Accuride President Resigns, Company Restructures

Accuride has announced the resignation of John Murphy as president and CEO and director of Accuride, effective 22 September 2008. Upon acceptance of Murphy’s resignation, Accuride’s board of directors appointed William (Bill) Lasky as interim president and CEO. At the same time, the wheel manufacturer also announced that it is embarking on restructuring programme that will eliminate a total of 392 positions, or 11 per cent the company’s workforce. This includes 159 salaried positions (18% of current level) and 233 hourly employees (9% of current total).

As a result of the restructuring programme, the Company expects to incur a one-time restructuring charge of approximately $14.3 million in the third quarter of 2008 of which a total of $10 million will impact cash during 2008 and 2009. However, the company expects that the restructuring will save an estimated $6 million in 2008 and generate annual cost savings of approximately $27.5 million thereafter.

In addition to the workforce reduction, the company is also seeking to reduce overhead costs through the redeployment of equipment and “rationalization of facilities,” while maintaining sufficient capacity to service customer needs during peak build levels.

New aftermarket division.

One of the key parts of the restructuring programme is the establishment of a new aftermarket division designed to “strengthen…services and offerings to its customer base.” Tony Pape will lead this as vice president and general manager of the aftermarket division. In addition, Phil Stolz was named vice president, Truck OE Sales and Corporate Marketing.

“We look to Tony and Phil to take a dynamic approach in significantly strengthening our customer relationships by servicing both the aftermarket and OE service in a centralized fashion,” said Rick Schomer, Accuride’s Senior Vice President, Sales and Marketing. “To support these initiatives, we will be consolidating our existing warehouses to reduce freight and product handling costs and significantly improve our customer service offering for full mixed product truckloads to our aftermarket customers.”

Analysts cast doubt over Accuride’s restructuring savings

Despite the new appointments and reorganisation, financial analysts are wary about the level of savings Accuride will actually be able to achieve using the measures it has described.

“Accuride expects 2009 North American Class 8 build to rebound to 260,000-270,000. However, precedent exists for a protracted downturn…early 2000s volume stayed approximately 40 per cent below the 1999 peak for a period of four calendar years (2000-2003),” the analysts explained, adding: “We believe earnings per share upside from Accuride’s announced costs savings could be mitigated by lower North American Class 5-8 builds.”

New interim president, Bill Lasky has been an independent director of Accuride since October 2007 and will continue to serve as a director during his employment as interim president and CEO. Previously, Lasky served as chairman, president and CEO of JLG Industries, Inc., a manufacturer of aerial work platforms, telescopic material handlers and related accessories, from 1999 through late 2006, when JLG Industries was acquired by Oshkosh Truck Corporation.

“Given Bill’s experience from his previous executive assignments at JLG, Dana, and Stoneridge, in conjunction with his work as an Accuride Board member, we are confident that he will drive initiatives to improve Accuride’s financial performance while maintaining uninterrupted customer service,” said Terrence J. Keating, Chairman of the Board of Accuride.