as certain jobs are completed. Cox said the regional community has stepped up to try and retain as many of the skilled workers as possible.

“Right after the announcement was made we began fielding calls from around the state from companies wanting to reach out to this skilled workforce. We held a hiring fair with 27 industries in this region in addition to the fall job fair at which several local manufacturers were present. Manufacturers make room for skilled machinists and robotics techs, even if the positions are not advertised,” Cox said.

Chung Tan, director of economic development in Fayetteville, said Air Filter and Marshalltown Tools have actively hiring displaced Superior workers.

“I know a few workers are transferring into Fayetteville’s Superior plant, but they have not disclosed the number. I can tell you that the mindset among many of these displaced workers has changed from one of sadness and fear to a more optimistic outlook. I have heard from some who actually moved into higher paying jobs with other local companies and there are some taking advantage of the governor’s workforce retraining opportunity,” Tan said.

She said there was some worker displacement in a few operational management and personnel positions in the Fayetteville plant that would have required the local U.S. managers to relocate to Mexico because the bulk of the production and new hiring is for the newer plants.

The Fayetteville plant employs about 700 workers and will be the company’s lone U.S. production facility when the Rogers plant goes dark. Tan said Superior has invested millions of dollars in the Fayetteville plant in the past couple of years and it gives them a bit of diversification outside of Mexico.

That said, she adds that Superior Industries is a publicly traded company that must perform for its shareholders and that will likely dictate if the Fayetteville plant can fend off closure in two to three years down the road.

Superior shareholders were asked by corporate executives to be patient in the recent earnings call as the company reported a loss of $2.4 million, or 9 cents per share, for the third quarter of 2014. This compared with net income of $5.2 million, or 19 cents per share, for the third quarter of 2013.

Included in the 2014 third quarter results were approximately $6.9 million in expenses associated with closure of the Rogers facility, as well as expenses from its recent proxy contest, strategic marketing assessment and the sale process of its aircraft. The estimated after tax impact of these expenses was $4.3 million.

Net sales for the 2014 third quarter decreased 8% to $176.4 million from $191.6 million in the comparable period a year ago, primarily reflecting lower unit volume. 

For the nine months of 2014 net sales were $558.8 million, versus $597.1 million for the comparable period a year ago, primarily reflecting a 6% decrease in the number of wheels shipped. 

Unit shipments for the first nine months of 2014 were 8.4 million versus 9 million a year ago. Additionally, the average wheel selling price decreased 1%, primarily from a decline in the value of the aluminum component of sales, which is generally passed through to customers. Based on the nine month results and when looking at the fourth quarter, the company estimated total sales for 2014 at $740 million.

Gross profit for the first nine months of 2014 decreased to $38.7 million and was 7% of net sales, compared with $45.2 million, or 8% of net sales, for the comparable period a year ago. 

Shiba said it will take two quarters or more to get the new plant in Mexico up to speed and this will mean softer financial results in the first half of 2015, as the expenses of the Rogers closure will be incurred in the same period.

Shares of Superior Industries traded slightly higher on Tuesday (Nov. 18) at $18.50, up 17 cents. For the past 52 weeks the share price has ranged between $16.89 and $21.77.

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