Titan stepping up cost-cutting efforts
QUINCY, Ill. (Oct. 16, 2014) — Titan International Inc., which reported operating and net losses in the second quarter and half year, is stepping up efforts to shore up market share in key sectors while also cutting personnel both domestically and abroad to contain costs.
Titan International Chairman and CEO Maurice Taylor Jr. outlined the company's situation and action plan in an open letter to shareholders, customers, etc.
In the letter/press release dated Oct. 16, Mr. Taylor stopped short of disclosing Titan's anticipated revenue and earnings forecasts for fiscal 2015, saying there are too many variables that likely will change in the coming months.
Among specifics Mr. Taylor did share:
- Titan is cutting in half its workforce in Russia — where its Voltyre-Prom venture operates a plant in Ekaterinburg — aiming to reduced employment there to 1,000 by year-end from 2,300 in January 2014. Without disclosing specifics, Mr. Taylor said Titan believes this measure will impact the bottom line next year “significantly.”
- Several high-ranking, long-time executives are retiring at year-end, including: Cheri Holley, general counsel; Kent Hackamack, vice president of corporate development; Ron Schildt, past president of Wheel Group; Mary Ann Wray, vice president of purchasing; Bill Campbell, executive vice president, chairman of Titan Tire; and Michael Akers and Ernie Rodia, consultants.
- Mr. Taylor did not comment specifically on the economic impact of their retirements, but he lauded them for their efforts “through the good and the bad times” and for helping select the members of the company's new management team.
- Titan is banking on the implementation of economic value-added (EVA) as its guiding performance management framework. Through EVA, Mr. Taylor said, Titan will be able to distinguish which business units are earning their full cost of capital and producing “quality” earnings.
Using EVA will provide Titan better insight into the discrete business drivers that will enable it to identify and prioritize the correlating initiatives that will drive growth and shareholder return, he added.
Titan fell $24.9 million into the red in the quarter ended June 30 on 11.7-percent lower sales — results Titan attributed at the time to slower demand and uncertainty in its key markets.
The second quarter loss dragged down Titan's six-month results as well, to a loss of $18.3 million vs. earnings of $42.7 million a year earlier.
Sales for second quarter 2014 were $523.7 million, while the firm's operating result fell $29.7 million into the red. Sales for the six months were $1.06 billion, down 9.3 percent.
Mr. Taylor noted that two of Titan's business areas, agricultural and mining, are in cyclical downturns that should last minimally through 2015, if not into 2016.
He also noted that Titan's management sees adoption by key vehicle makers of Titan's proprietary LSW low-sidewall tire/wheel concept as key to the company's sales resurgence and market share gains.
“Big agriculture could be down 20 percent or more during 2015,” he said. “We expect that the mining side of our business will be flat, still way off from 2012. We believe construction will also be slow to flat; therefore, Titan will have to gain market share in every market in which we compete.”
Mr. Taylor stressed that Titan has demonstrated time and again the performance improvements available through using the LSW system — fuel savings of approximately 6 percent, higher operating speeds, greater durability and the mitigation of road loping and power hopping, for example — but noted that the key vehicle makers have yet to spec LSW as an OE fitment.
“With many companies,” he said, there is an overemphasis on ‘Does it cost less?' as opposed to, ‘Does it offer a greater value proposition?'
“Because of that, innovation can be stifled and customers' needs may not be met.”
Titan now hopes the “overwhelming positive feedback” from farmers will result in pulling the LSW option through the dealer sales channel and then, in turn, influence the OEMs as to the value of the LSW.
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