Oerlikon’s Fedier Says Drive Systems Margin Helped by Job Cuts

OC Oerlikon Corp. (OERL)’s interim Chief Executive Officer Juerg Fedier said margins are improving in the Drive Systems division after the Swiss maker of textile machinery cut jobs at its Fairfield unit in the U.S.

“We have put out about 40 percent of the workforce in the U.S.,” Fedier said today in a telephone interview. “The effects are coming back into the business.”

The job cuts, which amount to about 480 of the 1,200 employees at the Lafayette, Indiana-based Fairfield business, helped improve profitability at Drive Systems in the second-quarter, he said.

Second quarter earnings before interest and taxes at the Drive Systems unit fell 62 percent on weaker demand for gears and axels for construction and off-highway vehicles in China and the U.S., Pfaeffikon, Switzerland-based Oerlikon said today in a statement. The unit had sales of 826 million francs ($890 million) last year, accounting for 28 percent of revenue.

Fedier, Oerlikon’s chief financial officer, has served as interim CEO since Michael Buscher’s surprise exit on March 14. The executive has continued Buscher’s push toward more profitable businesses, such as coatings for airplanes and car parts, while exiting lower margin units. The company completed the sale of its natural fibers unit last month, a business with about 3,800 employees and annual sales of 1 billion francs.

Advanced Technologies

Oerlikon is also exploring strategic options including a possible sale of its Advanced Technologies unit, people familiar with the matter said in June.

Second-quarter earnings before interest and taxes fell 8 percent from a year earlier to 89 million francs, Oerlikon said in the statement. Sales declined 3 percent to 720 million francs. The company reiterated that full-year order intake and underlying operating profitability should be around the levels achieved in the previous year.

Russian billionaire Viktor Vekselberg, the world’s 57th richest man, is the largest shareholder of Oerlikon, and is represented by three of six board members including Chairman Tim Summers.

Oerlikon shares rose 1.6 percent to 12.45 francs at 10 a.m. in Zurich. The stock has risen 23 percent in the past year.

To contact the reporter on this story: Patrick Winters in Zurich at pwinters3@bloomberg.net

To contact the editor responsible for this story: Simon Thiel at sthiel1@bloomberg.net

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