Tool maker Stanley Works said Thursday it will cut 2,000 jobs and close three manufacturing facilities, citing weakness in its construction and industrial segments and the effect of a stronger dollar. The company also cuts its 2008 earnings forecast.
Stanley said the job cuts amount to 10 percent of its total work force and will also involve elimination of layers of management. A spokesman said the company has not yet disclosed which of its 45 plants it will close.
Its stock fell nearly 3 percent in afternoon trading.
Stanley said the depth of decline in its construction and industrial segments has been worse than in previous recessions. This implies its markets are facing an “exceptionally severe” contraction, the company said.
“While these actions are difficult and affect valued Stanley employees, we feel it is imperative to move decisively to manage through the steep global economic decline we are currently experiencing,” Chief Executive John F. Lundgren said in a statement.
Stanley is the latest tool and industrial products maker to feel the effects of the economic downturn. On Monday, Illinois Tool Works Inc., based in Glenview, Ill., cut its full-year and fourth-quarter profit forecast, citing the weak economy, the rising dollar and restructuring costs.
Stanley announced the cuts as the government issued a series of gloomy reports on the broader economy. The Labor Department said Thursday that jobless claims surged to their highest level in 26 years last week.
New Britain, Conn.-based Stanley said most of cuts and plant closures will take place in December and will result a pretax charge of about $80 million, or 70 cents per share, in the fourth quarter.
The company hopes the cuts and closures will save $115 million in 2009.
Stanley Works also cut its 2008 earnings outlook, citing the difficult economy. The company said it now expects earnings between $3.30 per share and $3.40 per share, excluding the fourth-quarter charges. Previously, the company said it expected to earn $3.75 per share for the year.
Analysts polled by Thomson Reuters expect a full-year profit of $3.72 per share, on average. Such estimates typically exclude one-time charges.
The cuts come two months after Stanley reported a third-quarter profit that rose 80 percent from the previous year. The company said then it had raised prices on its products to offset economic weakness and a soft housing market.