The steps include revised wage and benefit plans; the strategic realignment of its business (more than 15% of the company’s U.S. staff have already lost their jobs); and the rationalisation of Hayes Lemmerz’ wheel capacity, namely closing its Huntingdon, Ind., wheel plant.
Curtis Clawson, president, CEO and chairman of the board said: “The last several years have seen profound changes in the competitive landscape of the automotive industry. We are aligning our organization to recognize the realities in the US and to assure continued success in the global automotive marketplace.”
In order to cut costs the company has already reduced base pay by up to 7.5% for its U.S. employees, 10% for the company’s president and CEO and 20% for the company’s board of directors. The measures will also see the company temporarily suspend company contributions to employee 401(k) plans and restructuring its short-term incentive compensation plans for hourly and salaried employees.
The rationalised wage and benefit plans follow the news that Hayes Lemmerz is “strategically realigning” earlier this year. The move combined the company’s North American and international wheel business units, creating a Global Wheel Group. “We will continue to look at additional efficiencies in the organization as capacity is adjusted and launches are completed,” said Fred Bentley, COO and president of the Global Wheel Group.
In addition, as of March, the company closed its aluminium wheel manufacturing facility in Huntington, Ind. Remaining production will be transferred to the company’s other wheel facilities in North America. The Huntington facility will operate through the company’s second quarter of 2006 to service existing contracts and assist in transitioning production. About 185 employees will be affected by this action when the plant finally closes at the end of the second quarter of this year.
In 2006, the company says it will continue its focus on improving free cash flow and controlling capital expenditures, which are targeted at less than $100 million. Hayes Lemmerz expects sales for 2006 to be approximately $2 billion, primarily due to reductions in North American volumes. The company expects adjusted EBITDA and free cash flow to improve in 2006 versus 2005.
Hayes Lemmerz expects the combined cost savings from all of the restructuring actions, including the wage and benefit reductions, to generate annual cost savings of at least $35 million.