The cost-reduction plan has been approved by the Wabash board of directors. In involves closing trailer plants in Scott County, Tennessee, and Fort Madison, Iowa. A parts distribution facility in Montebello, California also will close.
As a result of the plan, Wabash expects to take a one-time pre-tax charge of approximately $40 million during the third quarter of 2001. In addition, the company plans to immediately implement actions that will result substantially reduce its inventory of used trailers.
“Since existing poor market conditions have shown no signs of near-term improvement, the restructuring and cost-reduction plans are important to the company’s future in order to align its cost structure with the market,” said Mark Holden, vice-president and chief financial officer. “Recently, a Federal Reserve report noted that overall industry capacity in use in the U S fell to 77% in July, representing the lowest level of utilization since August 1983. Given these conditions, we believe these restructuring and cost-reduction plans will put the company n a much stronger position.”
Holden said Wabash has approximately $100 million of used trailers in inventory and anticipates trade-ins will produce as much as an additional $50 million in used trailers before the end of the year.
“We expect the total, pre-tax charges related to our restructuring and cost-reduction plans and used trailer inventory reductions will be approximately $68 million, of which less than $5 million pre-tax will be cash-related charges,” Holden said. “We also expect these actions will result in annual pre-tax cost reductions of approximately $75 million without significantly impacting our revenues.”