Following several fiscal quarters of declining sales amid a weakened industrial market, Sweden-based bearings maker SKF on Thursday announced that it is consolidating its North American facilities, including closing its sites in San Diego and Baltimore.
SKF — which saw Q1 2016 sales decline 8.9 percent year-over-year and profit dip 1.8 percent — said restructuring costs will be around $37 million, of which $12 million will be accounted for during Q2 2016 and the remainder. SKF expects the downsizing to generate full year savings of around $27 million from 2019, of which about $8.5 million is expected to be achieved in 2018.
Production from SKF's Hanover, PA site will be transferred to Flowery Branch, GA. That includes the production of spherical and large size roller bearings from Hanover, as well as rings and seals made in Baltimore for the aerospace industry.
The company said that discussions about the consolidation effect on Hanover and Baltimore employees will occur "within their respective employee representatives.
"These activities will strengthen our position in North America, making us more competitive and better able to support our customers, by improving the utilisation of our manufacturing assets," said Luc Graux, SKF president of bearing operations. "They also provide the foundation for investments in the further development of our manufacturing processes and technologies."
SKF will invest more than $18 million at Hanover and Flowery Branch to upgrade machinery.
The company will move production of condition monitoring solutions from its San Diego factory to other sites in Europe.
"This will enable the Group to offer customers better condition monitoring solutions, faster, as the development team will be centralized in the same region, close to the rest of SKF’s technical competence centers across Europe," SKF said, adding that a tech support team will remain in a separate San Diego facility.
The company said consolidation of its Hanover, Flowery Branch, Baltimore and San Diego sites is expected to take about 18-24 months.
Outside the U.S., SKF will close its Y-Bearing and Units production channels in Puebla, Mexico, which serve North American agriculture customers. Production will be moved to other SKF sites, with completion expected this summer.
On April 27, SKF announced the $339 million sale of its Kaydon velocity control business. SKF acquired the business in 2013 for $1.25 billion.
SKF's full year 2015 sales were up 7.1 percent from 2014, but profit sunk 14.2 percent.
The consolidation moves echo the company's sentiments it made in its Q3 earnings report last October, in which it said that the 1,500 jobs it cut during 2015 weren't enough.
"Given current market conditions, these actions alone are, however, not sufficient and we will continue our cost reduction activities across the Group," Alrik Danielson, SKF's president and CEO, said at the time.