From the Dow Jones Newsroom
OMC's troubles mount
Boat maker shuts down plants, lays off thousands
Waukegan-based Outboard Marine Corp., unable to secure critical financing, will slash its workforce and seek to sell its worldwide operations, Dow Jones Newswires reported.
The maker of Evinrude and Johnson brand boat motors notified hundreds of employees by letter Thursday it "must shut down our operations indefinitely." Asked if they may not reopen, an Outboard Marine (OMC) senior spokesman replied, "That's a possibility."
It's unclear what the troubled company's next move might be. The spokesman wouldn't comment on speculation Thursday by company observers that a Chapter 11 bankruptcy filing might be necessary, perhaps as early as Friday.
The principal investor in closely held OMC is financier George Soros. Efforts to reach Mr. Soros' representatives were unsuccessful.
Dow Jones also learned that most of OMC's 6,200-person payroll is likely to be laid off, and that a skeleton staff of perhaps 700 may remain at corporate headquarters in Waukegan and several manufacturing plants.
The company is on an expanded year-end shutdown that began last Friday and could last four weeks. Normally, OMC closes for two weeks over the Christmas holiday, but given its cash-strapped situation, that was extended.
Only two weeks ago, OMC said it would reduce its 7,200 employees by about 1,000 by Dec. 31 as part of "aggressive steps to secure the company's short- and long-term financial viability."
At that time, it also said it had retained an investment banking firm to explore strategic alternatives.
But since then, its search for a bailout has apparently led nowhere. An industry source told Dow Jones that OMC representatives had approached others in the boating industry about buying all or part of the company. OMC wouldn't confirm that.
Notices distributed to employees at several meetings Thursday at the company headquarters and sent out by overnight mail Wednesday spelled out some of the company's intentions.
"In the past few months, the operating performance of OMC has been disappointing, and our efforts to secure additional financing were unsuccessful," the notice said. "As a result, we must shut down our operations indefinitely, and regrettably, let go many of our valued employees."
The notice went on to confirm "the company's permanent layoff of about 1,190 employees" at its corporate offices in Waukegan and nearby manufacturing plants. It said OMC "regrets the need for this action and wishes you well in your future endeavors.
"Should the company's operational situation change, we invite you to reapply for a position with the company," the notice added.
A union official at an employee meeting Thursday morning, Jim Baker, vice-president of the Independent Marine and Machinists Assn., which represents about 280 employees in the Waukegan plants, said the notices were distributed to comply with the federal Warren Act. That law requires companies to give at least 60 days' notice to employees of a plant closing or significant employee reduction.
"This came as kind of a shock because it happened so quickly," Mr. Baker said. More than a year ago, the union had "put together a shutdown agreement," but business improved sufficiently so that it was shelved, he said.
But in recent months, Outboard Marine's situation has rapidly deteriorated. This past August, it brought in a new CEO. In late October, the company amended its credit agreement with senior lenders, giving it added liquidity for ongoing operations. An affiliate of Soros Fund Management pumped another $45 million into the company at the time.
In its most recent public financial statement, OMC said it lost $59.5 million, or $2.92 a diluted share, on sales of $565.7 million in the first half. The company has notified the Securities and Exchange Commission that its third-quarter report will be late.
Among the world's largest makers of outboard marine engines and boats, OMC held an estimated 32% share of the U.S. outboard engine market as of last Dec. 31.
In addition to its Johnson and Evinrude engines, OMC makes a variety of boats. Brands include Chris-Craft, Four Winns, Seaswirl, Stratos, Javelin, Hydra-Sports, Princecraft and Lowe.
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