Methode to lay off 125 area plant workers
Methode Electronics Inc. said Thursday it will stop making one of its oldest products -- the simple plug-in connector with tiny prongs that mates with another connector on many of today's computers.
It's now mass produced in Asia and costs a lot less to make. Such competition has forced the Harwood Heights manufacturer to layoff about 700 workers, including 125 at its Rolling Meadows plant who make the connectors.
Cuts also will be at its Carthage and Golden plants, also due to outsourcing operations to Asia.
Besides stiff overseas competition, advancing technology has hurt sales for Methode's smaller connectors.
Wall Street reacted favorably as Methode shares bumped up 84 cents, or about 7 percent, to close at $12.24.
So many manufacturers have moved operations to Asia that the connector industry, including Methode, was forced to follow their customers, said Ronald Bishop, principal of St. Charles-based Bishop & Associates, a research firm for the connector industry.
"It's difficult to be a small and global company and still compete with those products that went to China years ago," said Bishop.
Methode products have been made for computers, telecommunications equipment, locomotives and autos, such as for Ford Motor Co. It also has contracts for devices used on fighter jets.
The company, which has about 3,600 workers, will start eliminating the 700 positions over the next six months, said Joey Iske, Methode's director of investor relations.
"This is going to be an evolutionary process," she said.
Methode plans to focus on sophisticated connectors and devices that require more engineering.
"We're doing some specialty connectors for the automotive industry that could easily cross other industries," she said.
Later this year, the Rolling Meadows plant, at 1700 Hicks Road, will likely house other business units and development. Its Palatine operations will remain untouched, Iske said.
The restructuring is expected to be completed later this year. Affected workers will received severance packages and outplacement services.
The actions will result in a pre-tax charge in 2008 and 2009 between $19 million and $25 million, or about 30 cents to 40 cents per share.
It's now mass produced in Asia and costs a lot less to make. Such competition has forced the Harwood Heights manufacturer to layoff about 700 workers, including 125 at its Rolling Meadows plant who make the connectors.
Cuts also will be at its Carthage and Golden plants, also due to outsourcing operations to Asia.
Besides stiff overseas competition, advancing technology has hurt sales for Methode's smaller connectors.
Wall Street reacted favorably as Methode shares bumped up 84 cents, or about 7 percent, to close at $12.24.
So many manufacturers have moved operations to Asia that the connector industry, including Methode, was forced to follow their customers, said Ronald Bishop, principal of St. Charles-based Bishop & Associates, a research firm for the connector industry.
"It's difficult to be a small and global company and still compete with those products that went to China years ago," said Bishop.
Methode products have been made for computers, telecommunications equipment, locomotives and autos, such as for Ford Motor Co. It also has contracts for devices used on fighter jets.
The company, which has about 3,600 workers, will start eliminating the 700 positions over the next six months, said Joey Iske, Methode's director of investor relations.
"This is going to be an evolutionary process," she said.
Methode plans to focus on sophisticated connectors and devices that require more engineering.
"We're doing some specialty connectors for the automotive industry that could easily cross other industries," she said.
Later this year, the Rolling Meadows plant, at 1700 Hicks Road, will likely house other business units and development. Its Palatine operations will remain untouched, Iske said.
The restructuring is expected to be completed later this year. Affected workers will received severance packages and outplacement services.
The actions will result in a pre-tax charge in 2008 and 2009 between $19 million and $25 million, or about 30 cents to 40 cents per share.
Labels: Illinois, layoffs, Methode Electronics
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