Xerium to close Australia facility & discontinue Vietnam construction
Xerium Technologies Inc announced the launch of its newly created Paper Machine Clothing (PMC) Global Supply Strategy. Consistent with the Company's strategy to continually identify and implement changes to reduce its cost structure while improving its customer responsiveness, the Company has decided to concentrate its new product and manufacturing process investments in its existing global production network.
This strategy will focus production in the Company's most efficient plants located closest to its global customers while improving product quality and reducing customer order lead times. As part of executing this strategy in the Asia / Pacific Region, the Company intends to cease production at its Huyck Wangner clothing facility in Geelong, Australia by the end of the first quarter 2009.
The Company also plans to discontinue construction of its new Vietnam clothing facility. Xerium plans to retain a sales and distribution operation in Australia to service customers throughout Southeast Asia, Australia, and New Zealand. The Company also plans to retain the Vietnam facility while it evaluates its long term potential.
"Our new global supply strategy is the result of evaluating alternative paths for the Company to improve its cost structure while simultaneously improving its customer order response times," said Stephen Light, Chairman, President, and Chief Executive Officer.
"As part of this initiative, we are developing the capability to produce nearly all of our current and future products at our highly efficient existing plants nearest to our customers. Consequently we will direct future capital investment in equipment and product technology to our existing 'Centers of Excellence,' realign production capacity and technical capabilities among existing facilities to minimize production costs, and minimize time to market of both existing and new products.”
“These changes are essential in this dynamic market, where our customers are facing unprecedented challenges. Our plan is to continue to introduce highly competitive leading technology products that address our customers' need to improve their productivity and lower their costs, while we simultaneously continue to pay down our debt. The changes we are announcing today are consistent with the Company's strategies of debt reduction, product innovation and the reliance on the talents and dedication of our people."
These actions in the Asia / Pacific Region will impact approximately 15 salaried and 150 hourly employees at the Huyck Wangner, Geelong Australia facility, and approximately 50 salaried and hourly personnel in Ho Chi Minh City, Vietnam. Combined reductions in Asia Pacific manufacturing represent approximately six (6%) percent of the Company's workforce.
The Company expects to record restructuring expenses of approximately $8-10 million in the fourth quarter of 2008, of which $5-6 million is principally for severance to be paid through the first half of 2009 and an impairment loss of $3-4 million based upon the Company's evaluation under SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets.
The Company expects to incur $1-3 million of other restructuring costs throughout 2009 related to these announcements. In addition, the Company is evaluating the future use of equipment located in Australia, and may transfer the equipment to other facilities when economically justified and, if transferred, would record expense to dismantle and move such equipment.
Xerium Technologies Inc