Baldor reduces workforce through attrition, not job cuts (Corrected)

Reports posted Monday — including for a brief time at The City Wire — that Fort Smith-based Baldor Electric Co., planned to cut 900 jobs by June 2009 are wrong, according to Baldor Chairman and CEO John McFarland.

During a presentation to stock market analysts, Baldor officials said they face “a much tougher environment” with a “single digit decline in recent incoming orders.” To keep costs in check, the company is reducing its workforce by 475 jobs by December 2008 and 425 by June 2009. With other cuts in “discretionary spending,” Baldor officials estimate total cost savings during fiscal year 2009 of about $80 million.

Reuters and many other news outlets took the workforce reduction information to mean Baldor would cut jobs. However, McFarland told The City Wire that Baldor is not laying off workers.

“Since July 1, as people retire or quit, we don’t replace them,” he explained. “We haven’t had a layoff in Fort Smith since 1961. … And we don’t expect to have a layoff through this recession either. We just don’t have layoffs.”

The company, which manufactures electric motors, drives, generators and power transmission products, expects to save $30 million from the workforce reduction and another $30 million from a reduction in overtime pay.

“With 8,300 employees around the world, we have a fair amount of people leaving” so it’s not hard to reduce the employment count by 900 in one year, McFarland said.

Baldor employed 8,300 as of June 2008, in 28 plants in five countries.

The company is also struggling with rising material costs, paying $100 million more in 2008 for about the same amount of raw materials it purchased in 2007. However, a 15 percent decline in sales — a “worst-case scenario” according to McFarland — would improve cash flow by $105 million, according to company figures.

McFarland would not give specifics on when the economy might recover, other than to suggest that it will be sometime in 2010.

“In my career at Baldor, this is the most difficult time to forecast what might happen in the coming year,” said McFarland, who started at Baldor in January 1970. “So I’ve been through a few of these (recessions), and (Baldor) came out of every single one of them stronger than when we went in.”

There were a couple of bright spots in the Baldor report.

Congressional approval of an infrastructure stimulus bill would benefit Baldor because 40 percent of the products produced by its Dodge operations are sold to businesses related to asphalt, cement, aggregate and other products used for road and bridge construction.

Also, the company said it is on track to continue reducing debt from its $1.8 billion purchase of Dodge-Reliance in January 2007. Total debt should fall from $1.33 billion now to as low as $1.11 billion by the end of fiscal year 2009.