Chicago Tribune
December 22, 2000
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December 22, 2000

Cash-strapped Outboard Marine Corp. cut another round of employees Thursday and prepared to file for bankruptcy protection, three years after financier George Soros led a leveraged buyout of the company.

A notice to employees announced the "permanent layoff of about 1,190 employees" at the company's corporate offices in Waukegan and nearby manufacturing plants. Meanwhile, Outboard Marine has hired the New York-based law firm of Skadden, Arps Slate Meagher & Flom to represent the manufacturer of boat motors, should it file for protection from creditors, sources said.

Barring an 11th hour reprieve in the form of cash, the bankruptcy case is likely to be filed next week, but could be filed as soon as Friday, sources said.

An OMC spokesman did not return calls requesting comment. The case would be handled by bankruptcy attorney David S. Kurtz, a partner in Skadden Arps' Chicago office, who also could not be reached for comment.

"This came as kind of a shock because it happened so quickly," said Jim Baker, vice president of the Independent Marine and Machinists Association, which represents about 280 employees in Waukegan.

More than a year ago the union had "put together a shutdown agreement," but business improved sufficiently, and the plan was shelved, he said.

The layoffs are the latest blow to OMC, which was taken private in a $373 million leveraged buyout by an investment group led by Soros.

Since then, the investors' efforts to get the struggling company back on track have not been successful. And despite aggressive cost cutting, including plant closings and hundreds of layoffs, OMC has continued to lose money, forcing it deeper into debt.

Weak demand for the company's products, such as Evinrude and Johnson brand boat motors, has compounded its problems.

In recent months Outboard Marine's situation has rapidly deteriorated. Former chairman and chief executive David Jones left Outboard Marine in August; Roger Fix was named 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.

The layoffs announced Thursday come two weeks after the company said it would cut 1,000 jobs, reducing its workforce to 6,200 employees. And on Wednesday, OMC laid off another 700 hourly workers at its Waukegan plants--until Jan. 15 at least. The company said all of those workers might not be called back to work.

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 percent share of the U.S. outboard engine market as of last Dec. 31.

At that time it also said it had retained an investment banking firm to explore strategic alternatives. But its search for a bailout has apparently been fruitless.

The notice distributed to employees said: "In the past few months the operating performance of OMC has been disappointing and our efforts to secure additional financing were unsuccessful. As a result, we must shut down our operations indefinitely and, regrettably, let go many of our valued employees."

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.

Baker said the notices were intended to comply with the Warren Act, the federal plant closing law.

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