Cooper Standard Automotive Inc. intends to implement several restructuring initiatives to its global operations, including the closure of 10 global facilities.
The Novi, Mich.-based firm said in its third quarter financial report released Nov. 6 that the initiatives will reduce expenses in 2020 and beyond and include, in addition to the closures, further rightsizing of its selling, general, administrative and engineering expenses; and transitioning its current regional management structure to a leaner global organization structure.
Cooper Standard projects $7 million to $9 million in expenses related to job reductions and $20 million to $25 million related to facility closures, including $11 million in restructuring expense already incurred. The firm expects to drive a cash payback from the structural cost savings in less than two years.
The number of jobs impacted from the closures, or the overall restructuring measures, were not disclosed.
Chairman and CEO Jeff Edwards said on a Nov. 6 conference call discussing the firm's financials that global automotive conditions remain challenging, with declines in the production of light vehicles impacting Cooper Standard across the board, including some of the company's biggest platforms.
"The impact of these market conditions have more than offset our continuing improvements in operating efficiency and the increasing volume related to new launches," Edwards said.
Cooper Standard said light vehicle production is down 11.5 percent in China, 3.8 percent in Europe and 2.2 percent in North America. Edwards also cited a tough environment in China, which has led to many automotive original equipment manufacturers putting pressure on suppliers like Cooper Standard to reduce costs.
"Negotiations have been tough, maybe as challenging as I've seen since I started doing business in China more than 20 years ago," Edwards said. "During the third quarter, we experienced a number of unfavorable outcomes in our customer negotiations, leading to several one-time price concessions or give backs. In one extreme case, we opted to discontinue the customer relationship rather than accept the one-sided demands."
A Cooper Standard spokeswoman confirmed that six of the impacted facilities are in Asia, five in China. Edwards said the five sites in China will be mothballed to keep the firm in position to capitalize on if the Chinese auto industry rebounds as projections anticipate.
The firm did not elaborate as to whether the other Asia-based facility would be closed or mothballed.
The remaining sites — three in North America and one in Europe — will be closed.
A spokeswoman confirmed that some of the facilities have already closed, but firm did not disclose specific locations of the 10 sites. When the shutdowns are complete its manufacturing network will consist of 93 sites.
In addition to the closures, Cooper Standard will re-align its global structure effective Jan. 1. The firm will segment into two global units—Automotive and the Advanced Technology Group (non-automotive). It is currently structured into four regions: North America, Europe, Asia-Pacific and South America.
"Each will be flatter and more capable of quickly adapting to the dynamics of a transforming global business model," Edwards said.
Edwards confirmed that Bill Pumphrey, currently senior vice president and president of the firm's North America business, will lead the Automotive unit, and Jeffrey DeBest will continue to serve as SVP and president of the Advanced Technology Group.
In addition, Song Min Lee, SVP and president of the Asia-Pacific unit, will leave the company at the end of 2019, and Juan Fernando de Miguel Posada, SVP and president of the Europe, South America and India business, will remain with Cooper Standard through the first half of 2020 to assist with the restructuring activities, and then leave the company.
Edwards added that four other executives will leave the business by the end of 2019 and one other by mid-2020, but did not disclose who.
"These actions are consistent with a more lean and efficient organization and the continued rightsizing of or SG&A cost basis," Edwards said. "It also confirms the depth of talent and leadership that has been developed for the last several years throughout our company."
Edwards said the one-off price concessions and discontinuing a customer relationship in China combined with the United Auto Workers' strike against General Motors led to a $26 million negative impact on sales in the third quarter.
Raw material costs also remain higher than in 2018, making a $20 million impact for the first nine months. Cooper Standard said that it has made progress in operating efficiency, leading to $64 million in increased efficiencies.
The result was a drop in third-quarter sales to $729 million, down from $861.7 million in 2018. For the nine months ended Sept. 30, the firm posted sales of $2.38 billion, down from $2.76 billion the previous year.
Cooper Standard reported a net loss of $13.9 million for the third quarter, compared to a $32.2 million net income in 2018. Year-to-date, the firm's net income was $128 million, down slightly from $130.8 million.
Sales dropped in all regions with North America falling by $77.8 million to $393.8 million for the quarter, Europe by $30.9 million to $197.4 million, Asia-Pacific by $23.5 million to $112.6 million, and South America by $390,000 to $25.2 million.
"The initiatives we've laid out for you are already beginning to reduce costs, but the benefits have been far outweighed by the impact of the GM strike, certain one-time price concessions and continued weak production volumes in China, and lower than expected volumes on important platforms in North America," Edwards said.
Cooper Standard employs about 30,000 people globally and operates in 21 countries. Its products include sealing, fuel and brake delivery, and fluid transfer systems.