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Published: Thursday, 7/26/2001

Tecumseh's profits fall 39 percent; white-collar cuts planned

BY GARY T. PAKULSKI
BLADE BUSINESS WRITER

TECUMSEH - Profit fell 39 percent at Tecumseh Products Co. in the second quarter, and officials said yesterday they have offered retirement incentive packages to 20 percent of the firm's salaried workers in the United States and will move more manufacturing out of the country.

The firm made $17.5 million, or 94 cents a share, in the three months ended June 30, down from $28.5 million, or $1.47 a share, at the same time a year earlier.

Sales fell 18 percent to $382 million from $466 million in the second quarter of 2000. Officials blamed the drop on a slowing economy, competition from Asia, and wet spring weather that hurt sales of small engines that the firm supplies to lawn mower manufacturers.

“This quarter was again disappointing to us,” John Foss, chief financial officer, said yesterday in a conference call with Wall Street analysts.

Cost-cutting moves include the retirement incentives, which are being offered to 320 white-collar workers. Those employees are at corporate headquarters here and at offices of the firm's compressor division and in Wisconsin, Georgia, and Mississippi. The company would not provide a breakdown of how many eligible workers are in each location nor say how many white-collar workers are based in this city, 40 miles northwest of Toledo.

Workers have until Sept. 14 to decide if they will accept the offer.

Other Michigan operations include factories here and in Dundee and Clinton.

The company, which recently laid off employees and closed a plant in Somerset, Ky., is likely to pursue further cost-cutting, including job cuts and plant closings or relocations, a news release said.

The Tecumseh Products' division that manufactures engines and other parts for lawn mowers and snow-blowers recorded its first loss ever in the second quarter, Mr. Foss said.

He noted that late in the quarter the company completed the purchase of a lawn mower engine manufacturer in the Czech Republic.

That move almost certainly will lead to job cuts at other engine plants, but officials gave no details about which factories will be affected.

The company has begun to shift production of compressors for room air conditioners outside the country to compete with cheap foreign imports. Executives previously said they were looking at sites in Asia for a new plant. But yesterday, Mr. Foss said that “substantially all” production of room air conditioners compressors will be moved to factories in Brazil.

Tecumseh also makes compressors for refrigerators, freezers, and other refrigeration equipment.



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