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Titan layoffs follow slump in construction sector

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QUINCY, Ill.—A slumping construction market in 2012 has led to layoffs at Titan International Inc. and created concerns about the segment in 2013, although early government figures indicate that it is beginning to improve.

The industrial tire manufacturer reduced its work force by about 150 employees at three plants during the last three months of the year because of sluggish demand for tires in the parts of the construction industry it serves.

Now the company is carefully gauging the economic landscape to determine its next moves.

If the economy begins to improve and the construction end of its business picks up, it likely will rehire some of the workers in the next few months, according to CEO Maurice Taylor Jr. If the downward slide continues, the company will hold off until there is improvement, he said.

While the firm's industrial tires—designed for load-er/backhoes, excavators, wheel loaders, skid steers and forklifts—fit with numerous applications, it has a strong base in the evacuating, trenching and road grading ends of the construction sector.

Wait and see

Impacted by the layoffs are Titan's large-diameter tire factories in Freeport, Ill.; Bryan, Ohio; and Des Moines, Iowa. The cuts began shortly before the November election, Taylor said, after demand in Titan's construction orders dipped.

“It began happening before the election and I thought there might be a pickup after the election, which would have turned things around,” he said. “But that didn't happen.” So the company continued to cut.

In a year-end guidance report for 2013 issued by Taylor in December, the executive said the construction market will likely “continue to be in a sorry state except in Russia and Brazil, which should turn advantageous for Titan.”

Titan reduced its work force at the Des Moines and Bryan plants by a total of 90 workers in a two-month span and on Dec. 17 laid off 60 employees at the Freeport facility.

Taylor is still hopeful, but not overly optimistic, that the construction end of Titan's business will show improvement soon “and we'll be able to bring some of them back.”

The latest government monthly jobs report, issued Dec. 29, said about 155,000 jobs opened up in the month, with about 30,000 of those in the construction industry. Most of those were in the housing sector.

If an uptick is occurring, Taylor hasn't seen it. “And you won't see one for awhile from where we are,” he said.

“If the government figures are accurate,” he said, large machinery makers will begin to use up their inventories in the next month or two. “When they determine that they need more tires, they'll call us, probably in March or April. In the first month, we'll go with overtime to handle additional orders. If the increases continue we'll bring in more workers. Until then, those are simply figures from the government.”

Solid year

The company had a strong 2012. At the Freeport tire factory, for instance, employment had grown to close to 700 workers, up from about 545 in 2011 and approximately 365 three years ago.

Titan's sales for the first nine months of 2012 were at about $1.3 billion, up from approximately $1 billion in 2011 while income as of September jumped 56 percent to about $176 million from $112.7 million in 2011.

Revenues for the third quarter came in at a record $404.7 million, compared to $398.8 million in the like period of 2011. Third quarter income, however, fell to $36.2 million from $41.4 million last year.

Taylor projected in the firm's 2013 guidance report that the company will post record net income, revenues, gross margins and operation margins for 2012.

He anticipates the farm market will be good in North America in 2013 and capacity expansions should increase the company's overall market percentage. Taylor expects South America's farm sales to grow more than 10 percent and, because of boosts in capacity, Titan should be able to capitalize and gain market share.

The European market, on the other hand, will be down, Taylor predicted, while Russia should be a growth area over the next five years.