DOW JONES NEWSWIRES
Methode Electronics Inc. (MEI) will cut 850 jobs as the company
looks to reduce its exposure to the North American auto industry.
Meanwhile, the company swung to a fiscal third-quarter loss on
write-downs and restructuring charges.
The company said it would also move manufacturing operations to
lower-cost regions to cut costs. After the restructuring, all its
manufacturing will be in Mexico, Malta and China.
In January, Methode announced it would restructure its
U.S.-based automotive operations and stop producing some products
in its Interconnect segment, which deals with the installation of
fiber-optic and copper systems in appliances and various
electronics.
It added Ford Motor Co. (F) production at its Reynosa, Mexico,
facility - which contributed "a substantial portion" to the
quarter's loss - will move to another supplier while Methode closes
one of its three plants in Shanghai and indefinitely postpones
adding one in Morocco.
The company expects a charge of $9 million to $18 million
related to the restructuring.
U.S. auto makers are pinning their hopes on a recovery in retail
demand, but last month's industrywide sales slid 42%, an amount the
companies admitted was unsustainable. Executives admitted concern
about a February performance that casts doubt on the viability of
restructuring plans designed to keep General Motors Corp. (GM) and
Chrysler LLC out of bankruptcy protection with government aid,
while rivals trim capacity and boost incentives.
On Thursday, Methode President and Chief Executive Donald W.
Duda said, "We have accelerated our strategy to reduce our exposure
to the legacy automotive business, particularly with the Detroit
auto makers." He added the actions are seen reducing Methode's
revenue derived from the auto industry to less than 40% within two
years, nearly half that of four years ago.
Meanwhile, the electronic parts and devices maker posted a net
loss of $27 million, or 74 cents a share, compared with
year-earlier net income of $9.8 million, or 26 cents a share. The
latest results included 61 cents in write-downs and restructuring
charges.
Net sales for the quarter ended Jan. 31 fell 42% to $80.8
million.
Gross margin fell to 12.7% from 21.3% on the company's inability
to adjust overhead costs to meet the sudden drop in sales.
The company said automotive-segment revenue was hurt by the
continued softening of the global economy, especially its effect on
the North American auto industry, and by "negligible Chrysler sales
volumes."
Methode's shares closed Wednesday at $3.43 and haven't traded
premarket. The stock has lost 64% of its value in the last three
months.
-By Kerry E. Grace, Dow Jones Newswires; 201-938-5089;
kerry.grace@dowjones.com