NOVI, Mich.—Cooper Standard Automotive Inc. will shutter two more facilities in addition to the 10 closures completed last year as the auto supplier moves ahead with restructuring its global operations.
The two plants will close in 2020 at a cost of $15 million, compared to 2019 restructuring expenses of $20 million to mothball six plants in Asia, three in North America and one in Europe.
"Two more significant manufacturing factories have been identified for closure," Jeff Edwards, Cooper Standard Chairman and CEO, told investment bankers Feb. 25 during a quarterly conference call.
Edwards said this year's closures are partly customer driven and partly a continuation of corporate streamlining.
"We don't need as much space," Edwards said, adding the cost savings from the two pending closures represents a two-year payback of the $15 million restructuring expense.
Company officials didn't identify the locations of the two plants or say how many jobs will be lost.
Cooper Standard produces rubber and plastic sealing, fuel and brake delivery systems, and fluid transfer systems for auto makers, including Ford, General Motors, Mercedes-Benz and Renault Nissan, at a volatile time for the market.
The company lost $22.3 million in the fourth quarter of 2019 and ended up $3.3 million in the red for the year on sales of $3.1 billion. That compares to a $158 million profit in 2018 on sales of $3.6 billion.
Company officials are attributing the year-over-year change in fourth quarter and full-year sales to the divestiture of the anti-vibration systems business, unfavorable volume and mix, customer price adjustments, and the impact of the United Auto Workers work stoppage in the U.S.
General inflation, higher raw material costs and unfavorable foreign exchanges also hurt the bottom line.
The protracted UAW union strike and the write-off of a discontinued customer relationship in China last year had a combined $22 million one-time negative impact on results for 2019, Edwards said.
Other headwinds remain. Company officials offered sales guidance for 2020 at $2.85 billion to $3.05 billion
"We believe the challenging market conditions that have persisted for the last 18 to 24 months are the new normal for the auto industry," Edwards said. "In an environment of slow to negative growth, we have to be more focused than ever before on improving efficiency, providing world-class quality service and innovation to customers, and driving the business to improve cash flow and returns on invested capital. And, we are."
In addition to the facility closures, the company is in the midst of a strategic review process to consider alternatives for other unprofitable operations. Edwards said details will be provided as decisions are finalized.
About $81 million in operating efficiencies were achieved in 2019 while the company executed a record 271 new program launches, which is an increase of 38 percent over 2018.
Cooper Standard received new business awards of $191 million during the fourth quarter, which brought the 2019 total to $451 million. Some of the contract awards are related to company brands, such as ArmorHose, ArmorHose TPV, Fortrex, FlushSeal, Microdence EPDM and MagAlloy.
Cooper Standard officials said their 2020 guidance factors in macroeconomic conditions, current customer production schedules, the company's operating plans, and an estimated first-quarter impact of the coronavirus outbreak in China.
"From a big picture point of view, we're nowhere near back to normal as it relates to our plants and our customers' plants," Edwards said. "I just saw an announcement this morning of a couple customers that delayed startup until March 10. It's a very fluid situation."
Cooper Standard is fortunate to have an "incredible" Chinese management team in place in the country, Edwards added.
"They're doing a great job for us in terms of the supply chain being cut off from certain parts of the country," he said. "It affects everyone and our team is doing a marvelous job working 24/7 to support whatever our customers are requiring us to do. So far so good."
Still, everyone is wondering if virus-related issues will continue into the second quarter or beyond.
"How soon do we return the new normal in China," Edwards asked. "Frankly, I think Delta (Airlines) got it right. Toward the end of April would be my guess if you want me to give you a date."
Delta temporarily suspended all U.S. to China flights on Feb. 6 and plans to resume service there after April 30. The airline usually offers 42 flights a week between the countries.
The spread of the virus in China appears to be slowing but new outbreaks in Asia, Europe and the Middle East have raised concerns about a global pandemic. The virus has infected 80,000 people in China and 33 other countries with new hot spots in Iran, South Korea and Italy.
The virus has caused at least 2,600 deaths.