Jacuzzi Brands Moves To Cut Costs For North American Bath Operations
The company said it plans to eliminate its North American sanitary bath wholesale sales force, to be replaced with independent manufacturers representatives to market its Eljer® brand products to the wholesale channel on a commission basis. Eljer had a wholesale sales staff of about 25 people, according to a company executive.
“This is a continuing trend in our industry,” said Jay Schechter, president of the Association of Industry Manufacturers Representatives and a principal with Focus Sales LLC, Middlesex, N.J. “The vast majority of factories are represented by manufacturers representatives.
“We recently did a survey among our membership asking them to list those companies that do not use reps,” Schechter noted. “That list was fairly skimpy. It's hard to find companies in our industry that are still using factory salespeople. As Eljer will discover, reps are less expensive. You don't pay a rep until he actually sells something and we are responsible for all of our own overhead. We're a bargain.”
In another cost-cutting move involving Eljer, Jacuzzi Brands said it was considering the closure of its Salem, Ohio manufacturing plant where Eljer brand cast iron sinks and bathtubs are produced and hoped to finalize its preliminary decision in November.
The company had discussions with the United Steelworkers of America, which represents the production and maintenance workers in Salem, in which it presented financial and market data supporting its preliminary decision. In recent years the cost to manufacture in Salem has continued to escalate while prices in the retail and wholesale markets have been driven lower, the company said.
The Salem facility, which first opened in 1908, produces cast iron sanitaryware for retail and wholesale customers and has 253 employees. If Jacuzzi Brands decides to discontinue manufacturing in Salem, Eljer will continue to be a leading provider of cast iron products which would be made to Eljer's design and specification, the company said.
Jacuzzi Brands also said it plans to close its spa manufacturing facility in Plant City, Fla., by late November 2003. The Plant City facility, which produced less than 10% of its spa volume, will be absorbed by the company's new state-of-the-art spa manufacturing facility in Chino, Calif., without need for additional staffing. Jacuzzi's North American Bath Operations will also be consolidating a number of administrative functions currently being performed in multiple locations by its whirlpool bath, spa and sanitary bath divisions into a shared services operations center to be located in Dallas. The new center is expected to be fully operational by the third quarter of fiscal 2004. It will operate in an office space adjacent to the company's Eljer location that has remained vacant since the closing of the Zurn corporate office in Dallas.
“We are continuing to review every aspect of the North American Bath Products business, particularly Eljer, to reduce this segment's cost structure, expand margins and improve profitability,” Donald C. Devine, president and chief operating officer, said in a statement. Sales of the company's bath products are expected to increase by about 14% for fiscal 2003, outperforming the industry, Devine added.
In other news, Jacuzzi said it had completed the roll-out of its Jacuzzi Whirlpool Bath product line to all of Lowe's approximately 900 centers nationwide ahead of schedule. Lowe's named the Jacuzzi Whirlpool Bath business as its preferred supplier of jetted baths in March 2003, with the roll-out commencing in April 2003.
Although the roll-out was completed smoothly and ahead of schedule, set up costs were larger than expected due in part to the speed of the roll-out, the company said. As a result of these and other potential costs, results for the year ended Sept. 30, 2003 will be negatively impacted by about $6.5 million pre-tax or 5 cents per share.
Jacuzzi Brands expects to report sales of about $1.18 billion for its fiscal year 2003 in early December, according to David H. Clarke, chairman/CEO.
“While additional costs and charges are being realized in the current fourth quarter, we believe that the actions which produced them are necessary as we rebuild the profitability and growth prospects of the company,” Clarke said in a statement.
- Pat Lenius