Kennametal Inc. announced June 9 that it would implement new cost-control measures to weather the COVID-19 blow. According to a statement from the company, those measures will accelerate existing plans to reduce costs at the tooling materials manufacturer, including plans to “restructure” 10% of salaried employees.
The company, which was previously looking to save about $25 to $30 million by restructuring, is now aiming to save between $65 to $75 million after taxes. Effective July 1, to control short-term costs caused by COVID-19 business conditions, Kennametal will cut its Board of Directors compensation by 20% for the same time period, continue shutting down temporarily and reducing production schedules to fit demand, and reduce salaries by 10 to 20% through the first half of 2021.
According to Kennametal, the salary reductions should save between $10 to $15 million each quarter, a figure close to the amount saved by furloughing employees. CEO Christopher Rossi said the steps announced were “difficult decisions, as they touch every one of our employees, especially those who will be leaving Kennametal.” The company did not specify how many employees would lose their jobs.
According to Rossi, the plans are being made with long-term survivability in mind: “Based on our April and May sales, we expect economic weakness will persist, and we need to continue to maintain these types of temporary cost-control actions until we begin to see markets recover,” he said in a statement. “The steps we are announcing today and the ongoing work we are doing in simplification/modernization position us well for long-term success.”
Kennametal, headquartered in Latrobe, Pennsylvania, supplies aerospace, earthworks, energy, general engineering and transportation companies for materials and tooling products with about 10,000 employees operating in at least 60 countries. The company made $2.4 billion in 2019 revenues but has seen sales slip dramatically in recent months due to lax demand from business conditions caused by the novel coronavirus.
