Lubrizol Announces Cost Reductions and Job Cuts

Lubrizol Corp. (Cleveland, OH) will undergo a two-year, two-phase restructuring to revamp its staffing and rationalize production and offices. The company says that the process will be expedited by a new, globally integrated management information system. When the process is complete, more than 400 jobs will have been cut, and a 20% reduction in production facilities will have occurred.

Describing the cost reduction plan, W. G. Bares, the company's head, says that: ``The market growth rates for lubricants and additives have slowed at a time when the requirement for investment in new performance specifications is accelerating. This slow growth is also aggravated by the poor economic environment in Asia-Pacific and Latin America. The effects from these conditions have been declining shipment volumes, industry overcapacity and increased consolidation among both customers and additive producers. This has also resulted in a decline in the financial returns on our investment in the assets used for this business. While these actions are difficult, I believe they are necessary for Lubrizol to continue to deliver the value our customers and shareholders demand."

In the first phase, the company will be reducing primarily selling, general, administrative and testing expenses, which will result in staff reductions of approximately 6%, or 250 employees, by the end of the first quarter of 1999. During this phase, Lubrizol will implement a new commercial structure for its chemicals for transportation business and a portion of its chemicals for industry business. It will also consolidate certain sales offices and testing functions. At the same time, the company will be continuing the rapid consolidation of its recently acquired Adibis additives business. The company anticipates a special charge of approximately $32 million in the fourth quarter to cover both the costs associated with these steps and the write-off of in-process research acquired from Adibis. Savings from these steps are estimated to be $26 million per year beginning in 1999.

The second phase of this plan is focused on lowering costs and improving efficiency in production and distribution activities. Lubrizol will continue to reduce its number of intermediate components and product platforms, which will enable the company to reduce the number of its production units by an additional 20% over a two-year period. This will occur through the shutdown of certain production units and facilities worldwide. During this phase, the company will complete installation of its new globally integrated management information system and implement a new shared services structure in Europe. A further 5% reduction in employee staffing is expected to result from these steps. Additional charges are anticipated over the next two years related to the costs of facility write-downs and employee separations.