Pittsburgh-headquartered Kennametal Inc. recently completed the full closures of its manufacturing facilities in Lichtenau, Germany and Irwin, Pennsylvania, and consolidated those operations into other Kennametal facilities. These actions are part of the company’s ongoing simplification/modernization initiatives to enable a leaner structure and optimize its operations globally, including footprint rationalization and consolidation.
Additionally, Kennametal completed negotiations with the employee representatives of the Neunkirchen, Germany, distribution center. Distribution activities have been transitioned to a third-party logistics provider.
As expected, these actions will begin to reduce structural costs beginning in the second half of fiscal 2020. The closures and corresponding savings are part of the previously announced FY20 restructuring actions that are expected to result in annualized savings of $35 million to $40 million with pre-tax-charges of $55 million to $65 million.
For fiscal year 2021, the company also expects to deliver estimated annualized savings of $25 million to $30 million, but with lower estimated pre-tax charges of approximately $55 million to $65 million, down from the originally estimated $60 million to $75 million.
Following negotiations with local employee representatives, Kennametal has agreed to downsize its Essen, Germany facility instead of the previously proposed closure. The facility will be substantially smaller with considerably lower operating costs. Additionally, a significant reduction in labor will take place as products are moved to other lower-cost Kennametal facilities.
The agreement between Kennametal and the Essen employee representatives is effective through June 30, 2022. The company is also evaluating the acceleration of other facility closures as part of these restructuring activities.
“Our decision to maintain a much smaller presence in Essen was the result of a compelling proposal offered by the local employee representatives,” President and CEO Christopher Rossi said, in a statement. “The facility will be more competitive globally with improved productivity from increased work hours, lower costs and a smaller, but more profitable, product portfolio.”