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
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
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
It said OMC "regrets the need for this action and wishes you well in your
"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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