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Tuesday, Jun 6, 2023

Superior to Shut Plant, Lay Off 720

Aluminum wheel manufacturer Superior Industries International Inc. has faced tough struggles in recent years but the circumstances now arising out of Detroit may prove the toughest yet. The Big Three automakers are shutting plants, cutting their workforce and switching over to smaller cars that buyers prefer over large gas-guzzling sport utility vehicles and pick-up trucks. In response, the Van Nuys-based company resorted to making cuts itself. Last month, it announced the closure of a manufacturing facility in Kansas at the end of the year that will cost 655 jobs. Additionally another 90 positions will remain vacant positions and an additional 65 employees will be laid off. If being a smaller company in these harsh times is what it takes, that’s quite alright with Chairman, CEO and President Steven Borick. “We have a philosophy in the company called shrink to grow and we will continue to look at that as an opportunity for our future,” Borick said in a conference call with analysts in August. After the Pittsburg, Kan. plant closes, domestic production will take place at facilities in Fayetteville and Rogers, Ark., with specialty finishing done in Van Nuys. Superior also has a brand-new plant in Mexico and another in Hungary. The Kansas plant was a primary provider of light truck and SUV wheels particularly to General Motors Corp. “We are continuing to do process improvement at all of our plants and looking at the state of equipment to make sure it is operating as efficiently as possible,” company CFO Erika Turner said. The Big Three automakers — GM, Ford Motor Corp. and Chrysler — provide more than 80 percent of Superior’s revenues so when those automakers hit the skids, the supplier does too. The company did report a net income of $5 million for the second quarter, but that doesn’t tell the full picture of its finances. The average daily closing price of Superior shares falls in the middle of the 52-week range of $15.67 to $23.04 but that’s still significantly lower than what the stock price had been. “It’s in line with their three-year average price but their five-year average price is $28 but the stock is at $18.50,” said Douglas Christopher, an analyst with Crowell, Weedon & Co. in Los Angeles. “The 10-year average price is $30 and the stock is at $18.50.” And in late August, analyst Robert Baird downgraded the company’s stock from neutral to underperforming. Superior’s strategy favors a conservative approach to its balance sheet. The company is debt free and maintains the cash that competitors typically don’t have to carry them through tough times, Turner said. Analysts, however have their own way to calculate share value, Turner said, and the company looks at the actions it has taken as being significant cost savings. “Time will prove that out, I’m sure,” Turner said. Dependence on the Big Three is a drag on Superior, especially in light of a shift away from the light trucks and SUVs that the company makes wheels for in favor of smaller cars. Ford delayed sale of the 2009 F-150 pickup by two months, and General Motors plans to close four truck and SUV plants beginning this year through 2010. On the bright side, Superior shipped 32 percent more wheels in the passenger car group in the second quarter of the year compared with the same period in 2007, Turner said. The overall product mix is increasingly shifting toward passenger cars although Superior can easily continue with light truck and SUV wheels once the automakers figure out how to make them more fuel efficient. “We are not ruling out there could be resurgence,” Turner said, “but we don’t think it will be in the near future.” Plant closures and layoffs due to industry fluctuations are not uncommon for Superior. In 2007, the company shuttered a facility in Tennessee. The year before, quarterly wheel shipments hit a low not seen since 1998 and production was stopped at some plants, up to three full weeks in some instances. Also in 2006, Superior sold its discontinued suspension components business and laid off 375 workers from its Van Nuys location. The forces in play for the current situation are expected to be more permanent, although not all is dire at the Valley headquarters of Superior. By maintaining North American manufacturing plants, the cost of shipping to the automakers is less than bringing in wheels in from overseas plants. The high cost of transportation has some customers to rethink how they are sourcing their wheels, Turner said. “We are getting some re-quoting of business that had previously been given to Chinese competitors,” Turner said.

Mark Madler
Mark Madler
Mark R. Madler covers aviation & aerospace, manufacturing, technology, automotive & transportation, media & entertainment and the Antelope Valley. He joined the company in February 2006. Madler previously worked as a reporter for the Burbank Leader. Before that, he was a reporter for the City News Bureau of Chicago and several daily newspapers in the suburban Chicago area. He has a bachelor’s of science degree in journalism from the University of Illinois, Urbana-Champaign.

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