"These changes will eliminate job duplications and bring our operations closer to customers, enhancing our efficiency and competitive position across all business lines," said Frederic Poses, American Standard's chairman/CEO. "We expect these actions will generate savings of more than $40 million annually on an ongoing basis."
Currently the company employs about 58,000 people in 36 countries. American Standard reported record third-quarter sales, operating margin and earnings for the period ended Sept. 30. Revenues from continuing operations were 4% above the previous year's third quarter and operating margin was up 0.6 percentage points to 11.8%. Segment income rose 10% over the prior year.
The job cuts and plant closing will result in a pre-tax charge of about $82 million in the fourth quarter of 2000. The charge will be offset by a gain from selling the company's Calorex water heater business.
In December American Standard signed a definitive agreement to sell its Calorex water heater business to Grupo Industrial Saltillo S.A. de C.V. for $68 million. The sale includes Calorex's commercial and residential water heater product line and its factory in Ixtapalapa, Mexico. Calorex's 500 employees will become part of Grupo Industrial Saltillo's building products division. Under a trademark license agreement, the water heaters will be sold in the United States under the American Standard brand name.
"This is a profitable business that does not fit strategically within our core business segments," Poses said in a statement.
Grupo Industrial Saltillo expects the water heater business to become its third largest source of revenues, Javier Lopez, president/operations, said in a statement. Grupo Saltillo's operations include an auto- motive division and two divisions that manufacture building product materials and housewares.