MUSKEGON, Mich. -- SPX Corp., the world's top maker of automobile-testing equipment, said yesterday that it will take a fourth-quarter charge of as much as $250 million to cut 1,000 jobs, or 7.1 percent of its work force, and close 25 plants and offices.
Over the next six months, SPX will close some of the manufacturing, sales and administrative locations it acquired in its $2.34 billion purchase of electric-motor maker General Signal Corp. in October. The news boosted SPX shares $3.125, to $66.1875, yesterday.
SPX, based in Muskegon, Mich., is cutting costs as automakers pressure suppliers to lower prices. SPX also is coping by expanding into other businesses, such as General Signal's motors for kitchen, exercise and lawn equipment. The broader product base spreads risk and creates opportunities to save money.
"They need to look at their total product portfolio, and decide which ones work and which ones don't," said David Andrea, chief economist with CSM Forecasting Inc. in Lansing, Mich.
SPX will not specify which locations it will close until Jan. 15, and some of the closings could occur overseas, said spokeswoman Tina Betlejewski. She would not say whether SPX will trim any of the General Signal product lines.
The fourth-quarter charge of $210 million to $250 million could rise as the company reviews asset valuations, in-process technology and potential environmental costs arising from the acquisition, SPX said. It expects to incur another $20 million in related costs next year.
SPX was expected to earn $1.04 a share in the fourth quarter, the average estimate of six analysts polled by First Call Corp. Net income was $10.4 million, or 83 cents, on revenue of $242 million in the year-earlier period. SPX said it still expects to report 1999 earnings of $4.85 a share before charges.
The closure of the former General Signal headquarters in Stamford, Conn., is almost complete, SPX said.
SPX, which makes diagnostic tools for autos and some auto parts, bought General Signal in a move to diversify. It paid $2.34 billion in cash, stock and assumed debt. The move comes as auto-parts makers are under increasing pressure to cut costs. Automakers also are looking for suppliers who can build bigger chunks of vehicles, instead of just separate parts, to save money in assembly. These forces led to a wave of acquisitions and unit sales this year as parts-makers looked for the combination that works best for their product lines.
When SPX announced the General Signal acquisition in July, SPX said it expected to wring between $55 million and $60 million in cost savings in the first year. The purchase was designed to add to SPX's earnings next year and boost its cash flow.
Pub Date: 12/29/98