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Titan to reduce work force by 200 at six U.S. plants

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Maurice Taylor Jr.

QUINCY, Ill.—Titan International Inc. is reacting quickly to a downturn in key markets it serves with significant employee cutbacks to come in the U.S. and abroad.

To weather a severe drop in both sales and earnings in the first quarter, the holding company's subsidiaries—producers of tires, wheels, assemblies and undercarriage products—are trimming their combined work force by about 200 at their six U.S. plants with the possibility of further reductions in the future, according to Maurice Taylor Jr., Titan International chairman and CEO.

Bigger cuts will come at the firm's plants overseas, he said, where about 800 are expected to be laid off beginning in the third quarter. The company is taking longer to reduce its staff at those factories because notice is required, which means the whole process will take about three months, he said. The company employs about 8,500 globally.

Wide impact

Taylor indicated cuts will impact virtually all Titan plants, adding that “we have to keep trimming when and where it's needed.” He said the reductions are part of the firm's plan to keep Titan profitable in the midst of declines in some segments the company serves.

He did not provide a plant-by-plant breakdown on the cuts but said the reductions are being spread across the board worldwide.

In the first quarter, the company recorded a 6.8 percent sales drop to $538.9 million as net income tumbled to $2.2 million from $19.5 million in the like 2013 period.

“Winter's blast affected every factory in the U.S., with fuel costs up,” Taylor said. “The aftermarket and (original equipment manufacturers) farm business declined and the OE construction business was also below forecast.” A major culprit was mining, which was almost nonexistent in the quarter, he said.

Agriculture and construction product sales are expected to improve as 2014 progresses, he said, but he doesn't expect the same in the mining industry, where Titan has a strong presence.

“The current outlook for mining tires continues to be negative,” he said. “And the price of tires continues to drop like a big rock, especially the big ones,” partially because the price of materials— such as steel and rubber—have been fluctuating. Big OE manufacturers, however, want to purchase tires based on the lower rather than the higher costs, no matter what Titan shelled out for the materials, Taylor said.

Titan isn't expecting better results in the second quarter—certainly not what the company anticipated when it presented its expectations late last year, he said.

Better days ahead

But there is an upside.

Titan has an optimization plan—put together by President Paul Reitz and Chief Financial Officer John Hrudicka—aimed at keeping the company moving forward during a difficult period. Taylor said it's a good plan and should go a long way toward helping right the Titan ship.

Starting in late April, Reitz and Hrudicka visited all Titan operations to develop the plan. Reitz focused on increasing the firm's operating margin, improve product quality and delivery, while Hrudicka concentrated on finding ways to drive optimization throughout the company.

According to Taylor, the sectors Titan serves—other than mining—will begin to improve in the third and fourth quarters “unless the politicians in Washington toss another monkey wrench into it.”

Mining eventually will turn around in the U.S., he said, but it may take a long time for that to happen, and likely not in 2014. The same holds true for Australia and Chili, where mining currently is in a slump. China needs coal and is building coal plants, so that's a possible area of growth, he said.

“We're dealing with a lot of unknowns right now,” he said.

But Taylor does see great growth potential within the company, principally because of new products and the acquisitions Titan made in 2012 and 2013, which should show positive results for the firm in 2014.

The company also is looking to penetrate a niche specialty tire and wheel market in the construction and mining sectors, which Taylor said could generate additional revenue of between $200 million and $400 million. The extra capital investment to accomplish this is substantially complete, he said.

Titan has other new products—including LSW tires and wheels—that have demonstrated they are an improvement over the competition, he said. Many are beginning to penetrate the North American market, and the company intends to soon begin marketing some of them in Europe and Russia.