RACINE, Wis. — Modine Manufacturing Co. announced that it is realigning the organizational structure within its North American region to attain a more competitive cost base and support future growth. As a result, the company will reduce the size of its managerial workforce in its Racine, Wis., headquarters. In addition, effective Jan. 1, 2009, the company will eliminate post-retirement medical benefits for Medicare-eligible participants. These actions are part of the company’s previously announced four point plan to address business performance and position the company for long-term global competitiveness.
Commenting on the actions, Bradley Richardson, executive vice president – corporate strategy and chief financial officer, said, “As we look to the future, Modine has established performance targets including selling, general and administrative expenses (SG&A) at 11.5 percent of total sales, which is part of our overall framework to achieve an 11 to 12 percent return on capital employed. In order to achieve these objectives and provide Modine the financial strength and cash flow to support our current growth strategy, we continue to take difficult, but necessary actions, such as those being announced today. As we do so, we remain focused on our core thermal management expertise and the delivery of value to our customers and shareholders.”
The workforce reduction, combined with recent executive retirements, will result in an estimated $2.5 million charge for severance and retirement benefits in the company’s second fiscal quarter ending Sept. 30. The realignment of its North American regional structure will result in a workforce reduction of approximately 20 positions, including approximately 15 percent of the managerial workforce in the company’s Racine, Wis., facility. The company indicated that the reduction of post-retirement benefits will result in annualized savings of approximately $3.3 million.
“We continue to execute our four point plan, which includes manufacturing realignment, portfolio rationalization, SG&A reduction and increased capital allocation discipline,” said Thomas Burke, president and chief executive officer. “As we drive continuous improvement in our bottom line performance, we continue to invest in technological differentiation and the development of advantaged product and market positions, which capitalize on global demand for emissions reduction, fuel economy, high efficiency performance and clean sources of alternative energy. We are confident we are on the right course to build a stronger, more competitive company that can better serve our customers, employees and shareholders in the years to come.”
Modine is in the process of notifying employees and retirees impacted by the announced changes. Employees who are affected by the workforce reduction will receive transition support, including severance and outplacement services. The reduction of post-retirement medical benefits will not affect medical coverage for active Modine employees or pension benefits. In addition, retirees impacted by the change in medical benefits will have access to the health and prescription drug programs offered by Medicare.
For more information about Modine, visit: www.modine.com.
